Expensify Inc. Q1 2023 Earnings Call
March.
<unk> insight to a huge range of small to medium businesses with a huge collection of employees taken together now again reiterating that when you look at the small and medium business market and if you're looking at a company that has a top down sales driven business model, it's not easy.
Or at all possible to profitably acquire the small and medium business segment. So you need a product led growth model you need a viral adoption model and that's why we have an interest.
Next slide.
So just a quick recap on how the bottom up adoption model works. So extensive phase one of the few products out there that solves a real pinpoint to a largely ignored segment of the market. That's the employees. So employees have a genuine need and we are the only ones that.
Our product to continue to cater to this audience.
Even when their company has not adopted the product so an employee can download the app use it for free and because it solves a real pain point for them and for free they end up telling their friends. They end up filling their family anybody that they know who positive job who likely have the same standpoint, so what ends up happening.
If large swaths of individual users are using us for a business use case, sometimes it ends up being various groups within the company and so this is a tidal wave that ends up taking the company with it and we are able to convert this company into a paying customer without ever reaching them with a salesperson and that's really the <unk>.
At the bottom up adoption model it can be executed at scale across the market because it doesn't depend on us increasing our head count or spending feels stronger summit.
Next slide.
So why did we acquire companies, whether they're small or it is relatively small our philosophy has always been to never let a customer ever outgrew us. So we are really the only product that a three.
Caters to an individual and still have consumer grade UX, but at the same time. We also have enterprise level skills. We have cross sell capabilities that we have a rich suite of features and we also have global reach.
Next slide.
And you've seen this slide many times, but you know this is a robust roadmap and as you see more and more you noticed that more and more features that are great, which means they are planned become green, which means they're in beta and then go on to becoming blue, which means they're not fully launched.
And the way to read this again is to go from left to right anything on the far left is aimed at getting more viral lead generation into the platform and anything on the far right. The aimed at making the product, making a subscription richard for existing and targeted companies who are our customers.
Next slide.
So having recapped on the long term strategy and the value proposition of the company I want to give you a few strategic Q1 updates before I pass it I'll pass it onto Orion for financials.
So there are three things I wanted to talk about today.
Next slide.
The first one is our accounting channel and we've talked about this China with you many times, but again as a reminder, we considered this channel to be our gold mine. That's because every accountant has the ability to bring us hundreds of customers who in turn represent thousands of paid members for us now.
Not only is it a question of skin. It's also a question of quality because these companies are generally set up by the accountants, who is well versed in industry best practices and we also train them. So they are well versed in our products best practices. So these companies are ideally set up.
And so they become extremely easy to support photos and also as a result.
Very easy to retain for this high retention in this channel.
Now there are two things we've done and we've talked about in the past as well one as we've assigned a partner monitor to the 500 or so accounting firms that are already on our platform and beef partner managers are all expensive by employees and their job really is to give peace accountants, one on one support.
The onboard new customers and white glove support again as customers ended up having issue sort of needs to.
<unk>, they're set up because they're growing so on and so forth. So we keep this challenge very warm we keep them very little support it because it is a great opportunity for us to disproportionately grow our paid members.
We're also hosting expense account fee and of course as the name indicates you've done it twice in the past and the idea behind this to bring and this one is going to bring 140 of the industry's leading experts to cancun and large funds and we're going to bring them to Italy, and we have thought leadership sessions trading.
Best practices understanding their pain points, even more so we can fine tune our product to them and of course to have a good time, because nothing else breed loyalty is a good time to get that right.
So that's the accounting channel.
Next slide.
We are also working on our sales efforts and we've talked about this again in the past every quarter because we've been working on it quite consistently but this effort and this update always leads to a lot of questions.
Around we're still fits in with our bottom up adoption model and product approach models. So I want to address that head on.
The.
The way, we think about our growth opportunity the shining star of our growth story is really bottom up adoption, it's product led growth.
But we think of product led growth in fiery growth sort of like sailboat. When the wind is tie everything is exponentially foster.
And when <unk> can be thought off besides a lot of other things one of the primary drivers of this macroeconomic conditions. So of course right now given the macroeconomic conditions wind up a little bit low and what would be great. What is a very good business is the ability to supplement that growth with something consist.
<unk>.
Something studying albeit modest and that's what we consider our sales efforts to be it's sort of like a motorboat the supplement the wins in our fields and when the wind is slow we want to be able to depend on the motor boat to keep going and when the wind comes back we can go much faster one once again.
So that's but that's the strategic goal behind building the sales program. It's not intended to replace vibrant growth. It is not intended to even go head to head with it. It is intended to supply a consistent backup now.
Now all that said, let's talk a little bit about the results. We've been working on this for a little over a year.
Or str's, who are really the agents that we've hired and we've been using a flexible outsourced model for all of it as a reminder, but our STR. So really the people that we've hired who hit the phones and Paul Prospect list and get us more direct outbound E jet volume and.
We've been ramping up this program more recently and you can see the really kind of.
Settled into a rhythm in the first quarter of 2023, and you can see here from the green bars that are incoming need pipeline is growing very healthily as a result.
We also continue doubling down on our guides program and you might know that externally at the our setup specialists and theyre there.
Job is to absorb these incoming needs and to convert them better and better. So we've been tracking the abuse. The guide when and how many paid members deconvert and what's been really encouraging us every month in the first quarter of 2023.
The number of paid members in the number of deals that are setup specialists have been able to convert has been consistently doubling so every month, it's doubled versus the previous month, which again is a very encouraging leading indicator for growth and just these efforts overall.
Next slide.
Now last but not the least I wanted to come back to work are you going to do for product led growth now of course, the macroeconomic conditions are not under our control, but it is cyclical and what goes down must come up just like what goes up must come down.
So ignoring that for a second we want to be ready with is as the market sooner.
Hubbard, we want our entire product road map to be complete we launched and Polish now that is a very ambitious goal because we have a pretty robust roadmap as we've shared with you in the past and so what we've done is leaned on an external contributor community some more outsourced engineering resources to stop them.
Our engineering team and this crop shows you the number of jobs the number of people.
The number of engineering hours that we have been able to use the external community for.
And the idea behind this is not just to use them to launch new products New features but to also lean on them simultaneously to keeps finding and fixing bugs. So that we can move fast without breaking things or at least without completely damaging the quality of the products that we are building.
And.
Again as a reminder, the point of you think contributors is to go fast when we want and slow down and when we don't need to go so fast so when you hire.
A lot of engineers, you are kind of bearing the cost on your income statement for a really long time and you know at the risk of it.
Diamond Gene morale, you can see that employees go and hire them back quite as fast or as the market has shown us that doesn't really work because other companies doing that makes the headlines and extremely bad press too.
So what we do with this contributor community and there are no contracts, we basically just work with them on a per job basis. So we are able to sort of expand and contract much more nimbly and that's the idea behind it. So those are the three major updates are approved channel our accounting channel.
Our sales channel and our contributor community and.
All of them.
All of the progress we've made in the first quarter has been very encouraging and we think of it as really setting us up for success as we go into 2023.
So with all that out of the way I'm going to pass it back to Brian to run us through the financials.
Great. Thanks, Dan.
Everyone is happy to see everybody again, I'd like to take you through the Q1 financials.
Okay.
So revenue was $40 1 million that is just a pan her down year over year, but one thing to consider is that.
Our cashback as Contra revenue so as the card continues to grow and it has been growing quite nicely that actually pulls down that revenue number if you were to Jeff.
Just for cash back you would see that revenue is actually higher we have higher.
More users than we had last year, but actually the card is more successful bolt on revenue. So we get a flattish slightly down revenue year over year.
Our average paid members for 747 up about 6% year over year, and our gross interchange $2 3 million for the quarter, which is up 80.
5% year over year. So the car continues to grow quite nicely despite Ken.
Headwinds elsewhere in the next.
Next slide.
Our operating cash flow was $7 6 million, our free cash flow was $10 2 million, which are quite happy about our GAAP net loss was $5 9 million or non-GAAP net income was $4 1 million and the difference again between gap.
GAAP net loss and non-GAAP net income is stock based compensation.
And our adjusted EBITDA was $8 7 million.
Alright, so let's talk about what happened in Q1, so our customer count was up in Q1.
However, we did see activity across.
Our customers decrease which resulted in a net decrease in paid members from Q4, so basically what that means is let's say the average.
Customer has 14 paid members and we basically saw that decreased to 13 or 13, three something like that so we saw a kind of a decrease across the board a small decrease but we have so many customers that even a small decrease in activity.
Kind of a stripped the increase in <unk>.
No. We saw subscription members did increase in Q1, but our pay per use member decrease.
With larger than the grid.
Subscription. So this wasn't a big churn off of customers. It was just an average decrease in activity across the board.
The good news is we believe because it's not a big turn off of customers that we believe the activity.
Decrease is due to economic conditions, we think that as expected given the environment and ultimately we think that it is temporary no one thinks economy is going to.
It would be bad forever cyclical price can come back up and as long as we retain these customers connectivity goes back up another user counts will increase so we want to make sure we're retaining the customers and if there's kind of some choppiness in terms of.
The activity going up and down we'll weather that storm, obviously, because we are cash flow positive and it's just kind of a sign of the times next slide please.
Alright, so we don't give guidance, but what we do what we do do is we let you know how the next the first month in the current quarter is trending so.
As you can see in April .
Yellow bar furthest to the right.
We're continuing to see some volatility it actually looks remarkably similar to the.
Kind of up and down we saw in 2021, if you look over on the left hand side.
But.
As you can see in every single one of these months, we are having our subscription members increase but the pay per use is kind of going up and down a lot. So we.
We are not.
Through the woods, yet on the volatility.
Next slide please.
Let's talk about free cash flow. So we had strong free cash flow in Q1, a $10 2 million.
<unk>.
People say, hey, what are you going to do it with great free cash flow what do you do with it. So we obviously, we're spending it more and more on sales and marketing but also.
In Q2, we're going to take the free cash flow from Q1, we're going to do a $3 million buyback in the open market that starts tomorrow.
And also we're going to reduce our debt by $8 million.
And as you said, we are positioning ourselves for success in the future. Our sales efforts are starting to show some real results and free trials Ive seen a huge jump. So we are optimistic in the future. We think that the investments we made there.
Turning to show kind of some early green shoots data that makes us.
Encouraged.
We're well capitalized and our free cash flow was strong and we're using that positive free cash flow to reduce our debt and we're also returning value to our shareholders via buybacks.
And very soon we will be starting the migration of our users through our next gen platforms, so nothing to announce today, but.
Expect more announcements from us soon I don't expense country, which is may 18th 2000, <unk>, we have a lot of.
Product changes that we have been.
In the lab cooking for them for a while so we're excited to get those out in the opening here pretty soon.
Next slide and just as a reminder.
This is the future we've been building a lot of our efforts on the engineering side have been really focused on.
This new platform, we've been working on and not we've put so much work and do it and not very many people have seen it yet which is why we're so excited to start.
<unk> actual paying members onto it and.
But as a reminder, that the <unk>.
Super App that we're building right now is its expense management corporate guard with Cashback invoicing billing chat corporate travel management personal travel management PDP money transfer bill splitting and a personal wallet all for $9 all in one app and coming to you.
Very soon so we're all very excited about that.
Alright, now, we'll throw it over to Q&A and I believe our first.
A list is.
Natalie how from Bank of America.
Yeah.
Thanks. So my question for you guys is so pay per user went down and you guys have previously said that they do pay a premium price and you're trying to find a good balance of subscriptions in pay per use I think you guys had mentioned, 20% would be your ideal number.
The have these trends sort of how do you guys on the that path or have you guys sort of thinking about that balance earlier than you anticipated.
Great question. So yes, we are being successful in converting people over from pay per use to subscription and we are seeing increases in subscription. However.
We also saw a decrease in paper used this quarter and again that doesn't mean the customers left it just means that they have less employees that were active. So we are seeing paper use come down but this quarter. It was kind of.
But I call them, a little bit Combi, we're moving people over to subscription.
But also they they also decreased so yes, our pay per use percentages to go down but part of that is attributed to general.
Activity and also partly because we've been successful in converting so it's a little bit but.
Okay cool Thanks, and then a quick follow up it appears that sales and marketing as a percentage of revenue went down but you guys mentioned youre doing like more investments into that STR program can.
Can you provide a bit of color there sure.
No.
We have been.
We ramped down some of our marketing as we ramp up our sales but the.
They didn't coincide perfectly so we added a 100 <unk>.
In Q1, but a lot of those came onboard kind of towards the tail end. So the cost wasn't fully baked into the quarter.
So we should expect to see an increase in sales and marketing in Q2, especially because we have expense.
<unk>, so it's kind of a.
A double whammy there we have a big conference and then also our STR costs are fully baked in for the full quarter. So.
We should expect to see.
An increase in sales and marketing going forward, okay. Thank you but.
But that program is also getting more and more efficient like all of our setup specialists and FTR are getting more and more trained and becoming better and better. So we don't think that we need to keep ramping it up to get them.
A higher ROI.
Rather we don't need to keep ramping it up to get the good results. We can just improve the rois.
So Brian cyclic suite, the full cost of our baked into Q2 is going to come in a little bit higher on the cost alone.
But I don't think I would expect that it's going to keep ramping up because we are investing in the Chinese are investing in the channel not just in terms of growing the head count of those agents, but also making them better and more efficient.
Yes, that's a good point, we added 100 stores in Q1, but we are not adding 100 ftes in Q2, we are.
Training, and making more efficient and maybe even cutting low performers.
It's not 100 per quarter.
We are having.
Got it thank you.
Thank you alright.
Alright next we have Steven Enders from Citi.
Thanks for taking the question here.
I guess I just wanted to.
And so a little bit about the new expensive by that you talked about it both in the press release and Internet.
And the color of the transcript here I guess what is the biggest change that we should be I guess looking for kind of any early preview for how we should be kind of thinking about what that could potentially look like but from a net basis and how that might change the business overall.
Great question. So we are expanding the use cases in which you might use expense base right now and people use it.
Ore expense management or if you're on a business trip you can actually go to new data expense by Dot Com right now and sign up there is also an app in the App store and.
What is available to the public right now is basically.
Like slack or Whatsapp.
Type functionality and we have more.
Product announcements again coming in expense country, but very shortly we are going to be.
Adding all of the functionality that we have in our existing expense side product onto the new platform.
And then once we have parity there and then we're going to start launching into all of our new use cases, and there's a lot of really exciting.
New use cases, you're going to have when you have all on one platform. So it's.
It'll be a mix of new functionality that we haven't had and also bringing existing functionality onto the new platform.
And that will ultimately result in more activity basically so let's say.
Maybe you don't go on a business trip, but you do talk to someone within your business after the expense by platform.
Activity as well so we're trying to add use.
Use cases beyond.
This month, so I didn't have expense I wasn't active so we're just making it trying to current expense line is something that you use every day instead of maybe once a month or sometimes some people less than once a month.
Gotcha Okay.
Having viral lead gen.
If the goal is to have bottom up adoption than you wanted to turn every one of your individual users in Q1 of your champions right and the more functionality, we give them to live easier lives.
More theyre going to talk about that so that's really both there are some features that are aimed at increased activity simply to turn more users.
Into paid members and there are others that are aimed at better by any chance.
Individuals more opportunities to talk about it so there's a bit of both.
Okay. I guess is the view here that is both the increased growth of our own Asia, but also maybe to have a more consistent subscription user number instead of the paper is about okay. Okay.
Okay. That's helpful. And then I wanted to ask on the credit card side I mean, it looks it looks like pretty good growth here, but.
I guess where are we in terms of the.
<unk> ramp up curve to having that move from contra revenue to revenue.
Being recognized in a more a more traditional way.
Yes, so we have all of our operational perspective, we have all our work done. So we have all the contract is gone and we have the revenue recognition.
Like many others from the auditors so the tough part is over but as you probably noticed like this.
That would map right in front of you.
On the slide I was presenting about like Houston contributes more and more in order to keep beating on this.
More rapid pace.
The challenge is always engineering resources and sort of prioritizing what it's going to bring the most return to our business.
So that's kind of where we are like we are right now working on implementing the new programs, but then launching only to ourselves so like moving all of the expenses by employees off the old program into the new program for our heart. So that would give us the testing process. We will also be uses of our products every single employee usage.
Every single day.
So we're going through the motions on that right now and then once we are done with that I think we would start to boost our or rather looking launching two specific companies. Maybe we launched we just someone adopting the.
New so we don't go to the recording emphasize look we'd love to get prioritized in a sense, but.
Everything is about like what is going to get us the biggest bang for our Buck from an engineering perspective. So that's.
That's going to be the consistent answer going forward, because we have done with everything.
We are actually done with everything that we don't control and now we control about prioritizing it.
Yes.
Perfect. Okay. I appreciate the response, there and both of you for taking the questions here.
Thank you.
Alright next we have Mario Molina from Piper Sandler.
You can hear me okay.
So I just got a couple of questions around the SDR initiative.
So just first off what sort of drove the decision to outsource the SDR functions out to that vendor that you mentioned.
And in what scenario might it makes sense for expensive fight to bring that sort of initiative in house over the long term.
And then second thing around that is.
How long might you expect this initiative to sort of how long might it take to reach sort of a breakeven or a flip to a positive ROI.
Yeah. Good question. So let me start by just kind of summarizing like our agenda and approach to doing something in house versus outsourcing and SDR for a classic example, whenever we have a job that is repeatable and you can write down and it's simple and fun.
One can execute it over and over again to the moderate doing it many times and.
It requires very little Scanlon is repeatable, that's when we outsource that because what we can do then.
Hired a large number of agent give them a very clear set of instructions.
Even diversify across multiple vendors and that we can have some negotiating power in terms of pricing and we can get better Bang for our Buck.
But what we then do is manage them internally so.
So we restructured the sales program as we have internal employees on our sales team, who do things like partner management with our accountant channel sneak Honda the more strategic pieces of the business and then be managed to setup specialists and so the first question is have something of a lower scale than our internal employee job because their concern.
Getting incoming leads so they need to be able to anticipate and block and tackle but its not so high skilled the b.
That requires the kind of training and kind of experience in general tendency for we've hired internal employees for and then the setup specialists and our internal employee manage the MTR pipeline and their job is to be very repeatable and they have a script and they hit the script and they just do it over and over again.
So that's sort of how we structured it and never say never but I don't think the STR are the type of job.
Requirements towards the type of job profile that we've ever taken gently because we could do it much more cost effectively and ramp up and down much more easily if we outsource it.
So that's.
Let me stop there and see if that answers your question.
Yes, that's helpful on that front.
And actually just as a follow up to that part before touching on the ROI how long how easy is it so to speak to ramp up that you are head count month over month or quarter over quarter and Thats all I have there.
So that's also very interesting questions. We started this effort late last year and I wanted to see like Q4 like October and November and we did in fact thinks that it could be let me be told these vendors. We started with very skewed just elect pestiferous thinking work at all and when we saw that it could work we wanted to.
David to 100, so we started with like 10, and then you wanted to get it to 100, and we did notice that it took those vendors up to a month to hire them and then a few more weeks after that statistic keep them from basic training and let them get the phones. So that's why we why we started this initiative and kind of announced that we are ramping up in <unk>.
Q4, we didn't fully ramped up until maybe mid <unk>.
Q1.
We will continue.
A continuous process and you can go from 10 to 100 overnight, but it went from 10% to 25 to 45, so on and so forth. So it seems like it takes them something a quarter to get to 100, but that said, it's also behind us and going forward and I think we were responding to another one of your questions earlier, but we're not trying.
To keep growing the head count and this is where maybe I'll come back to your second question. The idea behind this entire arm of our growth model will be to meet it.
Yield something consistent something steady something modest that we are happy with and to do it more and more cost effective so right now we have <unk>.
<unk> set of specialists and controlled Str's and the idea isn't even to maintain that the idea is to sort of deploy that identify the real winners and then very aggressively performance manage the bottom of the.
Team, if you will and then keep optimize things. So we can kind of identify the 20% of the team that contributes to 80% about because thats generally how it ends up being so that's the challenge now like over the next few quarters, that's what we're going to be focused on identifying the witness identifying.
You know the loser so to speak and then being aggressive about managing this program for ROI and I'll, let Brian that anything that he wants to do as well.
Yes, I would just say.
It's pretty flexible and that we can drastically upscale and downscale the numbers intra quarter. So we're not locked into annual.
Numbers or anything like that.
Very flexible which is one of the reasons we like it.
Alright, Thank you all very much.
Thank you Alright up next we have Daniel Jester from BMO.
BMO.
Thanks for taking them.
Question, Daniel I think there'll be something thank you.
So maybe.
And.
Paid okay.
Yes.
<unk>.
Eric.
Awesome.
And pretty strong growth.
I'll now.
Okay.
All right.
It looks like.
Really the avenue of growth.
Okay.
Yes.
You kind of think theirs.
I think it's a little bit of an echo I know could you give me some real quick sorry about that Daniel.
Could you could you repeat the question sorry about that.
Is this better now yes.
Alright, so on the free product or the free the free trials, you've talked about growth there for a while it's been it's been pretty good for a bit is that can you give us any sort of like color about the conversion rate of those free to subscription or is it more important to look at those free trials as drivers of growth for interchange.
Okay.
Good question, so the free trials.
I see so the free trials are not related to the free.
So there is a free plan, where you can use like basics since my light for free you can run a simple business off of it for free the free trials are for the paid.
The paid program. So what we've seen is basically.
Yeah.
Sure.
Really focusing on our sales and marketing we have seen a substantial increase in the number of free trials for the paid product.
In Q1 versus previous quarters.
Basically what we're saying is.
That's some encouraging data because it's been a huge lift in the free trials. So it's actually it's not related to the free plan I understand that now that you said on my data. It is actually kind of confusing me, yes, we have a free plan and then when you are trying to pay for our product. We can give you a free trial and we've seen those free trials increased substantially in Q1.
Got you Okay that is helpful and then maybe.
Philosophically I know youre, not going to give guidance, but.
But as you think about sort of the growth trajectory this year.
Obviously, the macro is what the macro is do you think that interchange growth is really going to be a big.
Potential overall growth this year or maybe kind of walk through the puts and takes for the different variables in terms of getting the top line moving again.
Yeah, Great question so yes.
Yes, I think now.
The interchange isn't revenue I don't know a lot of people adjust for it in their models, but by GAAP, it's not revenue, but yes, the interchange is growing well and when.
When we do get that moved over into the interchange.
<unk> line item, we think that it is reaching a point, where it's going to be.
A good contributor to the top line revenue.
Now in terms of the subscription so we're adding new customers every quarter.
Quarter.
Subscription numbers are going up the paper used has just been kind of all over the place so.
I think that if we continue to retain our customers and.
Kind of.
Continuing to add more.
When this kind of.
Decreased activity from economic conditions.
Stops were going to be in a much better place.
In the future. So we're kind of like waiting out the.
Waiting out the storm and making sure that we don't lose our customers.
Activity decreases obviously.
We don't love that but we want to make sure we're holding on to customers and we do believe that as everything kind of opens up people are hiring activity. Overall increases also we're adding new use cases to our platform which gives.
People more opportunity to be active on our platform that we will see those activity numbers increase so we ultimately.
I believe that the decreased activity is temporary.
And but obviously in the short term in.
In Q1, it did decrease which kind of hurt us a little bit.
And then one more if I can squeeze it in.
The product roadmap has been very compelling you've got you've made a lot of progress. There can you just help us think about <unk>.
Customer usage of the various products.
How that has trended.
I'm, just trying to get a sense for what the demand pull for your customer base is for some of the new products that youre launching in some of the new pipeline that we'll hear an expensive. Thank you.
So I can't say too much because David has got all of these big announcements lined up and I won't spoil them, but basically.
Almost everyone uses expense management, it's expensive high people know us for them and also we're seeing more and more.
Ladies and expense my card actually all of the kind of turmoil in the banking sector has been a big boon to us our card wise, we saw a lot of customers come over to the expense my card.
After that.
We are seeing people want to use the invoicing solution I don't have any official numbers to get there but.
We have also we're getting a lot of good feedback from the chat product and.
But thats currently only available.
You go to <unk> Dot com. So we didn't have people actually actively using it.
But I think thats kind of all the.
All of that I can say right now without spoiling.
I would just say stay tuned expenses.
Coming up may 18th so we're going to have a number of them.
Announcements there, but we're excited to start migrating.
Customers over to the new platform and we think it's going to be a big boon to the business and it's something we've been working on for the last couple of years. So we're all just excited to get it in the hands of.
More of our customers.
Great. Thank you very much.
Thank you.
Alright, and next we have Sam Flynn from leaks we.
We have mark Chappell from loop capital.
Guys can you hear me okay.
Yes.
Oh perfect.
Thanks for taking my question.
Sort of.
Two quick ones for you.
The first thing have you seen obviously subs were up in the quarter, which was great. But just wondering if you've seen any turnover from your larger accounts.
So churn has been quite low.
The decrease in paid members.
More just kind of an overall decreasing activity across.
Across the user base.
Yeah.
What we see actually is most churn being in the smaller segments of the business. So like the ones and twos I wanted to employee businesses and in general the larger the business the less likely they are to churn and a higher or.
Seat retention is so it's.
I think maybe.
It's kind of the opposite rates the bigger customers are not churning in the smart customers. Those are the more likely to go out of business kind of in an environment like this or kind of.
Be there for a couple of months and bounce off type of thing, but they're also our smallest the one and two customer segments is our lowest revenue customer segments.
So.
In general it's not from a turn off customers. It's just the decrease in activity.
Across the board, which now.
We feel is attributed to the macro element.
Perfect. That's helpful. I appreciate it and then secondly, and then I'll hop up.
Just wondering what sort of trends youre seeing in business travel recently.
Okay.
Okay.
I think we've seen.
Our return in business travel, but also b.
As a reminder, business travel isn't.
101, we don't need people to take.
Two or three trips a month in order to be active on the platform, we need them to expense one item right. They need to buy a cup of coffee from Starbucks or at dinner with a client type of thing and then they are on the platform. So it's not.
If let's say travel increased three X that doesn't mean our.
Scrubbers.
Increasingly because many of the unique number of business travelers to increase we don't need the actual.
Current audience of business travelers to travel three X more so it's a little different I think than what people expect.
But one thing a boon.
Business travel does purchase since my is.
It creates more opportunities for word of mouth growth because you are experiencing the pain point that we saw so the worst part of expense management is going on a trip or maybe back to back trips and you have this huge powder seats and then you start complaining to your network and then if your complain about you have this problem and you're more likely to hear about expense buying that creates.
Overall lift so.
Business travel is good for the business, but it's a little different than what I'm.
The way you think is we're not like pulling transactional revenue off of business trips, we just business travel create activity and thats, how we monetize.
Great. Thanks, again for taking my questions.
Thank you.
And.
Next I believe we have Sam Flynn from Lake Street capital.
Let's see I think that.
Actually not on my list is wrong do we have.
That actually that is the end.
Sorry.
Operating off of our old list alright, well. Thank you everyone for joining the call. We really appreciate it without talking about business with you all.
Just kind of as a closing we're all very excited I think we.
We had a little bit of a shareholder letter and our earnings release from David but we're all very excited about the future of the business here or we've been.
Cooking in the lab for a long time on our new platform and it's so close to being released so we are excited to get that in the hands of all of our users and.
We will see you all next quarter. Thank you all very much.
Thank you Mike.
Yeah.