Expensify, Inc.

Hello, and thank you for joining us for Expensify's Q2 2026 earnings call. My name is Nikki, and I'm going to start off with the legal disclosure, and then I'll hand things off to Ryan Schaffer, our CFO, and David Barrett, our founder and CEO. 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 these forward-looking statements. Forward-looking statements in the earnings release that we issued today, along with 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. And with that, I'll hand it over to Ryan Schaffer, our CFO.

Thanks, Nicky. And thanks, everyone, for joining today's call. Let's start with the Q2 financials. Revenue for the quarter was $33.9 million. Average paid members were $640,000. Expensified credit interchange revenue across both Classic and New Expensify was $5.9 million, up 12% year-over-year. While we continue to see some pressure on the top line, our focus remains firmly on the financials of the business and on executing the work required to return to sustainable growth. Even though revenue has declined year over year, we've been working hard to meaningfully improve profitability and cash flow. Operating cash flow was 8.4 million and free cash flow was 6.4 million. Our gap net loss improved to 3.9 million from 8.8 million a year ago. Non-GAAP net income was $3.4 million compared to a non-GAAP net loss last year, and adjusted EBITDA improved to $6.6 million from a negative adjusted EBITDA a year ago. These results reflect the discipline with which we're managing the business as we focus on improving execution, returning to growth, and creating long-term value. We'll see you next time. We like to give you an early look at next quarter's paid member trends. For July 2026, we had 634,000 paid members. As you can see from previous years, July tends to run a bit lower as people take vacations and travel less for business. This is the usual summer dip, and we'd expect things to pick back up as we move through Q3. Turning to capital allocation, this was an active quarter for us. We commenced and completed a modified Dutch auction tender offer, repurchasing approximately 6.1 million shares of Class A common stock at $1.20 per share. That tender was actually substantially undersubscribed despite the premium we offered on the stock price. So following its completion, we went into the open market and purchased an additional 712,000 shares at an average price of $1.63 per share. Altogether, that brings our total Q2 repurchase to approximately 6.8 million shares of Class A common stock, which represents roughly a 7% reduction in shares outstanding. We think this reflects real conviction in the value of this business, and it's a continued commitment to returning capital to shareholders, even as we keep investing in grip. With that, I'll hand it over to David for a business and product update.

Thanks, Ryan. Q2 was a quarter where I think the product itself tells the story better than any single number could. We made real progress in AI, on product velocity, and as Ryan just covered in capital allocation, let me walk you through what that actually looked like for our customers. I want to start with something a customer told us this quarter, because it captures exactly what we're building towards. Lohr Redman of Redman Accounting put it this way. That's the whole thesis in one sentence. Most approval work isn't judgment. It's routing, and routing is exactly what we should be automating away. That's what agent rules do. It's what we call level three workflow automation. Tag, categorize, edit, route, hold, approve, reject, or pay based on natural language rules that get evaluated with LLM judgment inside a real-time workflow. So instead of writing rigid if-this-then-that logic, you just tell it what you want in plain English, and it handles judgment calls the way Laura's example showed. The next step up from that is custom agents, what we call level four. These are prompt-driven agents that collaborate over chat, email, and SMS with employees, vendors, or clients. They're both reactive, responding to internal or external events as they happen, and proactive, taking scheduled actions on their own. So where agent rules handles routing within the workflow, custom agents can actually go and have that conversation on your behalf. And this one's no longer in beta. It's live. The Expensify MCP gives third-party AI assistants a direct connection to Expensify, so tools like ChatGPT, Cloud, and Cursor can access expense data through natural language right from within those labs. We think this is a meaningful differentiator, and it's a good example of us meeting customers inside the tools they are increasingly using. Beyond the AI work, Q2 is one of our strongest shipping quarters yet, with more than 30 features and enhancements, and I want to hit a few highlights from each month rather than read the whole list. This slide has the details for anyone who wants them. In April, the headline was really, bring your own card. We shipped personal card imports directly into the Expensify wallet and shared card feeds across workspaces so customers can keep using the corporate cards they already have and still get full expense automation with no card migration required. In May, we focused on giving admins more control without more overhead. Card freeze, non-freeze, and CSV company card imports both extend that same bring your own card thesis, making it easier for finance teams to bring existing card programs into Expensify. We also expanded prohibited expense detection, a good example of AI quietly doing enforcement work that used to be manual. And in June, as I just covered, the Expensify MCP went live, alongside real-time Expensify card rules and automatic VAT capture via SmartScan, which starts to open up more of our international opportunity. It's been gratifying to see that work recognized externally, too. We were named Expense Management Platform of the Year at the TravelTech Breakthrough Awards this quarter. Now, I want to step back, because I think the simplest way to understand Expensify right now is that we're not really one company or two. Expensify Classic is the gold standard for traditional expense management. It established what's now the traditional design in the category, web and mobile app, credit card import plus scanning plus GPS mileage tracking, and an end-to-end workflow with export to cloud accounting and next-day reimbursement. That was our focus for the first 12 years, culminating in our IPO. But here's the thing. Thank you for joining us. Thank you for joining us. essentially all of our engineering has been devoted to it for years now and most of our customers and users including both net new signups and migrated classic customers are on it today it's extremely competitive and growing rapidly on top of and separate from the classic migration itself and you can see that growth directly in the numbers So this excludes all the classic customers who simply migrated over, grew more than 250% year on year to over $10 million in ARR. So to summarize the quarter, our classic to new migration has entered its long tail. virtually all classic customers have been nudged towards new Expensify. Most of them choose to stay, and now we have more users on new than on classic. New Expensify itself grew rapidly, with net new revenue up over 250% year-on-year to more than $10 million in ARR. Our card program continued to scale, with combined classic and new Expensify card interchange revenue up 12% year-over-year to 5.9 million. We launched a wide range of customer-requested features, more than 30 this quarter, including the MCP server and our new AI agents, which ultimately earned us a Platform of the Year award. And we returned capital to shareholders, repurchasing approximately 6.8 million shares of Class A common stock, representing about 7% reduction in our shares outstanding. Our path forward is the same one we've talked about since the IPO. Keep migrating the remaining classic customers onto new Expensify, where they get a dramatically better experience, and keep accelerating new customer acquisition into a market that's still almost entirely untapped. What's different today is that now we have increasingly solid evidence the plan is working. With that, thank you all for joining us today, and let's move to Q&A.

Lovely. Erin, I believe you're on the line with us.

I'm here. Thanks for the questions. First one for me, the free cash flow guide for the year was initially a little bit lighter for 2026 at $6 to $9 million. On 4Q call in late February, you reiterated it on the 1Q call in May. Tonight, you took it up $5.5 million at the midpoint. I guess the question is, where are you in terms of the sales and marketing investments as well as AI investments that you initially cited as part of the drag on free cash flow? in 26 on the original guide relative to 25 free cash flow.

Great question. So we are Deploying our sales and marketing dollars that have started. We have some more coming later this year. Also, we are currently in a, I think, a place a lot of companies are where our AI spend is scaling, but we're also now looking at it and trying to cut it back. Luckily, we have the best spend management software in the world, so... Schaffer. We can see what the numbers are going to look like a little bit better now that that's kind of behind us.

Got it. And then the second question I have, so the $10 million in new expense by ARR exclusive of prior class customers that switched over is really encouraging. I guess what I'm interested in is less the 250% year-over-year number and any commentary you can give on the sequential growth of what that might have looked like a quarter ago. I think that's the most important thing for investors right now is trying to figure out whether New Expensify is bringing in net new customers and revenue at a rate that it's going to continue to accelerate and become a more meaningful part of the business, right? At 10 million ARR, it's still less than 10% of the total business from those net new customers on New Expensify.

Sure, that makes sense. Maybe I'll be curious, Ryan, for your thoughts on this in a second, but I guess I would say I think that is the real kind of story and challenge of the company right now. On one hand, If this company were exclusively New Expensify, we would all be high-fiving each other as like the hottest startup in the space by far. And that we have a product which is super rad. It's very competitive. It's growing really quick. It's already got, you know, almost like 12,000 customers or already like, you know, over $10 million in AR. This is a great, great startup. and also we have this classic product, which has been around forever, which is producing a tremendous amount of cash that we've used to fund and build this startup. And either of those is actually quite valuable, like having a super fast growing expense management you know, startup combined with a kind of super cash flow positive sort of traditional products. Both of those are actually really, really nice to have. But when you combine them, it looks like a single company that has kind of like nothing going on. It's a very confusing story that we admit. And it's a story we've been telling for a long time. We understand why people could be confused. That's why we're trying to break it out of it here to clarify that, no, actually, there's something really rocking and rolling here. And also, there's something else that's funding it, which is a really great thing. And so the question is, how does the... How does those balance out? And it's a great question. I guess if we had better insight, we would be giving better forecasting. And I would say right now our challenge is we've solved what I would say is the hardest part, and that is build an incredibly successful new differentiated product in this market. And I think that this chart really shows the growth of that product. That's really good. Now what we need to do is we need to complete migrating everyone over to it and addressing basically any sort of anxieties along the way. Recall that New Expensify, it's a new product. It's pretty differentiated. It's quite different. And it's targeted to a much larger market than the one that we were historically targeting. And so there are a lot of conversations with existing customers who are like, well, how do these changes I think that that's sort of some of the experience we're dealing with now is basically it's like, how do we get existing customers onto the new platform such that we can address kind of the churn which is gradually eroding the traditional customer base? And so the question is, Well, which is going to happen first? Will new Expensify's growth just get to a scale that it can overcome Classics churn? And also, what can we do to reduce and reverse Classics churn by getting those customers onto new Expensify and then cross-selling our new products and so forth? So there's kind of two different business strategies playing out in parallel. Which of those is going to win? Which is going to happen first? I mean, it's a combination of the both. But it's a pretty dynamic system right now. And so it's, you know, if I had better insight, I would be sharing it. But right now we're just saying there are these really positive trends on both sides, and it's a little unclear which is going to win out. Anyway, that was kind of my take on the answer. I'd be curious for your thoughts, Ryan.

So, Aaron, I believe you asked what's the sequential quarter. I don't have that offhand. I'm looking at the graph. and it looks like we were at little around seven end of Q1 so we're just around 12 in end of Q2 so it's growing pretty rapidly which is why we were highlighting this the maybe just put a little finer point what David just said basically we have our large we've broken the We have our large classic cohort, which is slowly decreasing. And of course, it's decreasing because we're not adding new customers to it, right? You cannot join the classic cohort anymore. And then we have the new expensive cohort, which is small but growing rapidly. So if you were to line up two charts, one, which is the classic slowly declining, and On top of it, you overlaid new Expensify, rapidly increasing. Eventually those two lines intersect, and then we're just in growth mode again. So we think that that is on its way. We don't know exactly when it's going to happen. We think it's coming soon. And so we're just sharing the information that we have.

I appreciate that. And I had missed the graphic with the delusion of earnings after the bell. So this really helps. And then I guess the last question I would have is just any color on the percentage of total ARR that comes from New Expensify when you include the migrations from Classic today. Is it a meaningful part of the business?

So over...

I believe it's 56% of users are on New Expensify. So we have crossed... More people use New Expensify than Classic now. So that's a pretty major milestone that we hit this quarter.

But also I would say virtually all new revenue is coming from New Expensify because you can't buy Classic anymore. We only sell new. And so I'd say all incremental revenue is being added via new.

Understood. Thank you, guys.

Great. Daniel, I believe you're on the line. Daniel Jester. I have a couple of Daniels.

Hey, good. I hope you can hear me. Good evening, everyone. Thanks for taking my questions. Can we just continue the conversation then about new Expensify? And so I think from a client perspective and a user perspective, I think this all is very clear. Is there a different monetization opportunity for new Expensify customers versus classic?

I can do a crack at this and see what Ryan has to say after that. So fundamentally, it's solving the same problem and it's solving it using the same servers and the same support team and the same sales team and everything. So the business model is fundamentally the same. I view it more as just a refinement on executing the fundamental business model. And by that, I mean, what makes Inc. specify special is not necessarily that it's, you know, it's Higgins, and so on. streamline the collaboration elements between humans and also bring in AI agents to do the works that historically humans had to do, the kind of the collaborative chatting elements, the light judgment elements and routing elements that historically humans had to do. And so it's the same fundamental business model. It's just much, much better at it. So, for example, Classic has always grown primarily through word of mouth and individual employees adopting the product before the boss. That just works way better than New Expensify because it's a simpler product to adopt. It's more like WhatsApp than it is like an enterprise tool. And you also don't need to use the app. You can just use email. And so the bulk of the market out there. is just using email and Excel. And so this is trying to meet people where they currently are by saying, it's like, hey, you like using email for your expenses? Cool, keep doing that. But rather than emailing a human, just email an agent. And then it's going to work the same for you, but now your accountant doesn't have to basically manually enter it into the accounting system. And so again, I would say fundamentally the monetization is The same from a business model perspective. The difference, however, is I believe it's going to have a much larger addressable market because it's a fundamentally different experience that appeals to the 99% of the market that just has consistently opted out of a traditional kind of like enterprise heavy kind of like web-based design. Anyway, that's kind of my crack at that answer. Ryan, I'm curious what you think. And I think you're on mute.

We are adding new monetization to the product. We launched a new feature called Consolidated Travel Billing, which is a new way we're monetizing travel. That's very new, but that's an exciting way to pull some more transactional revenue out of our travel product. We also recently launched a lot of AI features, and I think that some sort of usage-based monetization is um something you know we're heavily considering it's still early days there but I think that's something that um we're you know considering and nothing to announce today but we are looking at new ways to generate revenue and developing new product features also um Bill Pay is on the horizon, a lot of opportunities there. I think that we're going to continue to layer more monetization opportunities into the product on top of what we already have.

That is very helpful. Thank you. Maybe speaking of that, can we spend a moment around What you saw in terms of payment volumes and revenue this quarter, it looked like you saw an improvement in growth compared to the first quarter. And so what are you seeing there? And maybe any updates you're able to share in terms of the penetration of the card into the base and how that's been progressing.

So I think the card continues to do really well, which is, I think, encouraging because our probably our We have two kind of big marketing messages right now. One's really centered on AI, but another one is really pushing what we call BYOC, bring your own card. This is a marketing message that we have found to be very effective, especially with all the noise. Everyone has a card these days. We have found the message that you can bring your own card and use Expensify. One interesting aspect of Expensify is that we don't require you Neocard competitors, Grant Brex, and the like. You have to use their card. That's how they make money. So if you switch to them, you have to use their card. We don't require you to switch. We'd love to give you an Expensify card, but if you want to use your own card, that's great too. And there's a lot of people who don't want one of these Neocards. They like their card. They like their Amex. They like their Capital One, whatever they have, and they don't want to switch. So if you're one of those people, Expensify is kind of not only the best option, it's kind of your only option. So that message has been working really well for us. And I'm just pointing out that the card is continuing to grow, despite the fact that we're pushing all of our marketing efforts towards saying you don't need, you can bring your own card. So I think that's pretty interesting. And I think things are moving in the right direction.

And would you share anything about maybe what sort of compared to the first quarter, how second quarter payment volumes trended, any sort of high-level thoughts about what you saw?

I mean, they, you know, modest increase, right, quarter over quarter. So I think we're just consistently adding more volume quarter after quarter, and it just continues to grow.

And then one last one for me on maybe the pipeline in terms of how you're seeing travel. I know that's a little bit of a different sales cycle and I'd love to kind of hear how the ramping process is going there on the sales front. Thank you.

So we just launched, I mentioned earlier, a feature called Consolidated Travel Billing, which is... We'll see you next time. for travel and we have a huge list of customers that are basically waitlisted on it and we are now we have like a contest internally you know big push basically to get everyone onto this new feature that we just launched and it's quite lucrative for us so we are very excited about that and I think travel just continues to be something that brings us large customers and With these kind of larger enterprises. So we're still very excited about travel, and it's one of the pillars of our business.

All right. Thank you.

All right. That rounds out all our questions.

Great. Well, thank you so much for taking the time and talking with us here. It's been a really, really exciting quarter, and so I can't wait to talk more again in the future. So thank you so much.