Expensify, Inc.

Hi, welcome to the Q2 2025 Expensify Earnings. I'm Expensify CFO Ryan Shaver and with me I have founder and CEO David Barrett. And now we're going to pass it over to Nikki for the legalese.

Please note that all the information presented on today's call is unaudited and during the course of this call management may make forward-looking statements within the meaning of the federal securities laws. These statements are based on management's current expectations and beliefs and involve risks and uncertainties that could cause actual results to differ materially from those described in forward-looking statements. Forward-looking statements in the earnings release that we issued today, along with the comments on this call, are made only as of today and will not be updated as actual events unfold. Please refer to today's press release and our filings with the SEC for a detailed discussion of the risks that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today. Please also note that on today's call, management will refer to certain non-GAAP financial measures. While we believe these non-GAAP financial measures provide useful information for investors, the presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. Please refer to today's press release or the investor presentation for a reconciliation of these non-GAAP financial measures to their most comparable GAAP measures.

Great. Thank you, Nikki. All right, let's talk about the financials. Revenue was 35.8 million, which is up year on year, which is really exciting. Average paid members were 652,000, and total interchange was 5.3 million, which is also up year on year. Operating cash flow was 8.9 million. Free cash flow was 6.3 million. Again, the difference between those is free cash flow does not include customer funds. Our net loss was 8.8 million. Our non-GAAP net loss was 1.9 million. And our adjusted EBITDA was negative 1.4 million. Again, these numbers are impacted by the release of the movie, as we've discussed in previous earnings calls. The way movie accounting works is we've been making payments for multiple years, but the expense is all recognized this quarter. So the reason these numbers look Worse than they normally do is because we just recognized multiple years of payments all in one quarter. We expect next quarter for these to go back to normal. Like I just mentioned, our free cash flow is $6.3 million, a 10% increase from last year. Last quarter, we updated our guidance to 17 to 21 million in annual free cash flow. We're now increasing that free cash flow guidance to 19 to 23 million. As the year goes on, our confidence in this number increases and we continue to increase it. We'll let you know next quarter if there's any updates there. July payment members were 641,000. July is usually a pretty soft month. A lot of people are on summer vacation with their families. Usually not a great month for us. And so we saw that seasonality this quarter. Or we saw the seasonality in July, which was expected. Now let's talk about what everyone wants to hear about, the F1 movie. So I hope you saw it. It was a great movie. Let's talk about some highlights here. So Expensify was on screen for an estimated total of over 35 minutes, which is insane. We did this Super Bowl ad in 2019. We paid a lot of money for 30 seconds and our logo was only on screen for about two seconds of those 35 seconds because we had to make it entertaining and funny. So the logo, not a lot of time for the logo. This was very logo based and a huge increase from two seconds to 35 minutes. Given the box office numbers and the fact that we were on screen for 35 minutes, we estimate that the Expensify logo was on screen and viewable for 1.3 billion minutes over the last month and change. Additionally, we estimate over 100 million was spent marketing the movie in which our logo featured heavily. So you probably saw a lot of ads, probably saw our logo in those ads. We think over 100 million was spent doing that. promoting our logo by companies other than us, which is great, a great deal. Additionally, there was a lot of buzz around the movie, so the PR, what's called earned media, generated an estimated equivalent value of $61 million marketing dollars. What that means is, How much would it cost to get all the articles written about us, all the times it was talked about on the news, social media? If you were to take all that activity and then figure out how much would it cost to buy that, that cost would be $61 million. So the earn me around the movie, we estimate at this point is $61 million. The movie's also been greenlit for a second theatrical release at IMAX. Then it's going to go to Apple TV. So it'll continue to drive interest for a long time to come. So these numbers are just, as of right now, these are not the final numbers. And we think that it's going to continue to be seen by people, be loved by people, and continue to pay dividends for us as a business. One of the ways we measure the effectiveness of this investment we made is in brand awareness. So we do brand awareness studies. Basically, the general population is surveyed, so we're not surveying specifically accountants or any specific population, just you know normal everyday people because we grow through bottom-up adoption we market to just regular employed people and they hear about us they download the app and they bring into the business so that's a big piece of our business model so that's why we do these awareness surveys so you get as you can see the increase from april to july is quite significant over a 50 increase in our core demographic which is ages 18 to 54. And very excitingly, in basically the future, our future bottom-up adopters, 18 to 24, which is a hard demographic to get in front of, we saw a 350% increase in brand awareness. And again, this is unaided awareness. What that means is, in the survey they're asked, do you know anything about expense management do you use expense management and if they say no then you know they're ignored if they say yes the next question is okay can you name any of them so they're and then they type in the ones that they can name way more people were able to name Expensify by name than any other of our competitors in the space now obviously the next question is do you know any of these companies in a list? And that's much easier. So unaided awareness is the hardest metric to increase and we've seen huge increases there. So we're very excited. We think that this is going to be great for the business. Obviously way more people know about us now and we think that's going to kind of trickle down and create a halo effect, a positive halo effect on the business for a long time to come. Yep. Thanks. All right, now I'm going to pass it over to David.

Great. Let's talk about Q2. And so we've been hard at work. In particular, we've been preparing for F1 for a long time. And recognizing that F1 is such a global sport, we put a lot of work into improving Expensify's availability and performance and just overall experience in a wide variety of F1 sort of familiar sort of countries. And so we've added support for over 10,000 banks globally, a whole bunch of United States, a whole bunch all over the world. And just to make sure that because one of Expensify's big differentiations is that we're really good for third party card support. Of course, we prefer to use our Expensify card. But if you don't, you can always bring your own card. And that's a huge thing. We're the best for that in the industry. And so now we're also expanding that strength. globally. Additionally, just the nuts and bolts of being able to do reimbursements. Again, Expensify is very good for a reimbursement heavy company that maybe doesn't issue corporate cards to their employees. Now those reimbursements work even more countries around the world. We've added support for buying Expensify in Euro. So previously you could buy it in pounds, US dollar, things like this, but now you can also support the Euro as well. Again, just making it a little bit easier to adopt throughout Europe. Also very exciting, the Expensify card itself is being expanded to work in the UK and EU. That's coming out very soon here, and so we're very, very excited about that. So overall, it's about basically making sure that the way we capture this long-term investment in F1 is about making sure that the markets where F1 is really popular are also good markets for Expensify. One thing I've been putting a lot of my time in, my top priority, is working on our concierge AI. We've talked about it a lot in the past. I'd say probably the biggest change here is really dialing in the technical foundation of our AI. Now, I know it's about a word salad here, but for the buzzwords, basically saying one thing is making sure that the concierge is multimodal, meaning that it can natively process not just chat, but also images and so forth. So if you upload an image, it can identify if it's a screenshot of maybe our app or a screenshot of something else versus maybe it is a receipt that it needs to take different action on. Things like this. Additionally, using technology called a tree of thought design, basically one of the challenges for any AI system is allowing to do a wide variety of things. And this new technique basically uses a hierarchical design that will categorize the intent of the user and then take it down to different sort of train of reasoning for different types of intents, whether you're doing customer support, whether you're trying to modify expenses, whatever it might be. We're going to have a lot more to say about that probably in the upcoming quarter, but this is a major focus of my personal time, and I know a lot of the company is very, very excited about this. Another highlight is Expensify Travel has been doing really good. Just in the last quarter, up 44%. I think July has been very strong as well. I think overall the way to think about Expensify Travel is it's really the new Expensify Card in the sense that just like Expensify Card has really shown that it can contribute in such a positive way to top-line revenue and especially free cash flow generation, I think Travel is going to do the same thing. I believe it's actually outperforming the initial days of Expensify Card, and so I'm just very excited about that. And then, of course, finally, we've always had a long-term strategy of positive cash flow generation and that we use as to steadily repurchase shares, return some of that money back to investors. And so all of this is in line with a high-level strategy that we've had for a long time. But basically, to kind of review the big plan here, step one is we've invested for years to build this entirely new technology foundation that we think can power the next you know, a decade of growth at Expensify, and that this is a major, major upgrade to the fundamental technology of the app, of the products to have what we call kind of a real-time infrastructure, meaning that if two people are looking at the page at the same time, the things will update automatically. Think like Google Docs or other sort of more real-time applications, but bringing that into the expense management space It's a chat-centric design, which is really important because that allows you to collaborate in real time on any object in the application, but also collaborate with our AI, which is increasingly important. Fundamentally, it's a cross-platform design. Everything works extremely well, not just on desktop, but all of the functionality works on mobile. This is a major differentiation in the industry, and we've seen this as really resonate with customers that they don't have to pull out a laptop to do things. It was an increasingly mobile workforce and admins on the road and so forth. And as there's just more capabilities in the product, if you need to issue a card, stop a card, wherever it might be, you can do everything on the road as well. Anyway, everything I just mentioned there, all of this sort of fundamental upgrade to the technology platform itself is done. It's in production, it's being used by customers. And so that's been a huge lift, but thankfully it's behind us. All of our attention right now is focused on, I'd say, two things. One is just migrating customers from classic to new Expensify. Our business model, as Ryan mentioned earlier, is a bottom-up business model. It's just all driven by word of mouth. It's all about basically encouraging people to talk to their friends, and then their friends adopt Expensify inside their company as an individual. And then we turn every expense report into a marketing message directly to the decision maker. And so this has been our business model from the start. It's what sort of powers us along. And the word of mouth is a fundamental numbers game. You need to get enough people talking about you to their friends in order to generate that long term lead stream. And so it's so important for us to get back to growth. It requires getting our customers onto New Expensify so that our existing users have something to talk about. Word of mouth is about novelty to a degree. And one of the most novel things is adopting a new platform, seeing all the new capabilities and seeing the result of our investment into this new functionality. So it's incredibly important for us to get all of our customers from classic to new. That's where so much of our attention is. On the other side, as I mentioned, that we've made some bold claims about trying to become, you know, we think the world's foremost expert in financial AI, which is a bold claim, I understand. But we're working very hard to make that true. And so a lot of our time is being spent on focusing on not just the fundamental AI technology itself, because I think that the key to making a good AI even smarter than the superintelligence already out there is to tightly integrate it with the data that you have such that you can act upon it in a real-time manner, collaborate on it with the AI. It's a very different design. and i think you're going to see a lot of applications going forward are going to look more and more like expensive high because the ui of ai is chat and if anything you can do to infuse chat throughout your system puts your system more in touch with the capabilities of ai and allows your customers to communicate with ai in more contexts so anyway we're going to have a lot more to talk about that in the future is just something that i'm personally very excited by And then I would say in the future, after we've migrated our customers from classic to new, after we've rolled out this AI and infused it throughout the application, then of course there's still the don't forget about the super app design. Right now we're focused on expense card travel, but we haven't given up on our ambitions on invoicing, bill pay, even payroll in the future, things like this. and so the goal is to build out this platform that has a universal and global payments engine and then we can use this engine for a wide variety of use cases not just the ones that we currently support but those in the future as well and then because of sort of this singular design behind all of this we think we can offer all of these use cases in a really compelling fashion at a super low price and a very low cost of sale so if we can roll out eight products for nine bucks a month. We think that's an incredibly compelling value proposition to customers. And so that's still a major part of the future strategy. And then finally, after that, I think the long term lead generation is really about simplifying this functionality down for the consumer so that it's not just about talking to your friends who are in other companies about doing expense reports, but talking to your family, talking to anyone and anyone who spends money and trying to be relevant to a much broader range of people. That's ultimately what creates the household name, the broad awareness of Expensify, and the ability to do something with it, talk to their friends, and the word of mouth that can generate positive lead generation for years and years to come. Anyway, it's the plan that we've had, the plan that we've been working on, and I think we feel very confident in the plan in the future. Other than that, I think that's about it, so I think we'll open it up for questions.

Perfect. First up, we have Citi. I believe, George, are you on the line with us?

I'm here. Hi, David, Ryan, Nikki. Thanks for having me here. George, good to see you. Yeah, good to see you guys too. Maybe just to start with the exciting news F1 movie. I think I'm one of the few people on the planet who still hasn't seen it. So I'm glad it's coming back to theaters. I'll have to catch it in the second round. You know, you guys talked a lot about some of the brand awareness increases there, at least in terms of its conversion to paying users. It seems like that metric hasn't moved much yet, at least as it relates to this initiative. Can you just talk to us about what you're expecting on that front? Is this kind of like a still to come maybe in the next quarter or two? Or is this more of a slow and steady type of improvement? How should we think about that?

Yeah, great question. So the movie came out with, I believe, three business days left in the quarter. So basically the end of Q2. So in terms of impact for Q2, not a lot, right? These all these numbers that we talked about today, those are things that we've seen in. you know, since the movie has been released. So they're not in the Q2 results. So we would expect the impact from the movie to be in the future. And again, with a big brand awareness play, it's not performance marketing, right? This isn't AdWords. So it's not a direct one-to-one. It's kind of a longer time horizon. So we expect that this will kind of You know, rising tide lifts all ships, produce kind of a halo effect on everything we do going forward in the future.

Okay, okay, that's helpful. And then maybe just sticking on this marketing topic, I think one of the topical things in the space of the PLG software has been changes to the Google search algorithm, kind of that AI blurb surfacing up top and changes to Facebook. to web traffic that that's, you know, that's engendered. Is that at all relevant for your guys' business? And have you guys seen any metrics as it relates to that, any adjustments to how you guys are thinking about marketing from that channel?

Sure. And so Expensify, I mean, before ChatGPT, we've always invested very heavily in SEO. And so I think we've got incredibly good, just general search engine sort of placement across a huge range of keywords. I think we've talked about that in past years or past quarters and so forth. A nice thing about that is because all of the AIs are trained to the internet because the internet is already talking about Expensify. That means the AIs themselves talk primarily about Expensify. I don't have the data off the top of my head, but I know that we've looked into in the past and Expensify just ranks very highly in ChachiBT, Claude, Gemini, and so forth. And so I think that Our SEO strategy has already put us into a good position to be recommended as a top option by these tools. And furthermore, we've doubled down on that by making sure that we're optimizing for the tools even more. And so I'm with you in terms of the future of search is really about these chat-based AIs. And we are certainly not going to be left unaware about that. And so we're definitely preparing for that and taking advantage of that now.

Okay, great. Thanks for taking the questions here.

Of course.

Great. Aaron, I believe I have you on the line as a dial in. So let me get you unmuted here. Aaron.

Thank you. I can hear you. Can you hear me? Yes. You put 14% of your payroll into GAAP R&D this quarter, 9% adjusted. RAMP disclosed in March that 50% of payroll goes into R&D there. Do you think the small scale of your business is a headwind to keeping up with the pace of product delivery we're seeing from scale vendors in the space?

That's a good question. I think that we have an extremely large group of our employees focused on R&D and I think we're trying to build maybe different products, right? We're building one product that is tightly integrated with each other. And I think the rest of the market's building more siloed products. So you have your expense, then you have a different product, which is your invoicing. And they are all kind of like mini companies within one large company. And we're building just something different, which is one product, basically one payments engine that can handle Everything in the back office, no matter what you need. So it's very integrated. It doesn't require as many people. Do you agree?

Yeah, I agree with that. And I think that with respect to R&D, I think that is tricky from an allocations perspective because so much of our work is about improving technology that's already in production. And so the separation between what's R&D and sort of expanding something for new use cases, as opposed to just, as Ryan was saying, standing up an entirely new system, it just produces kind of different allocations. Now, I'm not an accountant here, but I'd say that fundamentally, I know I spend all my time in R&D and a lot of people do as well, but I understand that the accounting of how that comes out for a public company versus a private company might sort of produce different results as well.

That's really helpful. And then I guess a similar question to follow up. Do you think the increasing application of AI or product development for expense management use cases has the potential to erode the moat you've built around SMB and VSB customers where historically You've been the only one who could get the unit economics to work down market, but not take some of that cost out.

That's interesting. I kind of think it's the opposite in that. I mean, so a lot of ink has been spilled in this topic and we could talk forever about it, but I think that we're going through a shift in user experience design. Just kind of like, you know, initially it was all desktop software and there's a bunch of patterns built up around that. And then it went to web and then basically all the software was reinterpreted through more of a web centric design. And then. then mobile came out and then all those existing software is reinterpreted through sort of more of a small screen application design. And I think we're going through kind of a fourth transition here where every application is going to be reimagined through a chat-centric design. And I think I kind of like where you're going in terms of it can be kind of a normalizing effect because it strips away so many differences in that Like historically, like the difference between an enterprise app and a consumer app just looks quite visually different. Whereas for an AI chat centric environment, they might look quite similar. But I think it's actually the difference, however, is it is much easier to make a simple product complicated than to make a complicated product simple. And I think that the enterprise space is primarily focused on building complicated products sold to a part of the market that can weather and endure and appreciate that complexity. And it's very hard for an existing product, especially a very existing complicated product, to be reduced down to the simplicity of a chat-based interface. Now, I think that's why we've worked so hard for a long time to do exactly that. We're speaking from experience here. It's not a straightforward process to make something this simple, and it's not a straightforward process to make something as infused with AI throughout the entire thing. When you look at, I think, again, who knows? There's a lot of good companies out there, and we're all taking our swing at this world, but I think that we're going to see most of them take sort of a chat agent on the side where basically your application is largely unchanged. And then there's like a clippy like thing that appears in the side that basically tries to navigate around. And I think people take that design because that's an easy technical design to do because it separates your AI functionality from the rest of the UI. And I think we're going to see a lot of the small enterprise competition doing that because they're forced into it by their architectural decisions. we've taken a very, very different path. Concierge is truly at every part of our application, and it's infused at a very, very deep level. No one has a design like us. And I think that's what I was saying earlier on. I think you're going to see more and more applications kind of moving in a direction like Expensify, recognizing that kind of, you know, a Windows 95 Clippy-style AI just isn't going to do the trick. It's not going to get you the kind of integrated experience that's going to compel the next generation of customers. And so I think it's actually... It's very hard for them to come down to simplify their product to go to the SMB. But I think it's much easier for us because we've already put the work in there and already built our business in the SAP. We've already seen it's much easier for us to sort of attack the enterprise. That's how we get our enterprise customers historically, is that we get them while they're small and then we just hold on to them forever. And so I would rather be in our position going after their market than in their market going after ours.

it also doesn't fundamentally change their business model they still have huge sales teams so that the economics aren't i mean they're still fielding a huge sales argument basically um so it could enable a new challenger to come in and do what we're doing but we haven't seen competitors do that they've come at it from a different you know card first angle but that's not AI based. I mean, that's just, they have a card angle versus an AI angle.

Agreed. Yeah. I think they, they had their big play and it was a card first angle and they leaned really far over their skis to push it. And they did a great job with that. But I think that that's their thing. Their thing is card based. I am with you. I think our thing is more AI based and I would be more concerned about some new entrant sort of stealing the industry than, than them.

That's great perspective. Thank you guys.

Thank you.

Fabulous. Lake Street, I believe. Max, are you on the line?

Yeah. Hey, guys. Thanks for taking my questions. First one's kind of a two-parter around go-to-market strategy. Just with the new F1 movie, I'm curious to know, I'm not sure if you guys track this information, but in terms of new customer ads, maybe... information that the team would have, but what percentage of these new ads may be joined Expensify because of the F1 exposure? And then on top of that, I know word of mouth is kind of a big deal with you guys and getting the Expensify name out there. I mean, is there any other investment initiatives you guys can implement to kind of gain traction like the legacy subscription business?

Great question. So we don't have any... F1 based new customer had information to share right now in Q2. Cause again, it came out, you know, right at the end, I guess maybe, maybe for July and August, I guess. have anything to share right now uh it's something that we can definitely talk about in the future but uh to answer your other question which is do we have other kind of follow-on plans to f1 uh we are we do certainly have uh you know more marketing plans in place um that we're gonna do, obviously not the scale of this blockbuster movie, but this isn't a one and done, see in a couple of years type of thing. We're gonna continue to invest in marketing and also try to harvest this great awareness that we've created.

Yeah, I mean, we've been obviously have a cash flow positive business for a reason. I think it has built up quite a nice war chest, even while paying off our debt. And so I think that we have shown that we're very willing to take big swings when we think there's a big swing to be taken. And so we don't have any announcements right now, but certainly, you know, this isn't the first time we've done something big and it won't be the last.

Yeah, and the last one for me, and I'll get back into Q, but it looks like Expensify Travel's trending well. Is there any other color you can add around that?

So we just, I just got back from GBTA, the Global Business Travel Alliance Conference, and it went great. Like we said before, a lot of customer enthusiasm. We saw great quarter on quarter growth. And even in July, we saw huge growth just, you know, month on month. So it is growing extremely well and customers are trying it, loving it. It's kind of a a flywheel in terms of, you know, the, the sales cycles a little longer, you know, they do demos, they do a pilot and then they start to roll it out and then it grows and grows. So I think we're starting to see that. So nothing specific to share other than what we already did, but I guess the, the color commentary is that it is continuing to accelerate and it's great.

All right. Thanks guys.

Great. And then I have our last one. I apologize. I'm not sure who it is of our last few analysts, but I've got someone on a 415 dial in. I'll give you just a second to try and unmute here.

A little bit of a mystery caller. I like it.

They're authenticated, but it didn't come through.

Long-time listener, first-time caller kind of situation. That's cool.

All right, let's wrap it up.

Cool. All right, well, thank you so much, everyone. As always, it's a pleasure. Very excited to be sharing the results of Q2 and looking forward to Q3. All right, thank you.