Expensify Q2 2024 Earnings Call Transcript

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Provided by Quartr
August 8, 2024

Key Takeaways

  • Q2 revenue of $33.3M and 684,000 paid members were flat QoQ while interchange climbed 48% YoY to $4M, driving a 10% QoQ rise in free cash flow to $5.7M and an adjusted EBITDA of $10.2M.
  • Annual free cash flow guidance was raised to $15–16M from $11–13M, reflecting the impact of recent cost-cutting measures.
  • The new Expensify Card program, which earns 20% more interchange and treats interchange as revenue, has migrated 34% of card spend by quarter end, improving financial clarity.
  • New Expensify features—including built-in travel management and billing card capabilities—are launching in Q3 to establish additional revenue streams.
  • As a title team sponsor in Apple’s upcoming F1 film, Expensify has garnered over 600M impressions and roughly $100M in earned media coverage, amplifying brand awareness.
AI Generated. May Contain Errors.
Earnings Conference Call
Expensify Q2 2024
00:00 / 00:00

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Ryan Schaffer
Ryan Schaffer
CFO at Expensify

Welcome to the Q2 2024 Expensify Earnings. I'm Expensify CFO, Ryan Schaffer, and with me I have our co-founder and CEO. Sorry, I have our founder and CEO, not co-founder, David Barrett. But before we begin, 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 the comments on this call, are made only as of today and will not be updated as actual events unfold.

Ryan Schaffer
Ryan Schaffer
CFO at Expensify

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. With that out of the way, let's talk about the financials. In Q2, our revenue was $33.3 million. Our average paid members were 684,000.

Ryan Schaffer
Ryan Schaffer
CFO at Expensify

So the, these numbers have basically leveled off. They're effectively flat quarter-over-quarter. They're both within 1% of Q1, and also, our interchange was $4 million, which is a 14% quarter-over-quarter increase and a 48% year-over-year increase. Our operating cash flow was $9.3 million. Again, operating cash flow includes timing of customer funds, which can vary depending on when the quarter ends. Our free cash flow, which excludes the timing of customer funds, was $5.7 million, which is a 10% quarter-over-quarter increase, something we're very happy about. We've talked a lot about our cost-cutting measures, and we're pleased with the results that we're seeing. Our net loss was $2.8 million, but our non-GAAP net income was $5.6 million, and our Adjusted EBITDA was $10.2 million.

Ryan Schaffer
Ryan Schaffer
CFO at Expensify

Something we're very happy about. All right, now my favorite topic, Expensify Card. Quarterly interchange from the card grew 48% year-over-year to $4 million. And now my favorite subject is the Program Manager issue. So as you know, we've been transitioning our members from our old card program to our new card program. The new card program has two benefits. One, we earn 20% more interchange on every transaction, and also, under the new program, our interchange will be considered revenue instead of a contract expense and cost of revenue. So it cleans up the financial story, makes the financials easier to understand. So our net interchange was $3.5 million. Our interchange in revenue is $5 million for a total interchange of $4 million.

Ryan Schaffer
Ryan Schaffer
CFO at Expensify

So the way to kind of read this is $3.5 million on the old program, $0.5 million on the new program, total $4 million. We're also increasing our free cash flow guidance. Previously, our guidance was $10 million-$12 million for the year. Last quarter, we increased that to $11 million-$13 million, and now we're increasing our annual year guidance to $15 million-$16 million, which is a big jump, and I think a testament to the effectiveness of the discipline that we put into reducing our costs. Again, our free cash flow is $5.7 million, which is a 10% increase from Q1. As you know, we don't give paid member guidance, but we do show you the actuals from how the current quarter is going.

Ryan Schaffer
Ryan Schaffer
CFO at Expensify

So in July, our paid members were up to 689,000. If you look at the pink bars, they show this current July and then every July in the past. And normally July is a bit of a soft month. You'll see that it's. We generally see a month-over-month decrease, but this month we're actually up. So things. That's good news. So we're excited about that. All right, now let's talk about some business highlights. Our SEO keywords have increased 122% year-over-year. This is important because it's top of funnel. Basically, in order to be on the first page, you have to work your way there. So the progress across our long-tail keywords has been increasing quarter-over-quarter. So we're encouraged by the progress that we're seeing there.

Ryan Schaffer
Ryan Schaffer
CFO at Expensify

This is the more actual results. These are the keywords that are on the first page, which get almost all the clicks. We've seen a 57% increase quarter-over-quarter in our first page SEO keywords. Our content marketing strategy is working and working well and quickly. That's something to be encouraged by. Also, we continue to see a brisk improvement in our number of global reimbursement customers. Global reimbursement is important because we're a global company, and our customers want to reimburse their employees no matter what country they're in. These are generally larger customers being in many or if they're in the U.S., global reimbursement is important for, you know, large enterprise customers.

Ryan Schaffer
Ryan Schaffer
CFO at Expensify

But it's also important because it allows us to expand globally in countries that we normally struggled or we have historically struggled to grow in. So this kind of unlocks a more global opportunity. Additionally, you might have seen that we announced our partnership with Apple for their upcoming 2025 film, F1, which is expected to be a very successful blockbuster. We are the title team sponsor in that film. So as you can see in this Instagram post on the right, you see Mr. Brad Pitt with Expensify across his chest. So we are our name is on the car, it's on all the jerseys. It has a very big placement within the film, something we're very excited by. The movie is still filming.

Ryan Schaffer
Ryan Schaffer
CFO at Expensify

It doesn't come out until next year, and we've already gotten such great coverage and TV on both TV and online that we've reached over 600 million impressions. Additionally, due to the fact that we have such crazy good placement on all across the movie and how much buzz this movie is generating, our earned media coverage is estimated to be over $100 million at this point. For those of you not familiar with the term earned media, what that means is what would be the financial equivalent to get all the placement that we have gotten effectively for free due to all the buzz.

Ryan Schaffer
Ryan Schaffer
CFO at Expensify

So if you think about how much does it cost to have one of the biggest stars in the world, have their—our name on, their chest for months and months, and be, filmed by the paparazzi and covered on the news across, you know, the world. Also, all the placement that we're getting, during F1 races and all the YouTube, videos and everything that people are creating. They also released a trailer, which has been seen, you know, over 10 million times on YouTube alone, also across X and other social media. So the coverage that this has generated thus far is estimated to. It would have cost us $100 million to get that. Obviously, we didn't pay $100 million for that. So that's what earned media means. With that, I want to hand it over to our CEO, David Barrett.

David Barrett
David Barrett
Founder and CEO at Expensify

All right. Yeah, very excited about the F1 movie. I think that we've been talking about trying to create a roadmap that builds a sort of mixed consumer business application, and I think the timing is really working out perfect for us. That's good. All right. So, last quarter, we talked about just a bunch of functionality we're gonna build. And so pretty much, I don't have a lot to talk about, other than just say, like, we've done pretty much what we set out to do, and we kind of walk through some highlights there. So to start first, however, is just kind of a reminder of the overall strategy. Now, many of you have already seen this before. There's always new viewers, so let's just start with kind of the three secrets to Expensify success.

David Barrett
David Barrett
Founder and CEO at Expensify

First, we're trying to capture the 99% of the untapped market. So, of the 300 million businesses in the world, you know, less than 1 million actually use anything today, and so we're trying to go after a huge, huge global opportunity, as Ryan mentioned earlier. The only way to do that is through a viral, bottom-up, word-of-mouth lead gen strategy. You can't just top-down sale your way into 300 million businesses. There's just not enough salespeople in the world to do that. And so there are lots of companies that have gotten to 1 billion users, and the way they do that is with a viral strategy, and that's why we're all in on sort of the viral dynamics that are built in inherently to expense management. And of course, we monetize that with high margin monthly subscription.

David Barrett
David Barrett
Founder and CEO at Expensify

That's been our strategy all along, and it's worked really well for us. It's kinda like breaking into that market, that 1.3 billion untapped users. There's a huge fraction of the market that's basically under 250 employees. A huge market is under, like, 10 employees and so forth. And so we're kind of going for this giant VSB, SMB market. Now, of course, we still have enterprise customers and growing there and so forth, but we think the much bigger opportunity is actually to, you know, 100x the market size itself. And the way we do that is by leveraging the natural, inherent viral, sort of component of the various use cases of expense management.

David Barrett
David Barrett
Founder and CEO at Expensify

Expensify is fundamentally a chat application, mixed with a payment application, mixed with a document sharing application, and notably, all three of those are the most viral applications on the Internet. So we think that we can find the viral, sort of event overlap between these three different use cases, and that's what we're going to propel us into, you know, this, you know, massive, scale opportunity. So the way we do that is just kind of like map how that works is, we can say something like, you know, Alice, an individual consumer or an employee, submits an expense to Bob, who basically turns around and sends an invoice to Kathy, who splits that invoice with her roommates, and then maybe that one of those roommates, you know, books travel with their company.

David Barrett
David Barrett
Founder and CEO at Expensify

Every time you use Expensify as a product, you can't help but promote us to the people around you. That's the sort of the viral dynamic we're leaning into. And by building a super app that can leverage all these different applications in a single app package, then we can get sort of a super virality effect. That's, that's what we're going for. To kind of, you know, walk through some highlights of that. So first, we've been building this for a long time, and we're getting to the point where we're launching it, we're testing with real users, and we are preparing for just a much bigger migration away from our classic messaging of the past and towards our new messaging. And towards that, we're just about to release a new homepage. It's been A/B testing 1 million variations for a long time.

David Barrett
David Barrett
Founder and CEO at Expensify

Not the most exciting thing in the world, but it is a highly visible thing, so just want to give you a heads up. Also, I would say one of the most exciting things, which is kind of subtle, is we've built something we call our hybrid app. Now, recall that we have millions of users on our existing app. We're using the classic experience, and so in order to migrate them to the new experience, we don't want them to have to download an entirely new app, lose all of the SEO and review history and so forth that we have. But the new app is a complete rewrite. It's a completely different technology stack and everything. And so the way that we're sort of bridging that gap is we've made a hybrid app.

David Barrett
David Barrett
Founder and CEO at Expensify

We're in the process of upgrading all customers today to this new app that actually has both apps packaged inside of it, that you can switch back and forth between. Now, that sounds really easy. It's actually super duper hard, and so we worked very hard on that. We're very proud of it, and we're launching that right now. That's basically a key part of allowing for a reunification or basically this process of taking old customers and moving them to new experience. Next, something else we've been talking about, super excited about, we launched a full-fledged travel management system built into New Expensify. And so travel management, obviously, you know, travel and expense, it's like peas and carrots. They go together to the dawn of time.

David Barrett
David Barrett
Founder and CEO at Expensify

We have brought the travel management experience into the product, which is incredibly powerful. We think that it can scale up to the top of the market. It has very, very powerful functionality. It can go head-to-head with anyone else out there, and it's built into the same super app experience that everything else. Additionally, we bring our unique flavor to it as well, in that we are chat-enabling all this functionality. What that means is, typically, like, we, we like to say that we do travel and expense at the speed of chat, because historically, if you're doing any kind of a collaborative application online, you can only go as fast as the other person in the collaboration. If that collaboration is happening over email, that means that you're collaborating at the speed of email.

David Barrett
David Barrett
Founder and CEO at Expensify

I don't know about you, I am always days or maybe even weeks behind on my email. So that means that any collaboration that someone wants to do with me via email is super-duper slow. Expensify is a real-time chat application, and we're bringing that real-time chat functionality to all of our approval flows, especially travel approval. For example, imagine you need to, someone's requesting a flight, and in the United States, every flight gets 24-hour free cancellations, but only if you cancel in that 24 hours. So it's in the business's interest to have those approvals happen incredibly fast, faster than you can realistically get done via email.

David Barrett
David Barrett
Founder and CEO at Expensify

That's what we mean about moving at chat speed, not just for travel, but for all of our expense management, is just removing the delay in all of the collaboration process and bringing it onto a single platform that lets it happen so much faster. Because the only way to make expense management faster is not by just, you know, making the button click faster. We need to make the people involved act faster, and that's where the new design really shines. Also, just, you know, a lot of nuts and bolts work. I know, this might sound kind of boring, but now you can enter a billing card in New Expensify. Up until this point, it just was impossible to actually buy, but now you can buy.

David Barrett
David Barrett
Founder and CEO at Expensify

And so, what's exciting about this is we are in a position to begin generating revenue from New Expensify, starting in Q3. So we're very excited, and looking forward and optimistic for the future for adding New Expensify as a new revenue stream, as well as adding travel bookings as a new revenue stream. On top of that, more just sort of like nuts and bolts, Expensify's historical strength has been our incredibly good accounting connections, and so we're migrating all of it over to New Expensify. Now, you can connect to Xero, NetSuite, you know, QuickBooks, Intacct, all of these basically directly from inside of New Expensify. One of the most exciting features, I would say, has got to be our search platform.

David Barrett
David Barrett
Founder and CEO at Expensify

Now, we've always been talking about search and this idea of universal search and how cool it is, but you really get to get a sense of how cool it is when you sit down and use it. And that is, there's a lot of competitors out there that have a suite of kind of disconnected applications. That means, like, travel over here, then you sign into a different place for invoices, and maybe it's kind of like, you know, the same sign-in to get to different places, but they're fundamentally different experiences. Expensify is very different. It's a super app, meaning that all of these different data types and all these different applications exist within the same app container. And that means because we've combined all the data together, we can search it in a universal fashion. And we're not having just, like, very simple search.

David Barrett
David Barrett
Founder and CEO at Expensify

We're talking like Gmail-style Boolean search logic, where you can custom craft very, very specific searches for exactly what you want, and then save those searches for use later. And so we think that we're gonna bring the most powerful search experience across any expense management solution, bar none. And we're doing it because the super app design allows us to combine data into a single place, such that it can be searched together in a single place. Then maybe finally, as we're talking about essentially onboarding, and that because we're getting to a point where the core functionality is starting to work pretty good, we're spending more and more time on just the onboarding flows themselves.

David Barrett
David Barrett
Founder and CEO at Expensify

I started talking to the homepage, but also, when you sign up, we're adding things like welcome videos, concierges assigning you specific tasks based upon what you've indicated you wanna do, and things like this. And so we're just very excited to be moving out of the sort of R&D mode and more into a go-to-market mode. And so that's a pretty exciting thing that we're gonna talk more about in upcoming quarters. So overall, I would say that it's been a great quarter. I mean, like Q1 was good, Q2 is even better. And I think that it's nice that sort of, as Ryan mentioned, the core business itself is stable. It's basically like, you know, things are a strong foundation, and also our cash flow is growing, which is fantastic.

David Barrett
David Barrett
Founder and CEO at Expensify

I think we've delivered a tremendous amount of engineering progress on New Expensify, and we're in the process of actually rolling it out to existing customers, new customers, and also rolling it out in new travel markets, which is great. I would say, looking forward to Q3, we hope that New Expensify is adding an entirely new revenue stream. We hope that new Expensify Travel is adding an entirely new revenue stream. And we think that, as Ryan mentioned, that we can be making tremendous progress in migrating our existing Expensify Card spend onto a new Expensify Card program, which is treated as revenue and also earns 25% more in interchange. And so it's a lot of really exciting things in the works.

David Barrett
David Barrett
Founder and CEO at Expensify

As always, our product managers are available to talk more about any of this, and me too. Just like, scan this QR code, click this link, and come talk to us. With that, I think we'll open up to questions.

Moderator

Perfect. Okay, let's start with JPMorgan.

Analyst at JPMorgan

Hi, David. Hi, Ryan. I was wondering if you could comment a bit more on the dynamics that you've seen in July related to the slight uptick in the customer numbers. As you mentioned in the past, it would typically be a slow month. What drove the improvement?

Ryan Schaffer
Ryan Schaffer
CFO at Expensify

Yeah, it's a great question. Also, good to see you again. So in terms of what drove it, it's. I don't think it's any one thing. We've been talking, you know, for a lot of quarters about how we're making a lot of small changes, and I think it's not one specific thing. It's not, you know, just travel or anything like that. It's that we. It's the sum of, you know, a thousand steps, basically. And we think that, you know, I'm not going to say that we won't see decreasing users going forward, but I think we're pretty encouraged on kind of the leveling off in what we're seeing in July, so.

David Barrett
David Barrett
Founder and CEO at Expensify

Yeah, I mean, we did go to new conferences as well, and so we've been constantly messaging users and just, you know, just giving fan service to the people who use us, so I think it all adds up.

Ryan Schaffer
Ryan Schaffer
CFO at Expensify

Yeah. We've been getting a lot of buzz from the, you know, Apple movie as well.

David Barrett
David Barrett
Founder and CEO at Expensify

Yeah, that doesn't hurt either again.

Ryan Schaffer
Ryan Schaffer
CFO at Expensify

A lot of exciting stuff going on in Expensify Land.

Analyst at JPMorgan

Would you mind providing a bit more detail on this initiative? So when do you think we will see the expense related to the sponsorship hit the P&L?

Ryan Schaffer
Ryan Schaffer
CFO at Expensify

So, it's recognized when the movie comes out, so the-

Analyst at JPMorgan

So 2Q of next year?

Ryan Schaffer
Ryan Schaffer
CFO at Expensify

Yes. That's going to come out in June of next year. Yeah.

Analyst at JPMorgan

Okay, perfect. Would you be able to quantify it, at least ballpark?

Ryan Schaffer
Ryan Schaffer
CFO at Expensify

I am unable to do that, unfortunately.

Analyst at JPMorgan

Okay. And, it sounds like, there has been quite a lot of investment done, to ensure that, as David said, the two apps are working together, the release of new travel product, and you talked about moving out of the R&D mode. When do you think we'll see more pronounced, optimization of, the R&D expense?

David Barrett
David Barrett
Founder and CEO at Expensify

Oh, interesting, Amor, are you talking about how are we optimizing the R&D's expense itself?

Analyst at JPMorgan

Well, your comment, David, about the fact that you are coming out of the R&D mode, does that imply that R&D may?

David Barrett
David Barrett
Founder and CEO at Expensify

Oh, great question. I didn't mean to suggest anything specific about R&D expenses. I just mean that... Because I think, maybe I know you're referring to an accounting term. I just mean in terms of, like, we're optimizing the sales process, which involves a different kind of R&D. It's basically R&D for, streamlining the ability for people to onboard, as opposed to R&D to enable people to make payments. Just kind of different in that way. I don't know if that.

Ryan Schaffer
Ryan Schaffer
CFO at Expensify

Yeah. Just for most people probably understand this, but for people that don't, when you launch a product and you keep working on it, that's no longer considered R&D, it's considered a cost, cost of revenue. So the same people who are fixing things or building things on, you know, the day before, and then they have to fix on the day after, that it's no longer an R&D expense. But internally, we still would consider that person, you know, building a new product.

David Barrett
David Barrett
Founder and CEO at Expensify

Yeah.

Analyst at JPMorgan

If I may squeeze one more question, please. The comment about revenue coming in in 3Q for New Expensify, would you be able to quantify your estimate on that? And maybe a more broader question, what sort of metrics are you looking at to get you some comfort in order to provide longer-term guidance for revenue and other than before?

Ryan Schaffer
Ryan Schaffer
CFO at Expensify

So I think it's too early to give a revenue number on New Expensify. Less than $1 million, like, significantly, probably between around... I'm not going to do it, but, it's not going to be a huge amount, right? But way more than significant. Anyways, and so what was the second part of the question?

Analyst at JPMorgan

The long-term guide that you stopped providing.

Ryan Schaffer
Ryan Schaffer
CFO at Expensify

Oh, yes. Okay. I think as the business becomes more predictable, we'll. Obviously, we've started giving some guidance on Free Cash Flow, and I think our goal is to provide more guidance in general. I think we need to see a little bit more stabilization or a longer period of stabilization in the business before we feel comfortable doing that, but that's top of mind for us, for sure.

Analyst at JPMorgan

Yeah. Any specific metric, if any?

Ryan Schaffer
Ryan Schaffer
CFO at Expensify

Oh, how do we measure the success of New Expensify? Yes. Okay. So, essentially, we are measuring. There's kind of two flows for that we get business. There is bottom-up, where the employee downloads it first, brings it in to the business, then they convert, and that generally doesn't involve any sales. The employee basically acts as the salesperson there. And then, a top-down, which is more traditional SaaS process, where someone at the top talks to a salesperson. So we are tracking both conversion of both of those flows, and then doing that for our two payment plans, which are Collect and Control. So there's basically two different segments, smaller businesses and larger businesses. So we are. Those are the, do you agree those are the four?

David Barrett
David Barrett
Founder and CEO at Expensify

Yeah. I mean, there's a lot of different ways it all kind of adds together, like different, you know, creeks all flowing to the same river. But maybe we can follow up more in different calls.

Analyst at JPMorgan

Sure. Sounds great. Thank you very much for following on this. So bye. Until today.

Moderator

Perfect. Next up, we have Citi.

Analyst at Citi

Hey, thanks. This is George on for Steve. Thanks for taking the questions, David and Nick. I wanted to ask about Nick, your favorite topic, the new Expensify card program. Really exciting that it's rolling out. I did want to get some clarity. The 34% of spend migrating, that's a really helpful disclosure. I did notice that you also disclosed kind of $0.5 million out of $4 million from the new program, which seems like less than a third. I mean, maybe there's some complications with timing, but I guess I would intuitively expect it to be higher, given you're collecting more interchange. Kind of, can you help square the circle there?

Ryan Schaffer
Ryan Schaffer
CFO at Expensify

Absolutely. Just for the transcripts and everything, this is Ryan. Nick's our head of IR.

Analyst at Citi

Sorry, Ryan and David.

Ryan Schaffer
Ryan Schaffer
CFO at Expensify

Yeah, I just. I don't want the transcripts to get confused. So, great question. I thought we might actually get that question. So the 34% is representative of what percentage of our spend had been transitioned over at the end of Q2. But in order for it to be exactly 30% total revenue, we would have had to start the quarter there, because at the beginning of the quarter, it was like 10%. So it, it's a transition over a 3-month period. So at the end of the quarter, we've transitioned 34% of spend, but a lot of that actually happened in the last, I think, like 25 days of the quarter.

Analyst at Citi

Yeah.

Ryan Schaffer
Ryan Schaffer
CFO at Expensify

But that's why it looks like it does, 'cause we put out some banner notices and push notification stuff in the app, and that was super effective at pushing people over.

Analyst at Citi

Yeah.

Ryan Schaffer
Ryan Schaffer
CFO at Expensify

So that's. Does that make sense for you? It's a timing.

Analyst at Citi

Yeah, that makes perfect sense. I figured it was just a timing thing. And then in terms of that spend that's migrated over, I know kind of baseline, we'd expect a 20% uplift, but I'm kind of wondering, part of the appeal here is that there's more features on the new card program. Do you notice any kind of change in terms of, like, transaction volumes from people who have migrated over?

David Barrett
David Barrett
Founder and CEO at Expensify

I shouldn't know. Maybe a bit early for that?

Analyst at Citi

Yeah.

Ryan Schaffer
Ryan Schaffer
CFO at Expensify

Most of the people have migrated over in the last, like, 60 days, so it's tough, I think, to draw.

Analyst at Citi

Yeah

Ryan Schaffer
Ryan Schaffer
CFO at Expensify

Some sort of trend there, but.

Analyst at Citi

That's when I look at.

Ryan Schaffer
Ryan Schaffer
CFO at Expensify

In general, I mean, I think when we get a company's spend, we get most of their spend.

David Barrett
David Barrett
Founder and CEO at Expensify

Yeah. It's pretty all or nothing.

Analyst at Citi

Okay, that makes sense. And then just one last one for me on the decision to kind of come back to the conference circuit. Maybe you could talk about maybe the history of why you left that channel in the first place. Obviously, you have a lot more products, New Expensify, a lot of exciting stuff to talk about. So just maybe the decision to come back there and any kind of implications from an OpEx standpoint?

Ryan Schaffer
Ryan Schaffer
CFO at Expensify

We never stopped going to conferences. We did stop going to corporate travel conferences once. So back in 2016-ish, maybe 2017, we were going to travel conferences because we had integrations with people like Egencia, which, you know, got bought by Amex. And, you know, we were trying to be the expense partner to a whole bunch of travel booking tools, and that was moderately successful, I'd say. I mean, it generated business, but.

Analyst at JMP

Yeah

Ryan Schaffer
Ryan Schaffer
CFO at Expensify

Didn't knock our socks off, so we stopped going to those, and now we have our own booking tools, so we're kind of reengaging on the travel side after taking an 8-year hiatus. And in terms of OpEx, I don't see it dramatically changing anything. There's not a ton of travel conferences. There's a ton of accounting conferences, but not as many travel conferences, so.

David Barrett
David Barrett
Founder and CEO at Expensify

Yeah

Ryan Schaffer
Ryan Schaffer
CFO at Expensify

I don't think it really shifting the, I don't think you'll notice it really.

Analyst at Citi

No, why not?

Analyst at Citi

Great. Thanks for taking the questions.

Ryan Schaffer
Ryan Schaffer
CFO at Expensify

Thank you.

Moderator

Perfect. We've got JMP up next.

Analyst at JMP

Hey, thanks for the questions, guys. It's Hugh Cunningham. So the first one, how much of the initial travel demand you're seeing for travel is greenfield versus replacing another vendor? And who are you bumping into there when it is competitive?

Ryan Schaffer
Ryan Schaffer
CFO at Expensify

First of all, great to hear from you, Aaron. Hope you're enjoying New York. That is a great question. So we're actually seeing both. So obviously, greenfield is an easier sale.

Analyst at JMP

Mm-hmm.

Ryan Schaffer
Ryan Schaffer
CFO at Expensify

You know, they see it, oh, wow, this is incredible. How do we start? The sales a little slower when you're doing a rip and replace, but we're getting a lot of enthusiasm from even people who currently have a current travel tool.

Analyst at JMP

Mm-hmm.

Ryan Schaffer
Ryan Schaffer
CFO at Expensify

And also, we're seeing a lot of companies, new leads come to us.

Analyst at JMP

Mm-hmm

Ryan Schaffer
Ryan Schaffer
CFO at Expensify

... because they saw a travel announcement, and I think it's. In the 2010s, I think it was very popular or in vogue to have a whole bunch of different point solutions.

Analyst at JMP

Yeah.

Ryan Schaffer
Ryan Schaffer
CFO at Expensify

This is the best in breed of this and this and this and this. And, you know, fast-forward 10, 12 years, the technology's gotten easier, and having a platform doesn't necessarily mean your product sucks. In 2010, if you had multiple products, your products were pretty terrible. That's not really the case anymore, and I think platform plays are becoming more popular.

Analyst at JMP

Mm-hmm.

Ryan Schaffer
Ryan Schaffer
CFO at Expensify

Since we've announced T&E, travel and expense, we're seeing a lot of customers kind of, or a lot of leads come out of the woodwork being we want both.

Analyst at JMP

Mm-hmm.

Ryan Schaffer
Ryan Schaffer
CFO at Expensify

So I think it's not just about cross-selling, it's also just been great from bringing new eyes onto Expensify.

Analyst at JMP

Yeah.

Ryan Schaffer
Ryan Schaffer
CFO at Expensify

We have a lot of brand strength and recognition, but we didn't do travel. For a lot of companies, that's kind of a deal breaker, and now we do travel, so, you know.

Analyst at JMP

Yep

Ryan Schaffer
Ryan Schaffer
CFO at Expensify

They're engaging.

Analyst at JMP

Awesome. That's really helpful. And New York is wonderful, but like, you know, Ryan, there's no place like Ohio. The second question, can you clarify for us on the public call? You have a stock repurchase plan authorized. You're generating cash. You have over $30 million in net cash on the balance sheet. Valuation is still near an all-time low. How does the covenant with your lender that restricts share repurchases work? What's the waiver you've received from the lender? And is buying back shares right now something that you can do with that covenant and something that you're considering, if so?

Ryan Schaffer
Ryan Schaffer
CFO at Expensify

Okay, great question. So for the people that don't dig deep into our disclosures, we have a covenant with our lender that limits how much we can, how many shares we can buy back. Now, currently it's quite low because it's based on a 12-month look back on free cash flow. And last Q3, we spent a lot of money, so that's kind of pulling that down. So we expect after this next Q3, that covenant will be loosened up, and we'll have the ability to buy back more.

Analyst at JMP

Got it. Thank you so much.

Ryan Schaffer
Ryan Schaffer
CFO at Expensify

Which is a comment that we're going to, but it's,

David Barrett
David Barrett
Founder and CEO at Expensify

Give, give it away.

Ryan Schaffer
Ryan Schaffer
CFO at Expensify

Yeah.

Moderator

Great. Next up, we have BMO. Do we have Daniel or Kyle on the line? All right, let's hop over to FT Partners.

Analyst at FT Partners

Hey there, guys. Thanks for taking the question here. I just wanted to ask on the cards. I think in the press release, it was said that you're planning on getting 100% by the end of the year. So is the plan then to whatever cards haven't been converted to basically forcefully shut them off and ship out new cards? Or kind of what's the strategy, you know, to get to that 100% conversion rate?

Ryan Schaffer
Ryan Schaffer
CFO at Expensify

Yeah, great question. So we're seeing... So the number we said was at the end of Q2, right? So that's like a 45-day-old number. So we're seeing great progress, even since then. We do think we're probably going... I think what you're basically angling at is we'll probably get to a very high percentage, and then some percentage will not do anything, right? So we haven't decided if we're gonna shut off the cards or not. We don't want to, but I think it— we're gonna try to get there just through some aggressive... Hopefully, they're not listening, but we're probably not going to shut their cards off.

David Barrett
David Barrett
Founder and CEO at Expensify

Don't tell them.

Ryan Schaffer
Ryan Schaffer
CFO at Expensify

Yeah, don't tell them. But we're gonna just try to, you know, through account managers and kind of aggressively be like, "All right, we gotta ship them over." 'Cause the last thing we want to do is disrupt some business operations, get them all angry, and then they decide to leave us or something like that, right? So we're trying to move everyone with smiles and carrots and, you know, spare the stick.

David Barrett
David Barrett
Founder and CEO at Expensify

Yeah, I mean, ultimately, these cards do eventually expire, and so they'll be forced to migrate over one way or another. We're just trying to accelerate sort of the inevitable timeframe.

Analyst at FT Partners

Got it. That makes sense. And then I was just wondering if there's any update on payroll. I think that that was a discussion a few quarters ago, looking at, you know, specific licenses. And so I just wanted to see if there's any updates there.

David Barrett
David Barrett
Founder and CEO at Expensify

Sure. I mean, so payroll, we still use it internally. We've got most of the money transmission licensing in place. I think right now, we're just primarily focused on the core business. We have basically the technology and the accounting basically in place, but there's a lot of front-end work that needs to happen to make it truly competitive in this market, and there's no interest in, like, launching an uncompetitive product. As Ryan mentioned earlier, it's one thing to be able to, like, you know, check the boxes, that you, like, technically, you've got a product, and then it's, like, that's the first 90% of the work, if you will. But then, like, the second 90% of the work is actually making it really good and market competitive.

David Barrett
David Barrett
Founder and CEO at Expensify

I think we're in that second 90% right now. And I don't think we have an exact estimate of when we'll be launching a truly competitive product, but when we do launch it, it's gonna be good.

Ryan Schaffer
Ryan Schaffer
CFO at Expensify

And we're also waiting two MTLs.

David Barrett
David Barrett
Founder and CEO at Expensify

Yeah, there are a couple left. That's true, and they're big ones, so yeah.

Analyst at FT Partners

Right. So I think last we talked, it was New York and maybe one other still staying, so that makes sense. Okay, that's all for me. Thanks, guys.

Ryan Schaffer
Ryan Schaffer
CFO at Expensify

Thank you.

Moderator

Great. That wraps the Q&A section.

Ryan Schaffer
Ryan Schaffer
CFO at Expensify

All right. Thank you to all very much. As David mentioned, we are actually in the Expensify Live chat room if you want to discuss with us further. I know, in the past, we've had a lot of retail traders come in and talk to us, but you don't have to be retail to come in and talk to us. Anyone can.

David Barrett
David Barrett
Founder and CEO at Expensify

Yeah.

Ryan Schaffer
Ryan Schaffer
CFO at Expensify

So we welcome our institutional friends as well, but, we're actually in there, so if you want to talk to the CEO, go to this link, and, we're there to engage with all of our customers or shareholders. So thanks a lot, and we'll see you next quarter.

David Barrett
David Barrett
Founder and CEO at Expensify

All right, thanks, everyone.

Executives
    • David Barrett
      David Barrett
      Founder and CEO
    • Ryan Schaffer
      Ryan Schaffer
      CFO
Analysts
    • Moderator
    • Analyst at Citi
    • Analyst at FT Partners
    • Analyst at JMP
    • Analyst at JPMorgan
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