Expensify, Inc.

The year itself was actually, we think, pretty good. It was a difficult year for our customers, and that reflected through basically our results. And so if you think about how the year itself is spent, it was really kind of a year of planting and 2024 is a year of harvesting, if you will. And one of the things we really plan to invest in is basically expanding our SEO keywords themselves. If you can think of it in terms of the top 100 SEO, top 100 search results for each keyword, we've really expanded kind of the broad breadth of the number of keywords that we're going after. Because if you want to get in the top 10, you've got to start in the top 100. And so you can see that we've had really, really sizable gains in the number of keywords that actually we rank for it all. Now, if you dig into the keywords that were in actually the first page, that's where we do even better. We have a really strong growth in actually the keywords in the first page. And so our SEO investment, which we've been strong in the past, so it's a big sort of machine to improve. but it's been improving pretty quick and really happy with that. And so the results there, as we've seen actually, our SEO traffic itself really just increased as well. Again, we've always been strong from an SEO perspective, and so it's a sort of a big freighter's turn, but it's been really improved, and so that's been great. And so in 2023, we think we've really improved our SEO game, and that's, I think, positioned us really well for continued growth in 2024. Now, if you talk about some of the functionality that we launched last year as well, one of my favorites has got global reimbursement. So as you recall, we have customers all over the world, especially some of our large multinational companies with entities and multiple jurisdictions. So one of the most common features we've had from our large enterprise customers is global reimbursement capability. And so this is something that we launched last year and we're really happy with the traction overall. You can see it's been growing exponentially ever since launch. Even the past couple of months, we've seen a 35% increase in the number of enterprise customers taking up global reimbursement. So this has been a great sort of feature that our customers have asked for for a long time, and we're really happy to have delivered. Also excited to talk about Expensify Chat. I know I've been talking about this forever. So we're really, really happy with the traction we've had in the past couple of years here. Also excited to talk about Expensify Chat. I know I've been talking about this forever. So we're really, really happy with the traction we've had in the past couple of years here. And we can see that basically chat has been around for a while and it's been growing very quickly, especially in this past couple of months here, where we've seen that actually seven thousand distinct companies have started using chat internally. And so that's just within the past year, an increase over two hundred and fifty percent increased the number of customers that are choosing to use expensive chat inside their company. And that's actually a huge testament because we call this is Right now, it's actually a different app. It's a different website. You have to go to new Expensify to get it. And so this is showing existing customers are going to a new app, new website to use this new functionality. Now, recall, right now, chat is a free feature. And so we're tracking the seats to make sure that we can charge for it in the future. But right now, it's actually just a free add-on to existing customers. But we're really happy that customers are finding value in it, so much so that they're going to a different app to experience it. And so we think that all of this leads into, you know, A great future for New Expensify. With that in mind, you might recall that New Expensify has been a completely open source community that is contributing towards it. And that open source community has grown staggeringly over the past year. Within the past year, we've gotten over 100% more contributors to the open source repo itself. And so that's great. And so we're actually having really strong growth in the community itself. It's basically been this huge force multiplier to our engineering team to be able to pull onto not just random contributors around the world, but true expert contributors from different agencies and so forth. We've gone from being basically a small user of this React Native technology to probably the largest React Native contributor outside of a Facebook meta. And so it's actually been a really important year for us because this is a super powerful technology of the future. And we've established ourselves as the leading name in it. So with that in mind, I'd like to talk a little bit about New Expensify itself. And so New Expensify, it's a new technology to solve some old problems. Now, our strategy hasn't really changed. It's really about just doubling down and improving on the strategy that we've always had. And to kind of reiterate that strategy, step one, we're going to capture a huge untapped market. And so we think 99% of the global opportunity is really in the VSV SMB. And no one's going after that right now. We think that we can build a platform that can tap this untapped market and basically grow uncontested. We think the only way that can happen, though, is with a bottom-up viral strategy where the customers themselves promote Expensify just by the mere virtue of using it. And then we can monetize that primarily through high margin subscriptions. It's going to break in to dig in a little bit more to kind of talk about them. Step one, when we talk about the VSB, it really is a huge industry. We're talking over a billion potential employees around the world in companies under 250 employees. It is a huge market. It is so much bigger than the current market, and it's almost entirely untapped. Just digging into the US alone, like 99.9% of all US businesses are small businesses. Again, this is not just a global phenomenon. It's a local phenomenon in the United States. It's a huge, huge opportunity. And it's not like no one's known about it. There's no one that's actually taken a business model that can actually credibly go out and get it. And so that business model works through viral lead generation. And it's not a new business model. Others have done it as well. So I'd say first is chat functionality is inherently viral. You can't talk to yourself. To use the product itself, you have to go talk to someone else. WhatsApp got to a billion users with 73 employees. We think the chat's an incredibly viral use case, and that's basically what the internet was primarily built on. Likewise, payments, same thing. You can't pay yourself. You gotta pay someone else. Payments are incredibly valuable, incredibly viral. Venmo got to hundreds of millions of users because of this viral dynamic overall. And third, we'd say document management is inherently a viral function itself. Dropbox sort of introduced the entire consumerization of IT. The reciprocal reward program is a masterclass in how to grow viral. And so in case all of these, document management and all of these, the three major use cases, chat, payments, documents, That really is expense management. Expense management already exists in the intersection of those three. So it's not that Expensify is pushing into each one of these. Expensify has always done all of these because the very act of submitting a expense report to someone and you're talking with your admin about the expenses, that is a chat application. Likewise, it's obviously a payment application because you're getting paid for your expense reports. But it's also a document sharing application. I mean, the most obvious documents are receipts, which we have millions and millions of. But also there's a bunch of other supporting documentation that goes into it as well. And so chat, payments, and documents, that's really what expense management is. And we think that actually we exist in sort of the overlap of these three incredibly viral use cases. And so when we think about building on top of that for a new expensive buy, it's really just doubling down on what these core strengths are and pushing a little bit into each of these different areas. Now, we're not going to dislodge any of these players anytime soon, but we think we can take a bite out of their market. More importantly, we can take the bite that's right next to ours. uh wherever we see the intersection of sort of chat payments and documents we think there's a real opportunity to grow from there and no better place in the world for that is the accounting community because that's what they do all day every day in a particular accounting firm sure many of them are processing expense reports but the bulk of the accounting firm is actually doing tax and compliance and that's just basically a ton of talking a ton of excel spreadsheets a kind of you know, just interaction around between organizations, not just within their own. And so we actually think the accounting community is a prime opportunity for this key intersection. And we think New Expensify can be targeted directly to them. So if we talk about basically what New Expensify is now, We've been again, we've been talking about it for a long time and at its core, it's fundamentally a chat system. As you can see, it feels very much like, you know. WhatsApp slack, whatever it might be, you got your chats in the left. You got your, who are you going to talk to your major conversation? You can do threads, you can react and basically it works a lot like any of the chat systems, but it's kind of few tricks under the hood. One is that it's a universal chat system. You can just basically mention not just people in your workspace, you can mention any email address or phone number, and we'll pull them directly into that chat room. And so think of like Slack, except without all that garbage about dealing with different workspaces and things like this. More it's like Discord, but without all the weird gamer stuff around it. Or it's basically, it's a more business oriented, super flexible global chat solution designs where you can, anyone that has an email address or a phone number, you can talk with them. And likewise, they don't even have to use the app. If you choose to talk to someone with the Extensify app via email or text messaging, we will just email them or text them. And if they respond via email or text, we'll show that tool. So it's a tool that you can choose to adopt as an individual, and you can use with 100% of people who have email addresses and phone numbers, and then we will communicate with them however is convenient for them. So it's a very powerful chat foundation. But it's also, of course, a payments tool. Now, it's still basically the same chat experience. You can still talk to people and things like this. But a major part of talking to people is actually to share documents with them, share receipts with them, share payments requests and so forth. And then when you do that, they can click in to basically pay the payments. They can pull up a traditional sort of expense management sort of money page, we call it, where you can search by your reports and expense and things like this. So it has all the same sort of same power that we've built up over the past 15 years doing expense management on a global basis. but presented in a chat-centric context where every single data object can be talked about. So it's not just about paying people, and it's not just about talking to people after the expense is done. It's also trying to capture some of the conversation that led up to that expense overall. And so it's a yes, it's a chat tool. Yes, it's a payments tool, but it's also a document management tool. Because again, this isn't new. Expense management has always been about document management. And so now we're just basically bringing that more to the forefront, especially when you start thinking about accounting firms, which are doing a lot of document heavy task based functionality. If you're closing the books on a monthly basis, it means every month you're spinning up a whole bunch of conversations about each basically category in your ledger. different sort of tasks they need to close out and so forth. Now, historically, you would use email, Excel, maybe some sort of an issue tracking system, whatever it is. In our case, you can do all of that on the platform. You can take everything from the payment to the reconciliation and all of the discussions in between on the same platform. You just basically upload the files themselves, and then we will store them permanently and securely inside of our cloud architecture. And so, again, it's a universal system, but that means it also becomes a universal document sharing system. If you need to chat with or share a document with anyone in the world via email or text, now we've become a tool to do that. So these are not new use cases. As you can see, chat, payment, document management, these are not distinct experiences. It's not like you have to go open to the chat experience or whatever. Every one of these is all three. When you're sharing documents or chatting and doing payments, you're infusing all three of these use cases throughout the entire product at all times. And so the reason we keep talking about chat is because we think that chat allows us to add a moat out of every feature. Again, expense management isn't new. This has been around since the dawn of time. But we think that actually building a collaborative real-time experience around it isn't. And we can bring new life into these use cases. And in the process of doing so, expand this huge market that's been largely untapped. Now, we talk about this idea of real-time expense processing. What makes it real-time is that people are in the product already since they're in a position to act in real-time. As much as we might like, basically, a user to prioritize expense reports, if it's not on their phone, if it's not actually in front of their face, they're just going to ignore it for as long as possible. Great thing about getting people into a real-time chat experience, however, is that when they receive a payment request, They immediately turn around and just approve it because it's just right there. We make it so easy to do. So we can cut days out of the reimbursement process merely because we cut days of waiting for the user to actually do something. We can take an action that took. You know, 72 hours and make it to, you know, 7 seconds. And so it's a completely different experience. Because chat changes the behavior of the user to be into the product at all times. And then that puts them in a position to act in a very different manner than they can in any other tool. So you can't just, it's not a matter of just making the money move fast. You have to make the user move fast. And that's a whole different experience. Second, when we do bill pay and invoicing, again, that we've had for a long time, but our experience is about trying to capture more of the conversation around the bill and the invoice itself. Because every time you invoice a client or pay a bill from a client, there's a conversation around there that preceding that engagement was basically some conversation around MSA and SOW. There's some terms as a contract, whatever it might be. Currently that conversation happens in, I don't know, email, Slack, or maybe a phone or something like this. Now we can capture all of those contract conversations in the chat tool itself. And then we can be the long-term storage repository of the final terms of the deal. So when you're reviewing the invoice, the invoice terms are actually right there in product. So you can see when it's supposed to start and end, how much it's going to cost. And so when you're actually approving a bill, you can assess whether or not that bill is actually in line with the stated purpose of the agreement itself. It's a completely different experience paying the bill when you're able to talk to everyone involved in real time. And that's just another feature of adding sort of infusing chat about the existing old experiences. And next, let me talk about travel management. Now, we've been talking about travel for a long time. We do travel booking and so forth. But we think that there's a great opportunity for, I think the term is leisure. I don't know why it's called that. I do know it's called that. It's business plus leisure. And it's just a fantastic term. Gotta love the internet. But anyway, I think that a great thing about pleasure is that when you're traveling for work you're going cool places and you're uh so the idea of book ending and staying a couple extra days and so forth it's incredibly common but it's not necessarily supported by the traditional tools additionally um when you travel places you're traveling with other people and you don't work all the time you have off hours when you go to a conference you know people are on call or on duty when they're But then they go, you know, wild out at night. And so as a result, we tried to recognize the real world social dynamic of people who are doing business travel. And there's a lot of normally you would basically spin up a WhatsApp group or something like this to sort of after hours you go someplace else. Instead, we just build that social group for you automatically. When multiple people travel to the same city, we're just going to throw them to a chat room together so they can actually start coordinating their dinners and their actual work activities right here in product. And so again, travel management is nothing new, but a social sort of pleasure-based travel management is new. And I think that's something that's highly defensible because it requires integrated, seamless chat functionality that pretty much no one else has. And then finally, we talked about universal chat and basically everything we talked about here. is designed to sort of cross IT boundaries seamlessly. Like you don't need an account, you don't need a password or any of this. It's basically just built in automatically. So anyone with an email address or phone number you can collaborate with, they can join, doesn't require an app. You just open up in the mobile app or just respond to the email, whatever it might be. So we're going, we're working very hard to eliminate the barrier to adoption such that no matter who you integrate with and who you collaborate with, They can engage with you directly through the product in whatever terms are most sort of palatable to them. And so all of this foundation, we think, creates a highly sort of defensible number of values for that high margin subscription. Because fundamentally, in the end, pretty much any technology can be reproduced. But it's very hard to reproduce chat functionality because that is actually held to the highest standard of any sort of usability or reliability and performance sort of standards. And so this is a completely different level of technology development. That's why we've been spending so long on it. And it's why we're years ahead of what we think the competition could do. So the kind of array of this overall, the three major sort of components of what we think is a long term growth is first, we start with this ESB SMB market because it's huge and untapped and no one else is going after it. There is really no organized competition there. It's, you know, our competition is email and Excel and it's not fighting back. And so we think that it's a huge opportunity that's largely uncontested. Second, we think the only way to go out and get it, in fact, the only way anyone else has ever gotten it was through viral word of mouth. And we're the only ones even trying that. If you look at any of our competition, all of them have the exact same business model, pretty much the exact same product being sold the exact same way. And it's all basically struggling. So we think that the way that you can capture this, it has to be with a different angle. The way others have captured this huge untapped opportunity has been through a viral word of mouth manner. Now, and we're going to do that for expense management because we think that we're at the sort of the nexus of the three most important and most viral use cases in the Internet. And so we think that we can play that again. And then finally, we think that subscriptions are the way that you can make profit in the sea of sort of like red competitors, because it's not a new idea to want to do everything, but actually doing everything is quite hard. And we've been working at building this foundation for a very, very long time. We think in the end, the most defensible way to operate in this market is with the best unit economics. It's basically to have the lowest cost acquisition into the largest market with the highest margins. Not exactly the most genius stuff, but saying it is actually quite hard, or saying it's easy, but doing it's quite hard. And so we've been focused entirely on unit economics and sort of profitable long-term growth for a very long time. And so we think that we have a very strong advantage of the competition, which is just now starting to think about this. Finally, I'd be remiss not to say something about AI, because that just seems to be the thing that everyone's picked up on. It's not a coincidence that Expensify has been pushing a chat focus for a very long time because we've known that this is going to come i mean everyone's known it's going to come but knowing it's going to come is different than actually doing something about it we built our entire platform around chat because chat is the language of ai the sort of generative ai chat bots are it's going to completely change how user interfaces are designed like historically uh you know there's a bunch of buttons there's a bunch of searching and things like this and that's still going to be there in a way But you can interact with AIs more natively, actually through chat, through talking and things like this. And so our platform is about trying to build a single foundation where all kinds of information and people can collaborate on the same level of the AIs themselves. And so if you have a super intelligent AI hanging out with you, You don't want to basically just press a bunch of buttons to talk to them. That's not actually how they talk. They talk in a language that we talk as well. And so chat is the language of AI and Expensify is building a foundation such that the AIs can collaborate on an equal footing with humans themselves. So we've been talking about all this stuff for such a long time. And I know that it's been a lot of work to get to this point, but we're extremely happy to actually start showing it rather than just talking about it. And so here on the screen, we've got a QR code. One more trick of an extensified chat is that it's got public rooms. If you scan that code, you're going to be on web and mobile, whatever it might be. You'd be dropped directly into a room where you, again, don't need to sign up, don't even need to type in an email address. You can just observe and read a bunch more information. There, you're going to get direct access to me, the rest of the product team, the executive team, to talk in real time about the product itself. Now, again, this isn't about financials. This conversation is about the roadmap itself, so let's basically stick to the topic. But if you have any questions about basically how the product works, why we're doing certain things, how it's differentiated from the competition and so forth, that's where we would love to talk with you. And so just scan that code, it'll drop directly into a room. You're going to see the whole chat experience. You can start requesting real money from your friends. You can start splitting bills. You can start experiencing everything we're talking about right now. It works in all platforms, works with email, phone number, works with everything. We think it'd be great if you created an account, but you know, we'll talk to you there. So I can't wait to talk to you soon. It's going to be a great time. With that, I guess let's open it up to questions. Vicki?

Great. Let's get started with city. George, do we have you on the line?

Hi, yeah, this is George on for Steve Enders. Thanks for taking the questions. Maybe just to start with on the paid user number, it was kind of flat quarter over quarter. Really appreciate the color on net ads versus churn versus contraction. Does that quarter on quarter stabilization give you guys any sense that maybe we're nearing a bottom kind of excluding seasonal factors or is there just still too poor visibility? Just kind of appreciate update on you know, how you guys are feeling about that metric?