Q4 2021 Expensify Inc Earnings Call

They call it unauditive and during the course of this call management may make forward looking statements within the meaning of the federal securities law.

Yes.

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.

These statements are based on management's current expectations and beliefs and involves risks and uncertainties that could cause actual results to defer 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 available only as of today and will not be updated as actual events unfold.

Forward looking statements in the earnings release that we issued today along with the comments on this call are made available only as of today and will not be updated as actual events unfold.

Please refer to today's press release and our findings 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.

Each of her 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 GAP. Please refer to today's call.

We also note that on todays call management will refer to certain non-GAAP financial measures why do 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 reconciliation of these non- GAAP financial measures to their most comparable GAAP measures . And with that,

Or the Investor presentation for a reconciliation of these non-GAAP financial measures to their most comparable GAAP measures and with that I'll turn it back to you David.

Speaker Change: Thank you for that fascinating introduction. So we are coming to you live from the San Francisco lounge. And so we have the whole dream team here to discuss any questions might have. We're going to go through all of this and then each analyst is going to have one question one follow up. And so let's get started.

For the SaaS introduction. So we are coming to you live from the San Francisco Lounge, and so we have the whole dream team here to discuss any questions. You might have we're going to go through all of this is in each analysts is going to have one question one follow up.

So let's get started.

Speaker Change: So, as a reminder, since bias majors plan for launch with success hinges on basically three major pillar, like one is that we have a huge untapped market opportunity. The second is that we have a unique bottom up adoption model and third that we're going after this huge, huge billion user opportunity.

So as a reminder, <unk> major.

Planning for launch was success hinges on basically three major pillars. One is that we have a huge untapped market opportunity.

Is that we have a unique bottom up adoption model and third that we're going after the huge huge billion user opportunity.

Speaker Change: So they're kind of reviewing to those in turn as a start. The market is huge and largely untapped. If you just sum up basically all of the customers of all the competition, we're talking about, you know, 1% of the actual companies in the world. And so the way that we view it is the opportunity is largely untapped. And so the differentiation for expensive buys that we are going after the whole market using a radical visit.

So the kind of review each of those in turn as we start the market is huge and largely untapped. If you just sum up basically all of the customers of all the competition, we're talking about 1% of the actual companies in the world and so the way that we view it as the opportunity is largely untapped and so it's a differentiation for expensive buys that we're going after the whole <unk>.

Using a radical business now one thing we're going to talk about.

Speaker Change: Now, one thing we're going to talk about a little bit more is that we're doing a lot right now to sort of expand growth in a few different ways. Now, you know from the roadshow and a bunch of other videos and so forth, that we have a bottom up adoption model and things like this. New things that we're adding to that basically, we've dramatically expanded our advertising. If you're new to the top 20 cities in America, you've probably seen our ads.

A little bit more is that theyre doing a lot right now just sort of expand growth in a few different ways, but you know from the road show and a bunch of other videos and so forth that we have a bottom up adoption model and things like this new things that we're adding to that basically we have dramatically expanded our advertising the journey of the top 20 cities in America, you've probably seen our ads everywhere. We've also Washington frequently.

Speaker Change: We've also launched a new free plan, which basically is allowing you to adopt the Accentify card and do reimbursements for free. The freeest free plan on the market, if you will. And so this is the kind of the two most visible things, if you will, to go after this beachhead or the VSB. But what you might not know is that we're doing a tremendous amount of work inside to go after the sort of the green field opportunity.

Basically is allowing you to adopt the expense by card and new reimbursements for the three years to three plan on the market. If you will and so those are the kind of the two most visible things. If you will as regards to this beachhead.

The VSP, but would you might not know is that we're doing a tremendous amount of work inside.

Go after the sort of the Greenfield opportunities one is that we've expanded our account management organization and this is basically pairing our top partners and customers with a dedicated point of context. So every customer can of course always reach out to our concierge service and get fast effect of 24, 7% or when do you want that personal touch and you're going to establish a long term relationship.

Speaker Change: One is that we've expanded our account management organization and this is basically pairing our top partners and customers with dedicated points of contact. So every customer can of course always reach out to our account year service and get fast, effective 24-7 support. But you want that personal touch and you want to establish a long-term relationship. Now we're expanding our ability to provide that in a per customer base.

Now, we're expanding our ability to provide that on a per customer basis.

Speaker Change: Second is that we've, for the first time, added outbound call, we've never really done this in the history of the business is an entirely new capability.

Is that for the first time it had an outbound call.

We've never really done this in the history of the business is entirely new capability for US. It is one advantage that we have is we have individual users and over 1 million businesses around the world and so as a result, we have basically our inside guidance.

Speaker Change: Because one advantage that we have is we have individual users in over a million businesses around the world. And so, as a result, we have basically our inside guy that's championing expensive by internal and so we can use this as a tremendous sort of owned asset, if you will, to call into businesses around the world and grow the business.

Championing expensive five internally as we can use this as a tremendous sort of owned asset if you will turn to call into businesses, where around the world and grow the business third we've really reinvesting in our channel program. As you know we've been in extensive partnership with the approved accounting channel and basically be a CPA is around the world.

Speaker Change: Third, we've really reinvesting in our channel program. As you know, we've been in extensive partnership with the Approved Accounting Channel and basically the CPAs around the world. Towards this, we've actually launched an entirely new card focused exclusively on CPAs. These are a card for CPAs and their clients.

Towards this we've actually launched an entirely new card focus exclusively on CPA. These are the best.

A card for CPA is and their clients. So there's a lot going on inside the business some of which is visible from the outside so much ism.

Speaker Change: So there's a lot going on inside the business, some of which is visible from the outside, some which

Speaker Change: Now, as a reminder, our major differentiation, yes, our product is great and cards, awesome and all of that, but the major difference between expensive and everyone else is our business models completely different than everyone. Well, we have what we call a bottom up adoption model where.

Now as a reminder, our major differentiation, yes, our product is great in karnes Austin that all of that but the major difference between expense behind everyone else is our business model is completely different than everyone. Well, we have what we call our bottom up adoption model where individual.

Speaker Change: individual employees will adopt the product internally without asking permission, without asking for advice, and actually just using the Expensify to promote Expensify inside the product, turning their expense report into a highly targeted marketing message directly to the decision maker. This is a radical departure from everything else in the industry and it's uniquely expensive.

Individual employees will adopt the product internally without asking permission without asking for advice and actually just using expensive Hajj promote expenses inside the product turning their expense report into a highly targeted marketing message directly to the decision, making this is a radical departure from everything else in the industry and its uniquely expense.

Speaker Change: And likewise, as we mentioned, this opportunity is huge and it's much bigger than business. We're going after the full market, not just as the enterprise scale, but also having a consumer-growing design that can actually solve all of the financial burdens of individuals doing, you know, bachelor parties, going to Burning Man, whatever it might be. There's a complicated series of financial transactions that happen inside, outside, between businesses, and this sort of quasi-business side hustle zone. And we're aiming for all of them.

And likewise as we mentioned this opportunity is huge and it's much bigger than the business.

We're going after the full market not just as the enterprise scale, but also having a consumer grade design that can actually solve all of the financial burdens of individuals doing Bachelor parts go into burning then whatever it might be a complicated series of financial transactions to happen inside outside between businesses and this is sort of quasi business.

Good Hustle zone, and we're aiming for OLED.

Speaker Change: We have a global reach, not just support for currencies, but support for receipt types across the entire world. We have not just our own native card, but also native travel. You can talk to concierge and book travel, book hotels, fights, whatever it might be. And all of this comes for free. We're the only company in the market that can make all of these claims. So, and maybe the finalize, we think it's a good idea.

Our global reach not just support for currencies, but support for a receipt types across the entire world. We have not just our own need a card, but also need a travel you can talk a concierge and book travel book hotels flights whenever it might be and all of this comes for free we are the only company in the market that can make all of these claims.

So.

And maybe the finalized.

That there is a true billion user opportunity here, we think that it's Instagram can link 1 billion people took photos, we can like 1 billion people two months, but this doesn't happen with a normal this doesn't happen with a series of solutions that are targeted towards the back office. We think the only way to approach. This is by building a platform that consolidates all of these payments opportunities.

Speaker Change: We think that if Instagram can link a billion people to photos, we can link a billion people to money. But this doesn't happen with a normal product. This doesn't happen with a series of point solutions that are targeted towards the back office.

Speaker Change: We think the only way to approach this is by building a platform that consolidates all of these payments opportunities and these payments flows into a single, seamless experience. And so that's what we're focusing all of our energy on. Extensify is all in on this billion user opportunity. And to invest in Extensify is to be a believer that that opportunity exists.

I'm just seeing flows into a single seamless experience and so that's what we're focusing all of our energy on incentivize all in on this 1 billion user opportunities and to invest in expense by us to be a believer, but that opportunity is real.

Speaker Change: So with that, let's talk about where we're going right now. All right, all the good stuff. So let's talk about how Q4 performs.

So with that let's talk about what was on lineup.

Alright, all the good stuff so let's talk about how Q4.

Performed.

Speaker Change: As you can see on screen, it was our best quarter in terms of paid member growth since the start of the pandemic, something we're very excited about.

As you can see on screen. It was our best quarter in terms of paid member growth since start of the pandemic something we're very excited about.

Alright.

Speaker Change: Last quarter we said that we were predicting revenue to come in between $38.2 million and $39.2 million. What we actually came in at was $40.4 million, so that is above expectations. In terms of paid members, we were expecting somewhere between $673,000 and $691,000. We came in at $711,000.

Last quarter, we said that we were predicting revenue to come in between $38 2 million and $39 $2 million, where we actually came in and that was $40 4 million. So that is above expectations in terms of paid members. We were expecting somewhere between 673690 1000, and we came in at 711000 so.

Speaker Change: We actually we gave this guidance kind of late in the quarter, so we didn't sandbag these numbers. We actually just had an incredible end of the quarter, which pushed up the numbers beyond what we were expecting. So that's great for us. As you know, we have a very reliable subscription, annual subscription business, and then a kind of a variable pay per use. Those are customers that

We actually we Dave.

David's guidance kind of late in the quarter. So we didn't sandbag. These numbers, we actually just had an incredible end of the quarter, which pushed up the numbers on beyond what we were expecting so that's great for us.

As you know we have a very reliable subscription our annual subscription business and then it kind of a variable pay per use those are customers that.

Speaker Change: Sign up without an annual subscription or just existing customers exceeding their annual subscription. So the overage and we had a huge influx of that overage that we were anticipating, which is why we have these above expectation numbers.

Sign up without an annual subscription or just existing customers exceeding their annual subscription. So the overage and we had a huge influx of that bridge that we were anticipating which is why we have these above.

Above expectation numbers.

Okay.

Some other numbers to point.

Point out.

Speaker Change: For Q4, we had 57% year-on-year revenue growth. We increased our paid members in Q4 by 44,000, a very exciting number for us. Our annualized revenue, our ARR for Q4 is 161.6 million.

For Q4, we had 57% year on year revenue growth.

We increased our paid members in Q4 by 44000, a very exciting number for us our annualized revenue our IRR for Q4 was $161 6 million on.

Speaker Change: On a gap basis, we had a $21.9 million loss, but on a non-gap basis, so if you take out stock-based comp and the IPO bonuses, which I'm going to touch on in a second, we had a $4.4 million non-gap net income and a $7.3 million adjusted EBIT

On a GAAP basis, we had a $21 $9 million loss on a non-GAAP basis. So if you take out stock based comp and the IPO bonuses, which I'll touch on in a second we had a $4 4 million non-GAAP net income and a $7 3 million adjusted EBITDA.

Speaker Change: I've talked a little bit about the IPO bonus again, so we talked about it last quarter. You might recall that I said that we had to actually accrue this over multiple quarters, so part of it is in Q3, part of it is in Q4, so we'll explain the impact in Q4. The good news is we don't need to worry about this. We're not IPOing again, so we won't be talking about the IPO bonus going forward. This is the last quarter where we've got to deal with that.

I talked a little bit about the IPO bonus again, so we talked about it last quarter.

Recall that I've said that we have actually crews over multiple quarters. So part of it is in Q3 part of it part of it is in Q4. So we will explain the impact on Q4. The good news is we don't need to worry about this from the IPO and again, so we won't be talking about the thinking about it going.

Going forward. This is the last quarter, where we got to deal with that.

Speaker Change: All right. So, here's how we calculate the non-GAAP net income, because we got a lot of questions about that last time. So, we had a GAAP 21.9 million net loss. You add back in 12.1 in stock-based comp, 14.2 in the IPO-related bonus. That gets you to the 4.4 million non-GAAP net income. Jumping over to adjusted EBITDA, negative 6.9 million dollars in adjusted EBITDA. Add in that bonus again, you get 7.3 million in adjusted EBITDA.

Alright, so here's how we calculate the non-GAAP net income because we've got a lot of questions about that last time. So we had a gap of 21 9 million net loss you add back in $12, one and stock based comp.

$14 two in the IPO related bonuses that gets you to the $4 4 million non-GAAP net income.

Jumping over to your adjusted EBITDA six.

$6 $9 million and adjusted EBITDA add in that bonus again, you get $7 3 million and adjusted EBITDA.

Speaker Change: All right, so let's talk about, that was Q4. Let's just look at some of the highlights for fiscal year 21.

Alright, so let's talk about those Q4, let's just look at some of the highlights for fiscal year 'twenty one.

Speaker Change: We did $142.8 million in revenue, that's a 62% year-on-year revenue growth over 20. Our interchange grew 185% versus the prior period, and we continue to increase the efficiency of our employees. We are now doing $1.1 million in annualized revenue per employee, which is, you know, higher than what we had in the roadshow or previous.

We did $142 8 million in revenue at the 62% year on year revenue growth over 20.

Our interchange grew 185% versus the prior period and we continue to increase the efficiency of our employees. We are now doing a $1 1 million in annualized revenue per employee, which is higher than what we had in the roadshow of previous quarters.

Talk about the numbers keep getting more exciting.

Speaker Change: Talk about the numbers keep getting more exciting. On the fiscal year 21, we had a net loss of $13.6 million. But when you look at our adjusted EBITDA, which excludes stock-based comp and the IPO bonus, we actually had $58 million in adjusted EBITDA, which is a 41% EBITDA margin, something that we are very proud of. And on a rule of 40 basis, that's 103%, so something definitely worth celebrating.

The fiscal year 'twenty, one we had a net loss of.

$13 6 million.

But when you look at our adjusted EBITDA, which excludes stock based comp and the IPO bonus, we actually had $58 million and adjusted EBITDA, which is a 41%.

EBIT margin is something that we are very proud of and on a rule of 40 basis, that's 103% so something definitely worth celebrating.

Okay.

Alright, now lets talk about guidance for Q1.

Speaker Change: You'll see that we have our previous guidance range and we are expecting it. We are giving you an increase in ranges here. So, in Q1, we are expecting revenue to come in between 39.6Million and 38.6Million.

Youll see that we have our previous.

Guidance range and we are expecting.

We're giving you an increase in our ranges here. So in Q1, we're expecting revenue to come in between $39 6 million and $38 6 million.

Speaker Change: And for paid members, we are expecting between $684,000 and $702,000.

And for paid members, we are expecting between 684700 in 2000.

Speaker Change: All right, now I want to talk about long term guidance today. You know, that we've only been given quarterly guidance. We'd like to actually issue long term guidance now.

All right and I want to talk about long term guidance to date that we've only been given quarterly guidance, we'd like to actually issued long term guidance now.

Speaker Change: We're finding that revenue is growing sustainably at between 2 and 3% month on month. And we are seeing that pay for use that I mentioned, we're seeing some volatility there kind of driven by macro events of the pandemic trends and business travel due to the war, but so that is making our pay for use numbers.

We're finding that revenues growing.

Sustainably at between 2% and 3% month on month, and we are seeing that pay per use that I mentioned.

We're seeing some volatility that are kind of driven by macro events of the pandemic.

Trends in business travel due to the war, but so that is making our pay per use numbers.

Speaker Change: more volatile than they have been in the past. So what we would like to do is we're going to start issuing a long term guidance and that's going to be twenty five to thirty five percent long term growth guidance. That's the growth level that we believe we can sustain over a multi year period. And we are going to cease the quarterly guidance because that has become more of a exercise in management.

More volatile than they had been in the past so what we would like to do is we're going to start issuing our long term guidance and thats going be 25% to 35%.

Long term growth guidance.

The growth level that we believe we can sustain over a multiyear period and we are going to cease the quarterly guidance because that has become more of a exercise and managements.

Speaker Change: trying to predict global macro events, and that has become increasingly tough with how the world is looking nowadays. So we would like to spend this time that we have with you all talking about our long-term growth and how we're going to drive that long-term growth versus debating whether there's going to be a new strain or if there's going to be more kind of a national...

Trying to predict global macro events and is becoming increasingly tough with.

The World is looking nowadays so we would like to spend this time that we have with you all talking about our long term growth and how we're going to drive that long term growth.

Debating, whether theres going to be a new strain or.

It's going to be.

More kind of.

National event.

Speaker Change: That is actually all the material I had. Now we're going to jump over to a new who's going to kick off our Q and a first we have Sterling.

That is actually all the <unk>.

Material I had now we're going to jump over to new who is going to kick off our Q&A.

First we have sterling from Jpmorgan.

Okay.

Okay.

STING: You would think by now we would get the unmute button.

You would think by now we would get the unmoved button.

Now corrected.

STING: Corrected, got it. Can you just maybe you touched on it in the last part of your comments but talk a little bit about the seasonality in the pay user given the expectation that this quarter is going to finish with fewer average paid members than what you did in the fourth quarter. Yeah.

Can you just maybe you touched on it in the last part of your comments, but talk a little bit about the seasonality in the paid user given the expectation that this quarter is going to finish with fewer average paid members and what you did in the fourth quarter, yes.

Okay.

Yeah.

STING: There we go. So you'll see it is actually an increase from the guidance we gave you before. We did have an influx of oversubscriptions pile in at the end of literally the last two weeks of the year, which drove those numbers up.

Alright, so youll see it is actually an increase from the guidance. We gave in Q4, we did have an influx.

Oversubscription pilot at the end of the last two weeks of the year, which drove our.

Those numbers are higher so.

STING: From our perspective, we are seeing, you know, our guidance is increasing, but we did see that influx at the end of Q4, and that was unexpected. We're not expecting that in Q1, so I would go off of the guidance that we're providing here. And maybe also to chime in on that, I would say, normally we don't see the last two weeks of December , which is a holiday period as being like a major growth opportunity, but.

From our perspective, we are seeing our guidance is increasing but we did see that influx at the end of Q4 and that was an unexpected we're not expecting that in Q1.

Go off into the guidance that we're providing here and maybe also to chime in on that I would say.

Normally we don't see the last two weeks of December which is a holiday period as being like a major growth opportunity, but Q4 was kind of special in the sense that it was the first clean quarter. We've had for very long time I think the Q4 is a reflection of how the visit power performance when the world of normal evidenced in open up.

And there are no major Atlanta, whereas in Europe and people looking towards the end of endemic and so I think that Q4 gives a good glimpse of kind of what kind of future, we expect and how things behave when the world of normal.

But.

Speaker Change: that the abnormality of the macro trends throws a lot of volatility into that pay-per-use and then that sort of compromises some of this complexity for forecasting. Siddharth? I think we have now one follow-up. Sterling, do you have anything? Yeah, I unmuted myself so you could answer and there'd be no background noise and then it wouldn't allow me to unmute, so. Tricky. All right, so then the second part is, at the time of the IPO, we had talked about pandemic and the way we built our models around this.

We've seen that the abnormality of the macro trends towards a lot of volatilities that pay per use and that sort of a compromise on some of this complexity for forecasting.

Speaker Change: Thank you very much.

Speaker Change: I think we have one follow-up, Julie, if you have anything.

Did that.

We are number one.

Yeah.

Speaker Change: Yeah, I unmuted myself so you could answer and there'd be no background noise then it wouldn't allow me to unmute so tricky. All right. So then the second part is, you know, at the time of the IPO, we had talked about, you know, pandemic and the way we built our models around business travel, really recuperating more towards pre pandemic levels.

Yes, Im muted myself. So you could answer that would be no background noise. It wouldn't allow me Dubuque.

It's tricky.

Alright. So then the second part is at the time of the IPO, we had talked about Pandemics and the way we built our models around business travel really recuperating more towards pre pandemic levels, probably in the back half of 'twenty. Two is there any change in your viewpoint in terms of I know you wanted to get away from the quarterly gyrations.

Speaker Change: probably in the back half of 22. Is there any change in your viewpoint in terms of I know you want to get away from the quarterly gyrations of forecasting macro. But based on what you've seen so far we still have to build our models.

Forecasted macro but based on what you've seen so far we still have to build our models do you think there is still anything different there.

Speaker Change: Do you think there's still anything different with Omicron, war, etc. That would prevent that pickup from getting there by the second half?

Omicron War et cetera that would prevent that pickup from getting there by the second half. So we think Q4 is actually a great example of how the business I think David said functions normally in Q1, we saw a surge in <unk> January was actually the peak of the pandemic and its coming back down so I do think that.

Speaker Change: So we think Q4 is actually a great example of how the business

Speaker Change: Like David said, functions normally in Q1, you know, we saw a surge in Omicron, who January was actually, you know, the peak of the pandemic and now it's coming back down. So I do think that again, the pandemic isn't forever. There's been these kind of.

Again, the pandemic has been forever, there's been these kind of.

Speaker Change: Hard to predict flare ups that we saw in Q1, but Q4, I think is a great example of everything was trending downwards. Everything's opened up. And then we kind of saw a, a regression, maybe a little bit in, in Q1, but obviously we don't think that it's going to be permanent going forward. Yeah, I think we're getting back in track.

Hard to predict flare ups that we saw in Q1, but Q4 I think is a great example of everything.

Everything was trending downwards everything's opened up and then with time.

Our regression, maybe a little bit in in Q1, but obviously, we don't think that its going to be.

Permanent going forward, yes, I think we're getting back on track.

Understood. Thank you.

Speaker Change: Thank you. OK, OK. So next we have Tanika from Bank of America, and I believe we haven't spoken to you before, so welcome. Welcome.

Thank you Okay at least the next we have <unk> from Bank of America, and I believe we havent spoken camber cornerstone and welcome welcome.

Hello can you hear me.

Tanyika: Yeah. Thanks for having me. Goji is actually in Hawaii right now, so I'm on for him.

Yes, thanks for having me.

He is actually in Hawaii right now.

For him.

Tanyika: So we've been seeing our signage outside of SF. We went to Seattle for an analyst day to see good success there with investing outside of the metropolitan like around the US. It's one of the understand how are you guys thinking about investing for growth? Has the investment profile changed since the IPO? And yeah, just trying to get at the spending environment. So we've been taking a great sense of that and how to think.

So we've been senior finance outside of Isa <unk> Fernandez day to seeing good success there.

Interesting.

Tired of the Metropolitan.

The U S and just wanted to understand how are you guys thinking about investing for growth has been rising profile changed since the IPO and.

Yes, Im just trying to get at the timing and magnitude and we'd be taking prices up.

And how do you think about it going forward.

Speaker Change: Great question. So I think that maybe it's kind of touching on what we discussed before in general.

Great question. So I think that maybe it is kind of touching on what we've discussed before in general So the answer to basically any question, we have more or less is that.

Speaker Change: The answer to basically any question you have, more or less, is that whatever we've been doing is working, and we're going to keep doing it. So we make small changes over time, and so we don't make big shifts in general. And so I would say, in general, we don't feel that our overall business model strategy needs any kind of changes. We think that it's already designed for a full market approach. And so it works incredibly well outside of metropolitan areas. It works internationally. It works basically everywhere people

Whatever we've been doing is working on regulatory so we make small changes over time and so we don't make big shifts in general and so I would say in general we don't feel that our overall business model strategy needs any kind of changes. We think that is already designed for a full market approach and so it works incredibly well outside the metropolitan areas.

It works internationally, what's basically everywhere people are.

Speaker Change: And so the basis of my answer is no, not much has really changed in how we are fundamentally planning and growing along the way.

So the basis of my answer is no not much has really changed and how we are a fundamentally planning growing along lines that said, we do obviously tweak the formula and as I just wanted to touch again, what I mentioned earlier, we have increased advertising, especially in metro areas, but also thats like podcasts. This digital there's a wide variety of things that go into that so you can see us based.

Speaker Change: That said, we do obviously tweak the formula a little bit, and that's sort of going to touch again what I mentioned earlier. We have increased advertising, especially metro areas, but also that's like podcasts, there's digital, there's a wide variety of things that go into this. And so you can see us basically anywhere people are, or anywhere people are looking, that's where we are as well.

<unk> anywhere people are or.

And where people are looking that's where we are as well.

Speaker Change: We're expanding our account management. Now, again, this is not new. We have always provided hands-on account management for customers. We're just making that more widely available. We're adding, outbound is new, basically calling people in a more sort of proactive fashion. So that's a new approach. And that does reach outside of those metro areas a bit more. We've done basically some direct mail as well. For example, contacting CPAs around the nation, which are basically in every state.

Spanning our comp management now again this is not new we have always provided hands on account management for customers. We're just making that a more widely available for adding outbound is Neil basically calling people.

In a more sort of proactive fashion. So that's a new approach and that does reach outside of those metro areas. The more we've done basically some direct mail as well for example.

Contacting CPA is around the nation, which are basically in every state.

Speaker Change: More channel partner and growing through the accounting firms, which is again, that necessarily limits bias towards metro areas, just because population spenders are, but again, it's everywhere. And the free plan is really about just making the work approachable on rank for customers of all sides. And so none of these I would say is.

More channel partner in growing through the accounting firms, which is again not necessarily limits bias towards metro areas as biggest population centers are but again it's everywhere.

The free plan is really about just making the work approachable on ramp for our customers of all sizes and so none of these I would say is a dramatic.

Speaker Change: A dramatic change, none of them is specifically targeted outside like to new markets. Our model has already been targeting a global marketplace. Yeah, thoughts on that. Yeah.

Change Nonetheless, specifically targeted the upside select new markets. Our model has already been targeting a global marketplace.

Thoughts on that.

Okay.

Any follow ups finito.

Speaker Change: Yeah, just just a quick follow-up. Is there any update on the visibility on the market or contract? Will it get gained? So we're going to move into gaps and timeline on visibility on that would be helpful. Thanks. Yeah, a good question. So we've made actually a tremendous amount of operational progress on that and we're still on track to get it all done so we can kind of clean up our financial statements this year. So the ETA is still 2022. We've

Yes.

Quick follow up if there's any update on the visibility on the market our contract when it came to move into GAAP.

Timeline.

And again that would be helpful. Yes.

Yes, a good question. So we've made actually a tremendous amount of operational progress on that and we are still on track to get it all done. So we can kind of clean up our financial statements. This year.

DTA till 2022 please.

We are still not.

Speaker Change: So close to it that I can give you a better timeline, but maybe next earnings release, we can tell you a little bit in more in detail.

So close to it that I can give you a better timeline, but maybe next earnings release, we can tell you a little bit.

And more in detail.

Okay.

Hel: Thank you so much, of course, thank you. Next up, we have Tyler from city.

That's helpful. Thank you so much.

Next up we have Tyler from Citi.

Hel: Great, can you hear me okay? Yeah, how's it going, Tyler? Hey, doing well, thanks. So,

Great can you hear me, Okay, Yes, I was going to Iowa.

Hey, I'm doing well thanks.

So.

Hel: I guess I just wanted to better understand the comments on

So I just wanted to better understand.

The comments on <unk>.

Hel: what you saw at the end of Q4 and then in terms of the influx of paid members.

What you saw at the end of Q4, and then in terms of the influx of paid members.

Hel: And then I guess specifically what is driving the drop-off into Q1, so was this

And then I guess specifically.

What is driving the drop off in Q1. So is this was this budget flush was this just kind of in response to promotional activities and then are those members going away in Q1 or is this just kind of the answer Greg typical seasonality that you see Q4 to Q1.

Speaker Change: You know, was this budget flush, was this just kind of in response to promotional activities and then are those members going away in Q1 or is this just kind of the typical seasonality that you see Q4 to Q1, just because it's a softer travel time. Yes, so that's a great question. So this is not a turn off of customers or anything like that. It is.

Because it's a softer travel time, yes. So that's a great question. So this is not a <unk>.

Churn off of customers or anything like that.

It is.

Speaker Change: A decrease or any kind of the volatility of the paper use members. So again, we saw an unprecedented level of customers exceeding their subscriptions in the back half of December , which is traditionally kind of a quiet time for us. And we don't predict that level of a pay-per-use surge in Q1, especially in light of what we've seen with Omicron in Q1. So that's, that's we've

A decrease or any kind of the volatility of the paper use members. So again, we saw an unprecedented level of customers exceeding their subscriptions in the back half of December which is traditionally kind of a quiet time for us.

And we don't predict that level of pay per use surge in Q1, and especially in light of.

What we've seen with our kind.

Q1, but we.

Speaker Change: adjusted are the guidance appropriately. But also by definition because it's paper use and it's overage and customers use it when they see the need, it's much harder to predict.

Adjusted our guidance appropriately, but also by definition because it's pay per use in overage and customers use sick when they see the need it's much harder to predict.

Speaker Change: When we say we don't anticipate it, there's nothing that tells us that we're going to keep seeing that sort of paper you search, but we might, we might not like it literally is a total unknown. Yes, the core revenue growth is very reliably very sustainably growing at a solid two to 3% rate. It's the.

When we say we don't anticipated.

Anticipated if nothing that tells us that we're going to keep seeing that sort of people use search, but we might we might not like literally a total unknown, yes the core.

Growth is very reliably very sustainably growing at.

A solid 2% to 3% rate.

Speaker Change: exceeding the customers exceeding their subscriptions, which is difficult to predict, especially in light of kind of what's going on in the world.

Exceeding that customers exceeding their subscriptions, which is difficult to predict especially in light of kind of what's going on in our roadmap.

Speaker Change: Right, but the customer is exceeding the subscription, that's kind of more revenue volatility versus average paid member volatility, right?

Right the customers exceeding the subscription that wouldn't that's kind of more revenue volatility volatility versus average paid member volatility right.

Speaker Change: The paper use numbers are in the total paid members, so it's most simple.

So people use numbers are in the total paid members so it moved them.

Speaker Change: I see. Okay. And then, um, this is what we think about, um, maybe some of the new new product initiatives. So obviously you, you know, this free plan was, it was announced recently. Um, I guess, first, is that, is that having any cannibalization on the paid users? And then, secondly, um, any just early, uh, updates on the invoicing and bill pay?

I see okay.

And then.

This is when we think about.

Maybe some of the new product initiatives. So obviously you. This free plan was it was announced recently.

I guess first is that is that having any cannibalization on the paid users and then secondly.

And he just early.

Dates on the invoicing in Bill pay.

Speaker Change: So I'd say, so first off, no, it's designed not to cannibalize basically the free plan, the paywall was calibrated to basically ensure the people who are currently paying keep a and so no, it's, this is adding a new group of customers, especially card holders that are generating interchange, but they're actually just not paying any subscriptions and so no, it's not cannibalizing it's purely added.

So I would say so first off no. It's designed not to cannibalize basically the pre plan. The paywall was calibrated to basically ensure that people who are currently paying get paid and so no. This is adding a new group of customers.

Especially cardholders that are generating interchange.

But they're actually does not paying subscriptions and so no it's not cannibalizing it's purely additive.

Speaker Change: As to the second part of that and sort of a traction with invoice and bill processing. I don't know that we've split any of that out quite yet, but we're very, very pleased with the growth of both of those. I think that.

That's the second part of that and sort of.

Traction with.

Invoice and Bill processing I don't know that we are splitting that out quite yet, but we're very very pleased with the growth of both of those.

Speaker Change: very much as a platform playing, perfecting the art of cross-selling these different use cases into a existing customer base. And so I think once it becomes more material, like my, you know, over 10%, I think is what we typically say, then we'll probably break it out. But at this point, it's still under that threshold. One maybe tip that we can give you is we've seen in Q4, we've had over 3,000 customers, new customers sign up for the free plan, which is

Thats very much I'd say, it's a platform play and perfecting the art of cross selling is different use cases into our existing customer base and so I think once it becomes more material with like for like over 10% I think is what we typically say that then we'll probably break it out but at this point, it's still under that threshold one.

Maybe typically we can give you is we've seen in Q4, we've had over 3000 customers new customers sign up for the free plan, which is.

Speaker Change: really exciting traction for how little it's been out and obviously we're

Really exciting traction for how little it has been out and obviously, we're going to continue talking about the free plan and the progress the best next quarter as well it is very encouraging and something that we're all excited by here yes.

Speaker Change: Continue talking about the free plan in the progress of that next quarter as well. It's very encouraging and something that we're all excited about here. Yeah. Thank you. Cool. Next, if we have.

Thank you.

Next we have Brent from pipeline.

Hi, Brian .

Speaker Change: Hello. Good afternoon. A couple questions if I could. I guess David, for you, we'll start things off here. I was actually on my first return to travel trip actually this week in Vegas, and there were a lot of people there. Quite a few people more than I anticipated. I guess as we just think about your business as we think about,

Hello, Good afternoon, a couple of questions. If I could I guess, David for you will start things off here I was actually on my first.

We'll return to travel trip actually this week.

At <unk> in Vegas.

There were a lot of people there.

Few people more than I anticipated I guess as we just think about your business as we think about paid members maybe just walk through expectations around this return to travel if we do see it coming back earlier in the year would you see that trend quick question towards.

Speaker Change: paid members, maybe just walk through expectations around this return to travel. If we do see it coming back earlier in the year, would you else see that trend towards SMB? Is it a little bit different expectation versus maybe some of these bigger conferences where they're larger,

SMB is a little bit different than expectation versus maybe some of these bigger conferences, where there are larger.

Speaker Change: you know, enterprise-oriented companies that showed up at the shop doctors.

Enterprise oriented companies that showed up at the shop talk this week.

Speaker Change: Yeah, those are all great questions. And so I think that you're absolutely right in the sense that there are these indicators, leading indicators, that things are coming back to normal. Like just last night, we went out to a team dinner with about, I don't know, like maybe 15, 20 people there. And I was sitting there and I talked to the person sitting next to me, I'm like, this is the most people I've had a dinner with in two years. And I'm looking around, the bar's packed, everything's, I'm like, this feels so weirdly normal. And that's just like a tiny tidbit of like, that was a business dinner. Like, that guy put down an expense card, that generates revenue and it's an active thing. Or even if we think about Q4, like I remember, I booked a Disney cruise for me and my seven-year-old daughter before we knew anything about Omnicron. And so I remember Q4 was like a brief window of hope and joy. And then basically as we got closer and closer to December , everyone's just like, oh my gosh, should we even go on this trip? And as we're pulling into port, all their ships are basically shutting down and being turned away. And so it's like, Q4 was a weird time, but it's a reminder of like, we can get back to normal.

Those are all great questions and so I think that you're absolutely right in the sense that there are these indicators or leading indicators that things are coming back to normal like just last night, we went up to her team dinner with about I don't know like maybe 15 20 people there.

Sitting there to talk to the person Thats been like this is the most people I've had a dinner with in two years and I'm looking around the bars packaging is unlike this feels so weirdly normal and that's just like a tiny inhibitor like that was that was a business dinner.

Put down on our intensified card that generates revenue and it is an active thing.

If we think about Q4 like I remember I booked Disney cruise for me in my seven year old data.

Before we knew anything about omnicom and so I remember Q4 was like a brief window of hope and Joy and then basically as we got closer and closer to December but it was like Oh My gosh, we even go on this trip and and as we're pulling into port. Other ships are basically shutting down being turned away and so it's like Q4 was a weird time as a reminder, Mike.

We can get back to normalcy and I think that we're seeing that again now like this now these indicators are positive indicators are like Bud in spring.

Speaker Change: And I think that we're seeing that again now like these, these indicators are positive indicators are like, you know, bud and spring, like it's coming back. Now, when you ask about like conferences specifically, I know that we have a robust conference season this year, much more than previous years. And so I think we've just speaking for ourselves and our own sort of like marketing, we're much more active in the conference circuit than we have in the past.

It's coming back now when you ask about in our conference and specifically I know that we have a robust conference season. This year much more than previous year, and so I think we've.

Just speaking for ourselves and our own sort of like marketing we're much more active on the conference circuit than we haven't in the past.

Speaker Change: Um, I think we're seeing conferences in the past, we're basically like partially virtual and things like this. And now they're actually, nope. It's actually fully in person, a vaccine mass mandates are going away that increases sort of this more participation.

We are seeing conferences in the past, we're basically like partially virtual and things like this and now they are actually no. It's actually fully in person. That's in mass mandates are going away to increases sort of this more participation. So these are all sort of anecdotal again like him and Thats, how <unk> I can't tell you what the <unk> going to do but I do think that.

Speaker Change: So, these are all sort of anecdotal again, like I'm, I'm not found to you. I can't tell you what the pandemic is going to do. But I do think that if from our perspective, we see far more signs for hope and optimism in the upcoming quarters.

From our perspective, we see far more signs for hope and optimism in the upcoming quarters and there is a pessimist.

Speaker Change: helpful color. I guess then for for Ryan, obviously historically this has been a very profitable business. And just wanted to pick your brain here as you think about the coming year ahead. Walk me through your your view around where could

Helpful color on I guess then for for Ryan.

Obviously historically this has been a.

A very profitable business.

And just wanted to pick your brain here as you think about the coming year ahead.

Walk me through your view around where could.

Speaker Change: free cash flow kind of be, what are intentions there? Where could EBITDA be going forward? Just trying to think through the path back to generating a meaningful amount of free cash flow and EBITDA going forward. Just trying to think through that equation here as on a four-year basis. Thanks.

Free cash flow kind of be what are your intentions there.

EBITDA will be going forward, just trying to think through the path back to generating a meaningful amount of free cash flow and EBITDA.

Going forward, just trying to think through that equation here.

On a full year basis.

Yes.

Speaker Change: When the pandemic started, we had pulled back on a lot of our spend and as we see kind of the economy waking back up, we have ramped up our spend accordingly.

When the pandemic started we had pulled back on a lot of our spend and as we see kind of the economy. We can back up we have ramped up our spend accordingly and.

Speaker Change: we feel that, you know, for 2022, we're probably going to be spending more than we spent in 21. So I do think that we're going to be very profitable in 22, but maybe if I had to

We feel that for 2020, we're probably going to spending more than we spent in 'twenty. One so I do think that we're going to be.

Very profitable in 'twenty, two but maybe.

If I had it.

Directionally give you an indication that's probably less than what we were in 'twenty. One just because our spend will be ramped up for the entire year instead of kind of incrementally as the year goes on.

Helpful. Thank you Colin.

Yeah.

Next up we have pack and GMP.

Speaker Change: All right, great. Thank you. Congratulations, you guys. So I guess I'm going to follow up where Brent just left off. You gave us sort of long term revenue guidance. How should we think about the bottom line and the gross margins for the long term?

Alright, great. Thank you.

Congratulations you guys. So I guess I got a follow up where Brent just left off you gave us sort of long term revenue.

<unk>, how should we think about.

On the bottom line and the gross margins over the long term.

It's a good question I think we did that during dimension.

<unk> changed.

Operational targets.

Target the long term targets that we have.

We've discussed in the past I think we're about the same rate that might vary a little bit but fundamentally not much has changed in the business. We have increased our sales and marketing spend so I think we will see.

Speaker Change: those margins go down, but in general, the overall economics of the business are still very strong, very profitable.

Those margins go down but in general the overall economics of the business are still very strong very profitable.

Speaker Change: Okay. You want just for the benefit of people who don't know and who are on this call. You want to just tell us what they are. The

Okay do you mind, just for the benefit of people, who don't know.

On this call I want to just tell us what they are.

The.

Of which margins.

Well I'll start with your long term bottom line either.

Speaker Change: I believe it's 30%, I believe, is what we indicated in the past.

I don't have the Susquehanna I believe it's 30% I believe is what we indicated in the past.

Speaker Change: Right. Great. And then obviously we're above that right now, but we think in the long term, it's going to probably trend more towards 30%.

Great.

And then Rob.

We were above that right now, but we think long term, it's going to probably trend more towards 30%.

Speaker Change: And Dave, for you, what do you, you know, smaller businesses have a lot of options. What do you view as the biggest competitive threat, and what's the plan to counter it? Good question. I mean, I don't think.

Okay.

And Dave for you what do you.

Smaller business does have a lot of options.

Do you view as the biggest competitive threat and what's the plan to counter it.

Good question I don't think I don't.

Speaker Change: I don't think anything's really changed. I mean, I think that if you look at the competitive environment, we have more clones of the same kinds of competitors, whether there's like one or 10 of the same business, it's basically the same thing. And the sum of all of them is still just like the same sort of like the same kind of concept.

Nothing has really changed I mean, I think that if you look at the competitive environment. We have more close of the same kinds of competitors, whether it is like one or 10 of the same business. It's basically the same thing and the sum of all of them is still just.

The same sort of like the same kind of concept and so I'd say by and large we don't think that the competitive environment is like meaningfully change we have more names, perhaps is more market confusion and so that can drive.

Speaker Change: And so I'd say, by and large, we don't think that the competitive environment has meaningfully changed. We have more names, perhaps, there's more market confusion. And so that can drive, the benefit of advertising is to cut through some of that noise, if you will. But fundamentally, we don't think the business model has changed. We don't think the opportunities changed. We don't think the strategy needs to change. Fundamentally, it's about getting to the customer first. And we think that a viral word of mouth model is

The benefit of advertisers cut through some of that noise. If you will but fundamentally I don't think the business models change, we don't see the opportunities change building our strategy needs to change fundamentally it's about getting to the customer first and we think that a viral word of mouth model is still unquestionably the best and most scalable and cost effective way to get.

Speaker Change: still unquestionably the best and most scalable and cost effective way to get to the broader market. If there's more players and sort of the shallow end of the pool, that doesn't really affect anything in defense.

The to the broader market if there's more players in sort of the shallow end of the pool that doesn't really affect anything on the dividend.

Alright, great. Thank you guys.

Okay.

Speaker Change: Next up, we have Mark from Loop Capital. Hi, can you hear me okay? Yeah. Okay, great. Well, thank you for taking my call. Going back to the margins, you know, with respect to the 25 to 35% long-term margin guidance, not margins, excuse me, revenue guidance that was given, how should we think about long-term? Should we, is it two years, five years, and then why not just provide annual guidance for that? Good question.

Next up we have mark from loop capital.

Can you hear me okay.

Okay, great well. Thank you for taking my call going back to the margins with respect to the 25% to 35% long term margins or margins excuse me revenue guidance that was given how should we think about long term.

Two years five years, and then why not just provide annual guidance for the good question. So.

Speaker Change: When we say long-term, we actually mean a multi-year period, so.

When we say long term, we actually mean, a multi year period. So.

Speaker Change: The company, before the pandemic, we had a basically 10 years, very predictable, up into the right growth. And the last two years have been very weird. But in general, we feel very confident in our ability to deliver these ranges over multiple years. So you say two, five? I think that sounds great.

The company before the pandemic, we had between 10 years Barry.

Aerie predictable up into the right growth in the last two years have been.

Very weird, but in general we feel very confident in our ability to deliver these these ranges over multiple years. So you say two five I think that sounds great.

Okay, great. Thanks, and then.

Speaker Change: Moving on here in the current environment pricing increases or price increases are on, you know, pretty much everyone's mind these days. What are your thoughts on the potential for a price increase coming year.

Moving on here in the current environment pricing increases where price increases are on pretty much everyone's mind. These days what are your thoughts on the potential for a price increase.

Coming here.

Speaker Change: So I think we have no immediate plans for a price increase. We have surveyed customers, and we know that compared to the basket functionality that we replace, but if you were to purchase each point solution, I think that's actually an incredibly attractive price point for what it would take to replace it all. But currently, we think that we're at a great price. We think it provides an extreme amount of value, and we want to continue just penetrating more and more

So I'd say, we have no immediate plans for a price increase we have.

Surveyed customers and we know thats compared to the basket functionality that we replaced if you were to purchase each point solution I just mentioned is actually incredibly.

Attractive price point for what it would take to replace it all but currently we think that we're at a great price. We think it provides an extreme amount of value and we want to continue just penetrating.

Speaker Change: throughout the world. So I think that that is a lever we can pull, but it's not one we intend to pull in the short term. Yeah.

More and more businesses throughout the world. So I think that that is a lever we can pull but it's now when we intend to pull in in the short term yes.

Okay, great. Thank you that's helpful.

Speaker Change: I think we're cool too. Well, it's been a real pleasure. We'll see you here again. Same at that time. Save that channel. One quarter from now. So, there's nothing else? Any other questions? No? Again? Great. Well, it's been a real pleasure. Thank you so much and Godspeed. Thank you, everyone.

Well I think Lear.

Go well.

Well, it's been a real pleasure, we will see you here again same at that time and shape that channel one quarter from now so.

And the questions now again, great well, it's been a real pleasure. Thank you so much and.

Okay.

Thank you everyone.

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