Q4 2023 Expensify Inc Earnings Call

Operator: Also note that on today's call, management will refer to certain non-GAAP financial measures. While we believe these non-GAAP financial measures provide useful information for investors, the presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. Please refer to today's press release or the investor presentation for a reconciliation of these non-GAAP financial measures to their most comparable GAAP. Excellent. Thank you very much.

<unk> management will refer to certain non-GAAP financial measures, while we believe these non-GAAP financial measures provide useful information for investors. The presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. Please refer to today's press release or the investor.

Presentation for a reconciliation of these non-GAAP financial measures to their most comparable GAAP measures.

Excellent. Thank you very much alright, let's get started rehearsals go over these to school 2023 financial fiscal year 2023 financials.

Speaker: All right, let's get started. First, we're going to go over the fiscal 2023 financials, the fiscal year 2023 financials. We had revenue of $150.7 million, and our average paid member was $732,000. We had a net interchange of $11.1 million. Our operating cash flow was $1.6 million, and our free cash flow was $600,000. The difference between operating cash flow and free cash flow is that we take out the customer funds, which can vary throughout the month, so the timing can throw that off a little bit. Our GAAP net loss was $41.7 million, our non-GAAP net loss was $500,000, and our adjusted EBITDA was $13.2 million.

Oh, we had revenue of $150.7 million or average paid members for 732000, and we had a net interchange of $11.1 million.

Operating cash flow was 1.6 million are free cash flow was 600000, the difference between operating cash flow and free cash flow is we we take out the customer funds, which can vary throughout the month. So the timing can throw it off a little bit.

<unk> net loss was $41.7 million or non-GAAP net loss was a 500000 and our adjusted EBITDA was $13.2 million.

Now, let's talk about Q4.

Speaker: Now let's talk about Q4. We had $35.2 million in revenue. Our average paid members were 719,000, and we had 3.1 million in net energy. Cash used in operations was $500,000. Free cash flow was negative $3.6 million.

We have $35.2 million in revenue.

Our average pay members were 719000, and we had 3.1 million in a net interchange.

Cash used in operations was 500000 free cash flow, but can I get a $3.6 million.

Speaker: The net loss was $7.5 million, non-GAAP net income was $3.1 million, and adjusted EBITDA was $5.9 million. Obviously, these numbers are an improvement over last quarter. As we discussed last quarter, I mentioned that we were going to be implementing some cost-cutting measures. We did implement those, and we saw a pretty positive turnaround in terms of our financial metrics. Our operating cash flow improved by $4.9 million, which is a 90.2% increase quarter-over-quarter. Our free cash flow improved by $3.5 million, which is a 49.3% increase quarter-over-quarter. Our net loss improved by $9.5 million, which is a 55.9% increase quarter-over-quarter.

It lasts for $7.5 million now.

<unk> net income was $3.1 million and adjusted EBITDA was $5.9 billion. Obviously these numbers are an improvement over Q3.

As we discussed last quarter I mentioned that we were gonna be implementing some cost cutting measures and we did implement those and we saw a pretty positive turnaround in terms of our financial metrics.

Operating cash flow improved by 4.9 million, which is a 90.2 per cent increase quarter over quarter are free cash flow improved by $3.5 million, which is a 49.3 per cent increase quarter over quarter, our net loss improve by $9.5 million would you like 55.9 per cent increase quarter over quarter and or non-GAAP net income improved by 90.

Speaker: And our non-GAAP net income improved by $98.8 million. 9.8 million, which is a 146.3% increase quarter over quarter, adjusted to EBITDA improved by 9.4 million, which is a 268.6% increase quarter over quarter. So it's a pretty stark difference from third quarter to fourth quarter.

8.9.

$9.8 million, which is 100, 146.3% increase quarter over quarter.

Our adjusted EBITDA improved by $9.4 million does a 268.6 per cent increase quarter over quarter. So it's a pretty stark difference from the third quarter to fourth order. So you can see the.

Speaker: So you can see the drastic impact of those cost-cutting expenditures that we did. As such, we're going to be initiating a full year free cash flow guidance to provide a more clear picture of the cash impacts of these recent cost reductions. That's something that the investor community requested of us, and we're going to be providing that. So, our fiscal year 2023 operating cash flow was $1.6 million, and our free cash flow for 2023 was $1.6 million.

The drastic impact in this cost cutting expenditures that we did.

As such we're going to be initiating a full year free cash flow guidance to provide a more clear picture on the cash impacts in these recent cost reductions that's something that I, the investor community requested of us gonna be providing that.

So our fiscal year 2023 operating cash flow at some point 6 million and are free cash flow for 20th 23, It was a point $6 million.

Speaker: In 2024, we're projecting free cash flow between $10 million and $12 million, which is obviously substantially higher than we did in 2020. We always show paid members for the first month of the quarter. So in Q1, for January, we saw paid members of 690,000. We've highlighted January's usually a bit soft on users. We've highlighted previous Januarys in pink, and as you can see, they're usually a little bit down.

In 2024, we're projecting free cash flow between 10 million to $12 million, which is obviously substantially higher than we did in 2023.

We always show paid members for the first month of quarters in Q1 in January we saw paid members of 690000. We've highlighted January is usually a bit soft on users. We've highlighted previous January is in pink and as you can see they're usually a little bit down and <unk>.

Speaker: And this January is the same. I want to give you a very exciting update on the Expensify card. As I mentioned earlier, the Expensified Card grew 63% to 11.1 million year over year. We've also added a new benefit to the card. Our accounting partners who onboard their clients through the Expensified Card now receive 50 basis points in revenue share for their clients. We've seen a lot of enthusiasm for the Expensified Card in the accounting channel. And then now we have a little bit larger incentive for them to really spread the good word of the Expensified Card to their clients. We also, and this is the most exciting part, have been talking about this for a while. I get questions on it every single quarter.

Murray is the same.

I want to give a very exciting update on the expense my card.

As I mentioned earlier. This was my card grew 63 per cent to 11.1 million year over year. We've also added a new benefit to the card are counting partners, who onboard their client to the extent of my card never see a 50 basis points and revenue share for the clients. We've seen a lot of enthusiasm for the extent of my card and the accounting channel and now we have a little bit larger incentive for them to.

Uhm really spread the good word at the expense my card to their customers.

We also and this is the most exciting part we've been talking about this for awhile and get questions on it every single corner.

Speaker: We have established our new card program, which earns more interchange per transaction. All existing customers are expected to be transitioned by the end of the year 2024, and all new business card customers are being put on this new card program. That's very exciting because it's an improvement in accounting treatment. Previously, interchange was a contra expense in the cost of revenue and not revenue, which was confusing for everyone. This is now more straightforward.

We have established our new card program, which earns more interchange per transaction all existing customers are expected to be transitioned by the end of the year 2024, and all new since my card customers are being put on this new car program, that's very exciting because it would be an improvement in the accounting treatment. So previously interchange was.

A contract expense and cost of revenue and not revenue, which is confusing for everyone. This is now more straightforward. It's been put on the balance sheet in the manner that you would expect an interchange going forward under the new program will be <unk> categories as revenue instead of a counter expensing customer and on top of that were also earn.

David: It's being put on a balance sheet in the manner that you would expect, and interchange going forward under the new program will be categorized as revenue instead of a contra expense in cost revenue. And on top of that, we're also earning about 20% more interchange fees if the same customers didn't grow at all, and we didn't have any increase in spend. The same transactions that we had in 2023, under the new program, that would be 20%. And with that, I will hand it over to David. Thank you.

About 20 per cent more interchange fees so.

If our same customers we didn't grow at all and we had didn't have any increase in spend that same transactions that we had in 2023 under the new program there'll be 20 per cent higher.

And with that I will hand, it over to David Thank you okay.

David: Okay. So, as Ryan explained, 2023 was a pretty good year. In fact, I would say it was a great year for the things that were under our control.

Okay. So uhm as Ryan explained 20th 2023, it was a pretty good year in fact, I would say it was a great year for the things are under our control pretty much everything under control with either stable or improved but there was one glaring exception. So this chart. This complicated waterfall Charles you walk through it and so we can see here is kind of a breakdown to the <unk>.

David: Pretty much everything under our control was either stable or improved, but there was one glaring exception. So this chart, this complicated waterfall chart, let me go. So what we can see here is kind of a breakdown of the major reasons that we gained and lost paid users over the course of the past couple of years. In 2022, we added 42,000 paid seats from new customers, and in 2023, we added about 43,000 paid seats. So about the same number between 2022 and 2023. Likewise, in the two years, in 22, we lost about 62,000 paid seats due to churn, basically customers leaving the platform, going out of business, whatever that might be. And we lost about 62,000 in 2023 as well.

Major reasons that we gained and lost paid users over the course of the past couple of sisters and 2022, we added 42000 paid seats from new customers and in 2000 twenty-three. We added about 43000 pages. So that the same between 2022 and 22 and three likewise in the two years and 22, we lost about 62.

Eight seats to churn basically customers, leaving the platform going out of business whatever it might be we lost about 6202023 as well so you're a customer acquisition receipts and also chances for basically the same year on year, but there was a big difference when it comes to customer expansion you can see in 2022, our existing customer.

David: So new customer acquisition for seats and also churn seats were basically the same year on year, but there was a big difference when it comes to customer expansion. You can see that in 2022, our existing customers added about 85,000 paid seats. And that's been a huge tailwind in our business model, because we've grown basically when our customers have grown. 2023 is kind of a brutal year for our customers. As you can see, those same customers lost 42,000 seats. So basically, in 22, they added 42,000; they added 85,000 seats. In 23, they lost 42,000.

<unk> added about 85000 page seats, and that's been a huge tailwind and our business model is that we've grown basically when our customers are corrupt 2023, it's kind of a brutal year for our customers as you can see the same customers lost 42006, so basically in 22. The added 42000, they added 85000 seats.

In 23, the last 42006.

David: The net of that is, over the past couple of years, we added about 4,000 active seats, but you can see it was kind of a rollercoaster ride to get there. So our business, the actual fundamentals of the business itself, new customer acquisition, customer return, and so forth, are actually quite stable. It's just the expansion and contraction of our existing customers themselves that, you know, hired a bunch of people, laid off a bunch of people, wherever it might be. That's what accounts for the huge swing, basically, in the paid seats themselves. So the year itself was actually, we think, pretty good.

None of that is over the past couple of years, we added about 4000 active seats, but you can see it was kind of a rollercoaster ride to get there. So our business the actual fundamental the business itself do customer acquisition customer returns and so forth actually quite stable. It's just the expansion and contraction of our existing customers themselves to that you know hired people laid off whoever it might be.

That's what's accounts for the huge swing basically in the in the Patriots themselves. So dear itself is actually pretty good. It says it was a difficult year for our customers and that reflects three basically our results.

David: It was a difficult year for our customers, and that reflects in, basically, our results. And so, if you think about how the year itself was spent, it was really kind of a year of planting, and 2024 is a year of harvesting, if you will. And one of the things we really plan to invest in is basically expanding our SEO keywords themselves. If you can think of it in terms of the top 100 SEO, top 100 search results for each keyword, we've really expanded the breadth of the number of keywords that we're going after, because if you want to get in the top 10, you've got to start in the top 100. And so, you can see that we've had really, really sizable gains in the number of keywords that we rank for at all. Now, if you dig into the keywords that were on the first page, that's where we do even better.

So if you think about how <unk> yourself expense. He was really kind of of your financing and use of 2024 is that your parvis thing if you will and one of the things we really plan to <unk>, there's basically expanding our.

Keywords themselves. If you can think of it in terms of the top 100 <unk> <unk>.

About 100 search results for each keyword, we've really expanded kind of broad.

Breath of the number of keywords going after because you want to get in the top 10, you get us off and it started the top 100, and so you can see that we had really really sizeable gains in the number of keywords that actually we rank for at all.

Dig into the keyboards that were actually the first page that's really do even better is like a really strong growth and actually the keyboard and the first agents, who are SCO investment, which we have been strong in the past. So it's a big sort of machine to improve but it's been a movement improving pretty quick and really happy with that and so the results. There as we've seen actually are SCO traffic itself really just.

David: It's like a really strong growth in actually the keywords on the first page. And so, our SEO investment, which we've been strong in the past, so it's a big sort of machine to improve, but it's been improving pretty quick, and I'm really happy with that. And so, the results there are we've seen actually our SEO traffic itself really just increase as well. Again, we've always been strong from an SEO perspective, and so it's sort of a big freighter to turn, but it's really improved, and so that's been great. And so, in 2023, we think we've really improved our SEO game, and that's, I think, positioned us really well for continued growth in 2024. Now, we've talked about some of the functionality that we launched last year as well. One of my favorites has got to be global reimbursement.

Increases well again, if you've always been strong <unk> perspective, and so it's sort of like a big afraid to return, but it's been really improved and so that's been great and so in 2023, we think we've really improved R. S. Yo game and that's what I think position is really well for continued growth in 2024 now when you talk about some of the functionality will be lost launched last year as well what am I <unk>.

<unk>. So as you recall, we have customers all over the world, especially some of our large multinational companies with entities in multiple jurisdictions. So what are the most common features we've had from a large enterprise customers is global reimbursement capability and so this is something that we launched last year. It really have traction overall, you can see it's been growing exponentially ever since launch even the past couple of months, we've seen a 30.

David: So, as you recall, we have customers all over the world, especially some of our large multinational companies with entities in multiple jurisdictions. So, one of the most common features we've had from our large enterprise customers is global reimbursement capability. And so, this is something that we launched last year. We really have traction overall.

David: You can see it's been growing exponentially ever since launch. In the past couple of months, we've seen a 35% increase in the number of enterprise customers taking up global reimbursement. So, this has been a great sort of a feature that our customers have asked for for a long time, and we're really happy to have delivered it. I'm also excited to talk about Accentify Chat. I know I've been talking about this forever.

Five per cent increased number of enterprise customers, taking up local reimbursement. So this has been a great sort of features are our customers have asked for a for a long time.

Really happy to delivered.

I'll also et cetera to talk about cause that's my chat I know I've been talking about this forever uhm. So we're really really happy with attractions. We've had the past couple of years here.

David: So, we're really, really happy with the traction that we've had in the past couple of years. I'm also excited to talk about Expensify Chat. I know, I've been talking about this forever.

I'll also et cetera to talk about cause that's my chat I know I've been talking about this forever uhm. So we're really really happy with attractions. We've had the past couple of years here and we can see the basically chat has been around for awhile and it's been growing very quickly, especially in this past couple of months here, where we've seen that actually 7000 distinct.

David: So we're really, really happy with the traction we've had in the past couple of years here. And we can see that, basically, chat has been around for a while. And it's been growing very quickly, especially in the past couple of months here, where we've seen that actually 7,000 distinct companies have started using chat internally. And so, within the past year, it has increased over 250% the number of customers that are choosing to use Expensify Chat inside their company. And that's actually a huge test.

Companies has started using chat internally and so that's just within the past year increase over 250 per cent increase the number of customers that are choosing to use expensive I chat inside the company and that's actually a huge test cause will call. This is right now it's actually a different it's a different website you have to go to a new expensive high to get it and so this is showing exist.

David: Because recall this is, right now, it's actually a different app. It's a different website. You have to go to the new Expensify to get it.

David: And so this is showing existing customers are going to a new app and a new website to use this new functionality. Now, recall right now, chat is a free feature. And so we're attracting the seats to make sure that we can charge for them in the future. But right now, it's actually just a free add-on for existing customers. But we're really happy that customers are finding value in it. So much so, that they're going to a different app to experience it. And so we think that all of this leads into a great future for new Expensify. With that in mind, you might recall that new Expensify is a completely open-source project that is contributing towards it. And that open-source community has grown staggeringly over the past year. In the past year, we've gotten over 100% more contributors to the open-source repo itself.

Customers are going to a new app new website to use this new functionality now recall right now Chad as a feature and so we're attracted the seats to make sure that we can charged for the future, but right now it's actually just a free add on to existing customers, but we're really happy the customers are finding value in it so much so it's going to a different apps experienced it so we think that.

All of this leads into you know a great future for a new expensive, but with that in mind you might recall that <unk> has been it's completely open source community that is contributing towards it and that open source community has grown staggeringly over the past year within the past year is that the over 100 per cent or contributors to the open source repo it's.

And so that's great and so we're actually having really strong growth in the community itself in which is building. It's basically been this huge force multiplier Tora engineering team be able to pull onto not just random contributors around the world the true extra contributors from different agencies and so forth. We've gone from being basically you know a small you.

David: And so that's great. And so we're actually having really strong growth within the repo itself, which is building, it's basically been this, a force multiplier for our engineering team to be able to pull in not just random contributors around the world but true expert contributors from different agencies and so forth. We've gone from being basically, you know, a small user of this React Native technology to probably the largest React Native contributor outside of Facebook meta. And so it's actually been a really important year for us because this is, you know, a super powerful technology of the future, and we've established ourselves as a leading name. So with that in mind, I'd like to talk a little bit about new Expensify itself. And so new Expensify is a new technology to solve some old problems. Now, our strategy hasn't really changed.

User of this reaction of technology, you, probably the largest reactive contributor outside of Facebook better and so it's actually been a really important ear for us. Because this is you know a superpower technology for the future and we've established ourselves with leading name minutes. So with that in mind I'd like to talk a little bit about new expensive by itself and so.

New expensive I, it's a new technology to solve some old problem now our strategy hasn't really changed it's really about this doubling down and improving on the strategy that was always had and to kind of reiterate that strategy step one we're going to capture a huge untapped market and so we think 99% of the global opportunity is really in the V. S V. S M B and no one's going after.

David: It's really about just doubling down and improving on the strategy that we've always had. And to kind of reiterate that strategy, step one, we're going to capture a huge untapped market. And so we think 99% of the global opportunity is really in the VSV SMB. And no one's going after that right now.

Right now we think that we can build a platform that can tap this untapped market and basically wrote uncontested. We think the only way that can happen nose with a bottom up viral strategy, where the customers themselves promote expensive just by the mere virtue of using it and.

David: We think that we can build a platform that can tap this untapped market and basically grow uncontested. We think the only way that that can happen, though, is through a bottom-up viral strategy, where the customers themselves promote Expensify just by the mere virtue of using it. And then we can monetize that primarily through high-margin subscriptions. Step one, when we talk about the VSV, it really is a huge industry.

And then we can monetize that primarily through high margins subscriptions trying to break in <unk> kind of talk about them, except one we talk about the <unk>. It really is a huge industry, we're talking over a billion potential employees around the world and companies under 250 employees is a huge market. It is so much bigger than the current market.

David: We're talking over a billion potential employees around the world in companies under 250 employees. It is a huge market. It is so much bigger than the current market, and it's almost entirely online. Just digging into the U.S. alone, like 99.9% of all U.S. businesses are small businesses. Again, this is not just a global phenomenon. It's a local phenomenon in the United States.

And it's almost entirely untapped just taking it to the U S alone like 99.9% of all U S businesses are small businesses again. This is not just a global phenomenon. It's a local phenomenon netted states, it's a huge huge opportunity and it sounds like no one's known about it there's no one there's actually taken a business model that could actually incredibly go out and get.

David: It's a huge, huge opportunity, and it's not like no one's known about it. But no one has actually taken a business model that can actually credibly go out and get it.

And so that business model works through fire lead generation and to start a new business model others have done it as well. So I'd say first is chat functionality is inherently viral you can't talk to yourself to use the product itself you have to go talk to someone else what's that got to a billion users with 73 employees, we think the chats and incredibly viral use case.

David: And so that business model works through viral lead generation. And it's not a new business model. Others have done it as well. So I'd say first that the chat functionality is inherently viral. You can't talk to yourself.

David: To use the product itself, you have to go talk to someone else. WhatsApp got to a billion users with 73 employees. We think the chat's an incredibly viral use case, and that's basically what the internet was primarily built on. Likewise, payments, same thing. You can't pay yourself.

And that's basically what the Internet was primarily built on likewise.

Likewise payments same thing you can't pay yourself, you gotta pay someone else payments are incredibly valuable totally viral then we'll get you you know hundreds of millions of users because of this viral dynamic overall <unk> management is inherently viral function itself, you know dropbox sort of introduced the entire consumers nation of I T. The reciprocal reward program.

David: You have to pay someone else. Payments are incredibly valuable, and incredibly viral. Venmo got to hundreds of millions of users because of this viral dynamic overall. And third, we'd say document management is inherently a viral function itself. You know, Dropbox sort of introduced the entire consumerization of IT. Their reciprocal reward program is a masterclass in how to grow viral. And so in case all these document management and all of these, the three major use cases, chat, payments, documents, that really is expense management. Expense management already exists in the intersection of those three. So it's not that Expensify is pushing into each one of these.

As a master class in how to grow viral.

So in case, all is talking to management and all is does the three major use cases chat payments documents that really is expensive management expense management already exists an intersection of those three so it's not that expensive I is pushing into each one of these expensive I has always done all of this because the very act of submitting essentials.

To someone and you're talking with your admin about <unk> that is a chat application. Likewise, it's obviously a payment application because you're getting paid for your attention.

David: Expensify has always done all of these things because the very act of submitting a central report to someone and talking with your admin about the expenses, that's a chat app. Likewise, it's obviously a payment application because you're getting paid for your essentials. But it's also a document sharing application. I mean, the most obvious documents are receipts, which we have millions and millions of.

But it's also a document sharing application I mean, the most obvious documents or receipt switch with millions and millions of but also there's a bunch of other supporting documentation that goes into it as well and so chat payments and documents that's really what expense management is and we think that actually exist and sort of the overlap of this is three incredibly viral use cases and so when we.

Think about building on top of that for new expensive I, It's really just doubling down what is core strengths are.

David: But also, there's a bunch of other supporting documentation that goes into it as well. And so chat, payments, and documents; that's really what expense management is. And we think that actually we exist in sort of the overlap of these three incredibly viral use codes. And so when we think about building on top of that for a new Expensify, it's really just doubling down on what these core strengths are and pushing a little bit into each of these different areas. Now, we're not going to dislodge any of these players anytime soon, but we think we can take a bite out of the market. More importantly, we can take the bite that's right next to ours.

A little bit into each of these different areas nope, we're not going to dislodge are these players anytime soon but we think we can take a bite out of the market more importantly, we can take the bike it's right next to ours wherever we see the intersection of sort of chats payments and document.

We think there's a real opportunity to grow from there and no better place in the world for that did the accounting community because that's what they do all day every day in particular accounting firm sure. Many of them are processing expense reports, but the bulk of the accounting firm is actually doing a tax and compliance and that's just basically a ton of talking a ton of excel spreadsheets I kind of you know just in or.

<unk> run between organizations nauseous within the realm, and so we would actually think the accountant community is a prime opportunity for this key intersection and we think too expensive, but it can be targeted directly to them. So if we're talking about basically what jokes on spy is now.

David: Wherever we see the intersection of these sorts of chats, payments, and documents, we think there's a real opportunity to grow from there. And no better place in the world for that is the accounting community, because that's what they do all day, every day. At a particular accounting firm, sure, many of them are processing expense reports.

Can we have been talking about it for a long time.

Its core it's fundamentally a chat system and you can see it feels very much like you know what's that slack whatever it might be you got your your chats and the left you get your check Uhm your who's Gonna talk to your major conversation you can do threads, you can react and basically it works a lot like any other chat systems, but it's got a few tricks out of the Hood one is a universal chat system.

David: But the bulk of the accounting firm is actually doing tax and compliance. And that's just basically a ton of talking, a ton of Excel spreadsheets, a kind of, you know, the interaction around between organizations, not just within their own. And so we actually think the accounting community is a prime opportunity for this key intersection, and we think the new Expensify can be targeted directly to them.

Basically mentioned not just people in your work space you can mention any email address or phone number and we will hold on to <unk> isn't that interesting.

David: So if we talk about basically what the new Expensify is now, we've been talking about it for a long time. And at its core, it's fundamentally a chat system. As you can see, it feels very much like, you know, WhatsApp, Slack, whatever it might be. You've got your chats on the left.

And to think of like slack, except without all that garbage about dealing with different workspaces and things like this more it's like discord, but without all the weird you know game or stuff around it works. It's basically it's a more business oriented super flexible global pay or global chat solution designs, where you can anyone that has an email address or a phone number.

David: You've got your chat, who you're going to talk to, your main conversation. You can do threads, you can react. And basically, it works a lot like any of the other chat systems. But it's got a few tricks under the hood.

You can talk to them and likewise, they don't even have to use it yet if you choose to talk to someone with the extent of my app via email or.

Text messaging, we will just email them or text and if they respond the email attacks will show that too. So it's a tool that you can choose to adopt as an individual and you can use with 100 per cent of people, who have email addresses and phone numbers and we will communicate with them. However is convenient for them. So it's a very powerful chat foundation.

David: One is it's universal. You can basically mention it, not just people in your workspace. You can mention any email address or phone number, and we'll pull them directly into that chat room. And so think of it as Slack, except without all that garbage about dealing with different workspaces and things like this, or it's like Discord, but without all the weird, you know, gamer stuff around it. Or it's basically, it's a more business-oriented, super flexible, a global payment or a global chat solution If you choose to talk to someone with the extensify app via email or text messaging, we will just email them or text them.

But it's also of course the payments tool now it's still basically the same chat experience you can still talk to people and things like this but a major part of talking to people is actually to share documents with them sheer receipts with them share payments request and so and then when you do that they can look in to basically pay the payments they can pull up the traditional sort of <unk>.

<unk> management, some money page, we call it where you can search violent gonna reports an expense and things like this so it has all of a sudden sort of the same power that we've built up over the past 15 years to an expense management and the global basis, but presented the chat central context, where you every single data object can we talk to them. So it's not just about paying people.

David: And if they respond to the email or text, we'll show that tool. So it's a tool that you can choose to adopt as an individual. And you can use it with a hundred percent of people who have email addresses and phone numbers, and then we will communicate with them, however, as is most convenient for them. So it's a very powerful chat platform, but it's also, of course, a payments tool. Now, it's still basically the same chat experience.

And it's not just about talking to people. After the expenses done. It's also trying to capture some of the conversation that led up to that extent overall interested it's a gas it's a chat tool yes, it's the payments too, but it's also Dr. Benjamin tool because again this isn't new expense management has always been a a document management and so now we're just physically bring that more to the forefront.

David: You can still talk to people and things like this, but a major part of talking to people is actually to share documents with them, share receipts with them, share payment requests, and so forth. And then when you do that, they can click in to basically pay the payments. They can pull up a traditional sort of expense management, a sort of money page, we call it, where you can search by your reports and expenses and things like this.

Especially when you start thinking about accounting firms, which are doing a lot of document heavy task base functionality is it closing the books on a monthly basis. It means every month, you're spending up a whole bunch of conversations about each basically category and or a ledger.

Different sort of tasks that you to close out and so forth now historically you'd use email excel, maybe some sort of the an issue tracking system whatever it is it R. A case you can do all that on the platform you can take everything from the payments to the reconciliation and all of the discussions in between on the same platform you just basically upload the files and.

David: So it has all the same sort of power that we've built up over the past 15 years doing expense management on a global basis, but presented in a chat-centric context where every single data object can be talked about. So it's not just about paying people, and it's not just about talking to people after the expense is done. It's also trying to capture some of the conversation that led up to that expense overall. And so, yes, it's a chat tool. Yes, it's a payments tool, but it's also a document management tool because, again, this isn't new. Expense management has always been about document management, and so now we're just basically bringing that more to the forefront, especially when you start thinking about accounting firms, which are doing a lot of document-heavy, task-based functionality.

Selves, and then we will store them permanently and securely inside of our cloud architecture, and so again, it's a universal system, but that means it also becomes a universal document sharing system, if you need to chat with or sure document with anyone in the world. The email text now we've become a tool to do that so these are not do use cases as you can see chat payment talking to Angela.

These are not distinct experiences. So it's not like you to you know go open to the the chat experience or whatever every one of these is all three when you're sharing documents for chatting you're doing payments you refusing all three of these cases throughout the entire product and at all times.

So the reason, we keep talking with a chat is because we think that a chat allows me to sort of allows us to add a moat. At every feature like an expense management is <unk> is this has been around since the dawn of time, but we think that actually building a a collaborative real time experience around it isn't and we can breathe new life into these cases and.

David: If you're closing the books on a monthly basis, it means every month you're spinning up a whole bunch of conversations about each basically category in your ledger, different sort of tasks they need to close out, and so forth. Now, historically, you would use email, Excel, maybe some sort of an issue tracking system, whatever it is; in our case, you can do all that on the platform. You can take everything from the payments to the reconciliation and all of the discussions in between on the same platform. You just basically upload the files themselves, and then we will store them permanently and securely inside of our cloud architecture.

In the process of doing so expand if this huge market that's been largely untapped nope. We talk about this idea of real time expense processing what makes it real time is that people are in the product already since they are in a position to <unk> as much as we might like basically a user to <unk> to.

Prioritize expense reports.

They're not if it's not on your phone if there's not actually in front of their face, they're just going to ignore it for as long as possible great thing about getting people into a real time chat experience. However is that when they received the payment request immediately turn around and just to prove it because it's just right there will make it so easy to do so we can cut day is all out of the reimbursement process.

David: And so, again, it's a universal system, but that also means it also becomes a universal document sharing system. If you need to chat with or share a document with anyone in the world via email or text, now we've become a tool to do that. So these are not new use cases. As you can see, chat, payment, document management, these are not distinct experiences. It's not like you have to, you know, go open to the chat experience or whatever. Every one of these is three.

Merely because we cut days are waiting for the user to actually do something we can take an action that takes you know.

Two hours and make it too you know seven seconds in such a completely different experience because chat changes the behaviour of the user to be into the crowd is dull times and then that's in the position to act in a very different manner and they can any other tool. So you can't just it's not a matter of us making the money move fast could you make the user moves fast that's a whole different experience.

David: When you're sharing documents or chatting, you're doing payments, you're infusing all three of these use cases throughout the entire product at all times. And so the reason we keep talking about chat is because we think that chat allows us to make a moat out of every feature. Again, expense management isn't new. This has been around since the dawn of time.

Second when we do a bill pay and invoicing again bunks now that we've had for a long time, but our experienced is about trying to capture more of a conversation around the bill in the invoice itself. Because every time you invoice of clients or you know <unk> pay a bill from the client there's a conversation around there the preceding that engagement was basically some converse.

David: But we think that actually building a collaborative, real-time experience around it isn't. And we can bring new life to these use cases and, in the process of doing so, expand into this huge market that's been largely untapped. Now, we talk about this idea of real-time expense processing. What makes it real-time is that people are in the product already, so they're in a position to act in real-time.

<unk> rounded MSA and S. S O W. There's some terms of the contract or whatever it might be currently the conversation happens in I dunno email slack or maybe a phone or something like this now we can capture all of those contracts conversations in the chat tool itself and then we can be the long term storage repository of the final terms of the deal.

David: And as much as we might like, basically, a user to prioritize expense reports, if it's not on their phone, if it's not actually in front of their face, they're just going to ignore it for as long as possible. The great thing about getting people into a real-time chat experience, however, is that when they receive a payment request, they immediately turn around and just approve it because it's just right there. We make it so easy to do, so we can cut days out of the reimbursement process merely because we cut days of waiting for the user to actually do something. We can take an action that took 72 hours and make it in seven seconds. And so, it's a completely different experience because chat changes the behavior of the user to be into the product at all times, and then that puts them in a position to act in a very different manner than they can in any other tool. So, you can't just...it's not a matter of just making the money move fast. You have to make the user move fast, and that's a whole different experience.

So when you're reviewing the inputs. The invoice terms are actually right. There in product <unk>. It started supposed to start and how much it's going to cost and so when you actually approving a bill you can assess whether or not that bill is actually in line with the stated purpose of the agreement itself, it's a completely different experience pain.

Bill when we're able to talk to everyone involved in real time, and that's just another feature of adding sort of infusing chat about the existing old experiences and next can we talk about traveling management now we've been talking about travel for a long time to travel booking and so forth, but we think that there's a great opportunity for I think the term is leisure.

I don't know why it's called that might do now it's called the business plus leisure and you know just the.

Fantastic from camp, we got a lot of Internet, but anyway, I think that's a great thing about pleasure is that when you're traveling for work you're going cool places and your so the idea of book ending is staying a couple of extra days and so forth. It's incredibly comment, but does not necessarily supported by the traditional tools. Additionally, when you travel places.

David: Second, when we do bill pay and invoicing, again, funks that we've had for a long time, but our experience is about trying to capture more of the conversation around the bill and the invoice itself. Because every time you invoice a client or pay a bill from a client, there's a conversation going on there. Preceding that engagement was basically some conversation around an MSA, an SOW, there are some terms of the contract, whatever it might be. Currently, that conversation happens in, I don't know, email, Slack, or maybe a phone or something like that. Now we can capture all of those contract conversations in the chat tool itself, and then we can be the long-term storage repository for the final terms of the deal. So when you're reviewing the invoice, the invoice terms are actually right there in the product.

You're traveling with other people and you don't work all the time you have off hours. When you go to a conference you know <unk>.

People are on call her on duty when the.

But then they go you know wild out at night and so as a result, we tried to recognize the real world social dynamic of people, who are doing business travel and there's a lot of normally you would basically spin up a whatsapp group or something like this to sort of after hours you go someplace else. Instead, we just build that social group for you automatically when you travel and multiple people.

Travels with the same city, we're just gonna throw them to a chat room together. So they can actually start coordinating their dinners in reactor sort of after work activities right here and products and so again travel management is nothing but a social sort of pleasure based travel management is new and I think that's something that is highly defensible because it requires integrated seamless a chat functionality and finish no one.

David: So you can see when it's supposed to start and end, and how much it's going to cost. And so when you're actually approving a bill, you can assess whether or not that bill is actually in line with the stated purpose of the agreement itself. It's a completely different experience paying the bill when you're able to talk to everyone involved in real time. And that's just another feature of adding some sort of infusing chat about the existing old experiences. And next, let me talk about travel management. Now, we've been talking about travel for a long time. We do travel booking and so forth. But we think that there's a great opportunity for, I think the term is leisure. I don't know why it's called that.

Else has and then finally, we talked about universal chat and it basically everything we've talked about here is designed to sort of cross boundaries seamlessly like you don't need an account you don't need a password or any of this is basically just built in automatically so anyone with an email address or phone number you can collaborate with they can join.

David: Well, I do know it's called that. So, you know, business plus leisure and, you know, just a fantastic term. Can't, gotta love the internet.

It doesn't require an app you just open up and the mobile app or does respond to the email whatever it might be so we're going we're working very hard to eliminate the barrier to adoption such that no matter, who you integrate with and who you collaborate with they can engage with you directly to the product and whatever term most sort of <unk> and so all of.

David: But anyway, I think that a great thing about it is that when you're traveling for work, you're going to cool places. And so the idea of bookending and staying a couple extra days and so forth is incredibly common, but it's not necessarily supported by the traditional tools. Additionally, when you travel, you're traveling with other people, and you don't work all the time.

This foundation, we think creates a highly sort of defensible number of values for that high margins subscription because fundamentally any and pretty much any technology can be reproduced, but it's very hard to reproduce chat functionality because that is actually held to the highest standard of any sort of usability or reliability and performance sort of standards instead of.

David: You have off hours. When you go to a conference, people are on call or on duty. But then they go wild out at night.

David: And so as a result, we tried to recognize the real world social dynamic of people who are doing business travel. And there's a lot of, normally, you would basically set up a WhatsApp group or something like this to sort of, after hours, you go someplace else. Instead, we just build that social group for you automatically. When you travel, when multiple people travel to the same city, we're just going to throw them into a chat room together so they can actually start coordinating their dinners and their after-work activities right here in Product. And so again, travel management is nothing new, but a social sort of leisure-based travel management is new.

This is a completely different level of technology development at why we've been spending so long on it and that's why we're years ahead of what we think the competition to do.

So it's kind of a <unk> the three major components of what we think is a longterm growth is first we start with is B S. D. S. M. B market cause it's huge untapped and no one else is going after it there is really no organized competition. There. It's like you know our competition is email on itself and it's not fighting back and.

So we think that it's a huge opportunity this largely uncontested.

David: And I think that's something that's highly defensible because it requires integrated seamless chat functionality that pretty much no one else has. And then finally, we talked about universal chat, and basically everything we talked about here is designed to sort of cross IT boundaries seamlessly. Like you don't need an account. You don't need a password or any of this.

Secondly think the only way to go out and get it that's the only way of your muscles get forgotten. It was two viral word of mouth and what are the only ones. Even trying that if you look at any of our competition all of them have the exact same business model pretty much. The exact same product being sold the exact same way and it's all basically struggling so we think that the way that you can catch.

David: It's basically just built in automatically. So anyone with an email address or phone number can collaborate with you. They can join; it doesn't require an app. You just open up in the mobile app or just respond to the email, whatever it might be.

This has to be with a different angle the way others have captured this huge untapped opportunity has been to a viral word of mouth manner now and we're going to do that for expense management, because we think about the sort of the nexus of the three most important and most viral use cases and the internet and so we think will be can play that again.

David: So we're working very hard to eliminate the barrier to adoption such that no matter who you integrate with and who you collaborate with, they can engage with you directly through the product on whatever terms are most sort of palatable to them. And so all of this foundation, we think, creates a highly defensible number of values for that high-margin subscription. Because fundamentally, in the end, pretty much any technology can be reproduced, but it's very hard to reproduce chat functionality because that is actually held to the highest standard of any sort of usability or reliability and performance sort of standards.

And then finally, we think the subscriptions or the way that you can make profit in a sea of sort of I can read competitors because.

A new idea to want to do everything, but actually doing everything's quite hard we've been working at building. This foundation for a very very long time, we think in the end the most defensible way to operate in this market used with the best unit economics, it's basically to have the lowest cost acquisition into the largest market with the highest margins not exactly the most genius stuff the same.

It is actually quite hard or saying, it's easy, but doing it's quite hard and so we've been focused entirely on unit economics and sort of profitable longterm growth for a very long time, and so we think that we have a very strong advantage of the competition, which is just just now starting to think about this finally I'd be remiss not to say something about a I am because that just seems.

David: And so this is a completely different level of technological development. It's why we've been spending so long on it. And it's why we're years ahead of what we think the competition could be. So the kind of array of this overall, the three major sort of components of what we think is a long-term growth is first, we start with this VSB S&B market because it's huge and untapped, and no one else is going after it. There is really no organized competition there.

To be the thing that everyone's picked up on but.

<unk>, it's not a coincidence that expensive high has been pushing a chat focus for a very long time because.

We've known that this is gonna come I mean everyone's known it's gonna come but nobody is gonna come is different than actually doing something about it we built our entire platform around chat because chat is the language of a sort of generative chatbots are <unk>. It's.

David: It's, you know, our competition is email and Excel, and it's not fighting back. And so we think that it's a huge opportunity that's largely uncontested. Second, we think the only way to go out and get it, like the only way anyone else has ever gotten it, was through viral word of mouth. And we're the only ones even trying that.

It's going to completely change how user interfaces are designed historically you know there's a bunch of buttons. So there's a bunch of searching and things like this and that's still going to be there in a while but you can interact with a as more natively actually through chat to talking and things like this into our platform is about trying to build.

David: If you look at any of our competition, all of them have the exact same business model, pretty much the exact same product, being sold the exact same way, and they're all basically struggling. So we think that the way that you can capture this, it has to be with a different angle.

A single foundation, where all kinds of information and people can collaborate on the same level of the eyes themselves and so if you have a super intelligent yeah hanging out with you you don't want to basically just press a bunch of buttons to talk to them that's not actually how they talk they talk in a language that we talk as well. It's a chat is the language of AI and expensive <unk>.

David: The way others have captured this huge untapped opportunity has been through viral word of mouth. Now, and we're going to do that for expense management because we think that we're at the sort of the nexus of the three most important and most viral use cases on the internet. And then finally, we think that subscriptions are the way that you can make profit in a sea of sort of red competitors because it's not a new idea to want to do everything, but actually doing everything is quite hard. We've been working at building this foundation for a very, very long time. We think, in the end, the most defensible way to operate in this market is with the best unit economics. It's basically to have the lowest cost acquisition into the largest market with the highest margins. Not exactly the most genius stuff, but saying it is actually quite hard, or saying it's easy, but doing it is quite hard.

Okay Foundation <unk> can collaborate on an equal footing with the humans themselves.

So we've been talking about all this stuff for such a long time and I know that you know.

It's been a lot of work to get to this point, but we're extremely happy to actually start showing it rather than just talking about it and so it here on the screen, but a Q R code one more trick of since my chat is that he's got public rooms. If you scan that good you're gonna be you know a web and mobile whatever it might be you'd be dropped directly into a room, where you can get <unk>.

David: And so we've been focused entirely on unit economics and sort of profitable long-term growth for a very long time. And so we think that we have a very strong advantage over the competition, which is just now starting to think about it. Finally, I'd be remiss not to say something about AI because that just seems to be the thing that everyone's picked up on, but it's not a coincidence that Expensify has been pushing a chat focus for a very long time because we've known that this is going to come. I mean, everyone knows it's going to come, but knowing it's going to come is different than actually doing something about it. We built our entire platform around chat because chat is the language of AI. The sort of generative AI chatbots that are. It's going to completely change how user interfaces are designed. Like historically, you know, there's a bunch of buttons, there's a bunch of searching and things like this, and that's still going to be there in a way, but you can interact with AIs more natively through chat, through talking, and things like this.

The sign up you don't even need to type an email address you can just observe and read a bunch more information there you're gonna get direct access to me the rest of the product team executive team to talk in real time about the trial itself now again this isn't about financials. This conversation is about the roadmap itself. So it's basically stick to the topic, but is there any questions about basically how the product works.

Why we're doing certain things differentiate from the competition and so forth. That's what we would love to talk with you.

Skinner code the dropped directly into a room, you're gonna see the whole chat experience you can start requesting real money from your friends you can start splitting bills you can start experiencing everything we're talking about right now he works on all platforms works with email phone number of course does everything we think it would be great. If you create an account, but you know who will talk to you. There. So I can't wait to talk to you soon.

Going to be a great time.

Oh and with that I guess, let's open it up to questions. Thank you.

Great.

Let's get started with city George do we have you on the line.

David: And so our platform is about trying to build a single foundation where all kinds of information and people can collaborate on the same level as the AIs themselves. And so if you have a super intelligent AI hanging out with you, you don't want to basically just press a bunch of buttons to talk to them. That's not actually how they talk. They talk in the language that we talk as well.

Alright, Yeah. This is George on for Steve vendors. Thanks for taking the questions maybe just to start with I'm a paid user number.

It was kind of flat quarter over quarter really appreciate the color on you know net adds verses turn versus contraction does that quarter on quarter stabilization give you guys any sense that you know maybe we're nearing a bottom kind of excluding seasonal factors or is there still too poor visibility just kind of a <unk>.

David: And so chat is the language of AI, and Expensify is building a foundation such that AIs can collaborate on an equal footing with humans. So, we've been talking about all this stuff for such a long time, and I know that, you know, it's been a lot of work to get to this point, but we're extremely happy to actually start showing it rather than just talking about it. And so here on the screen, we've got a QR code. One more trick of an extended chat is that it's got public rooms.

<unk> update on you know how you guys are feeling about that metric.

Yeah, It's it's tough to say airport the bottom right now obviously, David Wayne.

David sure we have a lot of positive indicators for the future January I think I mentioned January is usually pretty soft month in terms of users. So that's not completely unexpected.

David: If you scan that code, you're going to be, you know, on the web and mobile, whatever it might be. You'll be dropped directly into a room where you, again, don't need to sign up, don't even need to type in an email address. You can just observe and read a bunch more information. There, you're going to get direct access to me, the rest of the product team, and the executive team to talk in real time about the product itself. Now, again, this isn't about finances. This conversation is about the roadmap itself. So let's basically stick to the topic, but if you have any questions about basically how the product works, why we're doing certain things, how it's differentiated from the competition, and so forth, that's where we would love to talk with you. And so just scan that code to drop directly into a room. You're going to see the whole chat experience. You can start requesting real money from your friends.

But.

Where.

Working real hard to improve all inbound traffic inbound leads and we have some exciting green shoots data that way every shared with you but.

I think it's probably.

Still out on whether whether it's about them or not obviously, we hope sir but.

Yeah.

<unk>.

Great. Okay, and then one one quick follow up I appreciate the F. C F guidance and you know obviously, a big improvement in cash flow generation this quarter.

Do you is there more cost cutting on the horizon, that's required in order to hit that actually I've target or do you guys believe you have things in place.

It's a good question. So we implemented the changes midway through the quarter. So.

David: You can start splitting bills. You can start experiencing everything we're talking about right now. It works on all platforms, works with email, phone number, works with everything.

There's no at this point in time there is no.

Additional cuts needed we've made all the cuts not all of them.

Took effect in time to be experienced in Q4. So we do believe that will see a greater impact of it cuts in Q1 and future quarters, but.

David: We think it'd be great if you created an account, but, you know, we'll talk to you there. So I can't wait to talk to you soon. It's going to be a great time.

Operator: And with that, I guess we'll open it up to questions. Great. Let's get started with Citi. George, do we have you on the line? Hi, yeah, this is George on behalf of Steve Enders.

<unk> everything's good <unk>.

Great. Thanks for taking questions. Thank you.

Alright next we have J P. Morgan.

Hello, everyone. Thank you for letting me ask a question David.

George: Thanks for taking the questions. Maybe just to start with on the paid user number. It was kind of flat quarter over quarter. I really appreciate the color on, you know, net ads versus churn versus contraction. You know, does that quarter on quarter stabilization give you guys any sense that, maybe, we're nearing a bottom kind of excluding seasonal factors? Or is there just still too much poor visibility?

Me too. So I was wondering if you could and on the long awaited migration.

To the new expensive my is the statement in the press release about the global launch in 2024 does that imply that you.

You expect the migration to be fully completed this year.

Speaker: Just kind of appreciate an update on, you know, how you guys are feeling about that metric. Yeah, it's, it's tough to say. If we're at the bottom right now, obviously, David, as David showed, we have a lot of positive indicators for the future. January, I think I mentioned January's usually a pretty soft month in terms of users.

Great question so.

It's a rolling lunch I mean as you can see it's already out customers are using it it's being used for different use cases, where migrating people over in batches and so forth. We intends to keeps the old website around for as long as people need it since we don't know how long exactly that's going to be because it's basically we're pulling everyone over.

Speaker: So that's not completely unexpected. But, We're working real hard to improve all inbound traffic, inbound leads, and we have some exciting green shoots data that we shared with you. But, I think it's probably, the jury's still out on whether there's a bottom or not, obviously, we hope so, but fingers crossed, we'll know soon. Great. Okay, and then one quick follow-up. I appreciate the F

With you know a hunting editor that's the right phrase and so we're gonna make sure that we're taking the time to do it right or not in a hurry to basically push people over but basically making sure that they come over time, so I can't predict that and I would like to say, yes, but I I just I don't know for certain because fundamentally that's gonna be up to customers.

Speaker: And, you know, obviously, a big improvement in cash flow generation this quarter. Do you think there is more cost cutting on the horizon that's required in order to hit that FCF target? Or do you guys believe you have things in place? Good question.

Speaker: So we implemented the changes midway through the quarter. So, there's no, at this point in time, there are no additional cuts needed. We've made all the cuts. Not all of them took effect in time to be experienced in Q4, so we do believe that we'll see a greater impact of the cuts in Q1 and future quarters, but as of today, everything's in momentum. We don't need to do anything else.

Okay perfect.

And Brian quick a question about the theme for change.

I remember last what are you suggesting that.

Transition Uhm may take up to a year, because you customers who will be on the new card.

Customers will switch whenever they their contract comes up so when do you expect to see the most embarks on the transition uhm throughout the year.

Speaker: Great. Thanks for taking the question. Thank you. All right, next we have J.P. Morgan. Hello, everyone. Thank you for letting me ask a question. And hi, David. Great to meet you.

And.

What was the initial impact on revenue.

Perhaps on the fourth quarter, because I can see that you've.

Probably receive it historic number numbers as well so the 11 million versus a historic numbers and what was the impact that you're booked in the fourth quarter.

Speaker: So I was wondering if you could comment on the long-awaited migration to the new Expensify. Is the statement in the press release about the global launch in 2024. Does that imply that you expect the migration to be fully completed this year? Great question. So, it's a rolling launch. I mean, as you can see, it's already out. Customers are using it.

So it'd be embarrassed in fourth quarter is.

Essentially nothing you'll see that in Q1 going and going forward in terms of the speed of that transition.

David: It's being used for different use cases. We are migrating people over in batches and so forth. We intend to keep the old website around for as long as people need it. And we don't know how long exactly that's going to be. Because, basically, we're pulling everyone over with, you know, honey, not vinegar.

If similar to what David said, it's gonna be kind of at the speed of customers now they will be forced you know eventually it just switch over but.

I would if I had to guess I would think that it's gonna be a.

Initially a relatively large swath of customers and then.

David: That's the right phrase. And so we want to make sure that we're taking the time to do it right. We're not in a hurry to basically push people over. We're basically making sure that they come in on time. So I can't predict that.

Kind of a long tail and we're gonna have to.

Kind of noticed some people, but we do have some carrots to get remember we have.

Not yet announced we have some function a new card functionality coming out that I'm actually announced here, but we will announce shortly.

Speaker: I mean, I would like to say yes, but I just, I don't know for certain because, fundamentally, that's going to be up to customers. Okay, perfect, and Ryan, a quick question about the interchange. I remember last quarter you were suggesting that this transition may take up to a year because new customers will be on the new card, but old customers will switch whenever their contract comes up. So when do you expect to see the most impact of this transition throughout the year, and what was the initial impact on revenue, perhaps in the fourth quarter? Because I can see that you've probably restated historic numbers as well from the 11 million versus historic numbers, and what was the impact that you booked in the fourth quarter? So, the impact in the fourth quarter was essentially nothing.

That is only available on the new card program. So they have a very actual real benefit to switch over his bacon they'll be able to do.

Exciting helpful things with a new card that they couldn't do with the old card, but what for maybe an announcement on that in the coming weeks, but we do think that we have really good reasons switched over another point is also.

We're starting to see we're coming up on the expiration date of our initial customers. So the.

All the new cards will also be under the new program. So we're gonna hit a point, where our initial like since my card customers or cars or expiring. So they will automatically be migrated over when they get their new cards.

Speaker: You'll see that in Q1 and going forward, in terms of the speed of that transition, it's similar to what David said; it's going to be kind of at the speed of customers now, and they will be forced, you know, eventually to switch over. But if I had to guess, I would think that it's going to be a relatively large swath of customers at first, and then, kind of a long tail, and we're going to have to kind of nudge some people, but we do have some carrots to get through. We have, um, not yet announced. We have some functions, new card functionality, coming out that I'm not going to announce here, but we will announce shortly that is only available on the new card program. So they have a very real, real benefit to switch over as soon as they can; they'll be able to do exciting, helpful things with the new card that they couldn't do with the old card.

Thank you for that color I appreciate it.

No problem great questions.

Great now.

Now we have JMP securitas.

Alright.

<unk> thanks for the question.

Oh, well first off you cough that you're expecting a 20 per cent off on card pay grade five becoming your own program manager.

Talk a little bit about the challenges associated with replacing your prior program manager and whether it's something any company can pull off or if there's something you need <unk>.

Thank you for your question, it's not easy we we did it we have.

<unk>, yeah, because while I asked you all now but it's.

A new R. C U I was actually formerly from Marchetta. So we <unk>, we might have a little bit of an advantage there well maybe also because it requires taking over a lot of technology as well that we do in house and so not everyone has the same level of sort of in house technology expertise to handle like the real time authorizations, and so forth and so I think that we have an advantage over.

Speaker: But look for maybe an announcement on that in the coming weeks. But we do think that we have really good reasons to switch over. Another point is also, we're starting to see that we're coming up on the expiration date of our initial customers. So, all the new cards will also be under the new program. So, we're going to hit a point where our initial expensified card customers' cards are expiring, so they will automatically be migrated over when they get their new cards. Thank you for that color.

Companies, because we've already built so much of the card product you've already taken.

Basically already taken that in house, and so therefore migrate into becoming a <unk> a relatively low lift for us was for others. It would it be all legal list that we went through and also on top of that taking on like you know.

Speaker: I appreciate it. No problem. Great questions. Great. Now we have JMP Security. Hi, this is Aaron from AMC. Thanks for the question. Hey Aaron.

Speaker: Hello, first off, you call out that you're expecting a 20% uplift on card take rates by becoming your own program manager. You talked a little bit about the challenges associated with replacing your prior program manager, and whether it's something any company can pull off, or if there's something you need to expensify. That is a good question. It's not easy.

A second latencies sort of like high uptime transactional processing and like so I think it's actually <unk> you know it's.

It's not impossible totally we did it but you can see it took us a lot of time and we worked really hard on it. So I think I'm gonna take anyone else at least as long as US yeah. We have more of a bill <unk> Ultra here, Sir I think that the company had more of a bicultural.

Speaker: We did it. We have. It took a while, as you all know, but it, I knew our CEO was actually formerly from Marketo, so we might have a little bit of an advantage there. Well, maybe also because it requires taking over a lot of technology as well that we do in-house. And so not everyone has the same level of in-house technology expertise to handle things like real-time authorizations and so forth. And so I think that we have an advantage over companies because we've already built so much of the card product. We've already taken, basically already taken that in-house, and so therefore, migrating to becoming our own program manager is a relatively low lift for us, whereas for others, it would be all legal hassle that we went through. And also, on top of that, taking on like millisecond latency, sort of like high-uptime transactional processing.

Not.

Really struggle to do that.

That's helpful. And then May 20th 22, the board authorized $50 million a share repurchase plan. Thank you still have about 41 million approved under that offers uhm. So just trying to get an understanding of why you're thinking I mean valuations that last one times next year's revenue you have the guide for 10 to $12 and 24 free pass.

About 25, nine and my cash you anticipate prioritizing share repurchases in 24 and is there a certain level of my task you want to maintain the wrong with those.

All my questions that is a great question I think in the near term so you might as well we eliminated most of our debt.

Speaker: And like, so I think it's actually, you know, it's not impossible, clearly we did it, but you can see it took us a lot of time, and we worked really hard on it. So I think it's going to take everyone else at least as long as us. Yeah, we have more of a build versus buy culture here. So I think if a company had more of a buy culture, they probably would not really struggle to do that. That's helpful. And then, in May 2022, the board authorized a $50 million share repurchase plan.

We still do have a little bit in our revolving facility. So.

My instinct would be <unk>.

Focus more on reducing that but I think you're absolutely right that at the share prices and generating the cash for that we expect you bet, it's pretty good.

Uhm.

Move on our part, but no firm payments or or anything to announced at one time yeah.

<unk>. Thank you.

Speaker: I think you still have about $41 million approved under that authorization. So, just trying to get an understanding of how you're thinking. I mean, valuations are less than one times next year's revenue. You have the guide for $10 to $12 billion in 24 free cash flow, about $25 billion in net cash. Do you anticipate prioritizing share repurchases in 24? And is there a certain level of net cash you want to maintain to run the business?

Alright, now we have paper Sandler.

Great. Thanks for taking my question it looks like the pressure on the subscription revenue started the business I was wondering if there's any other color you can provide their maybe on how much. This drug you would attribute a business closures and downsizing.

Maybe any actions are taken to mitigate it.

<unk> yeah.

Well I think I would say you know, it's kind of rewriting what I mentioned earlier, I mean fundamentally acquisitions insurance table and I would say those are the most important metrics basically for us to control.

Speaker: Great question! That's a great question. I think in the near term, so you might have thought we eliminated most of our debt. We still do have a little bit in our revolving facility. I think you're absolutely right that at these share prices and generating the cash flow that we expect to, it's a pretty good move on our part, but no firm limits or anything to announce at this point in time. Yeah. Thank you. All right, now we have Piper Sandler.

Cause I think those really signify the health of expensive I as a business in terms of our economics of acquisition and retention.

But I would say and the challenge is yes. The 2022, what was good for our customers and that they were actually expanding as businesses and adding seats in the hiring of <unk> 2023, with bad for customers and that they were producing seats. They were lauren they weren't necessarily leaving expensive I. They just needed less expensive because they had fewer <unk>.

Speaker: Great, thanks for taking the question. Looks like there continues to be pressure on the subscription revenue side of the business. I was wondering if there's any other color you could provide there, maybe on how much of the drag you would attribute to business closures and downsizing, and maybe any actions you're taking to mitigate it. I'm going to do the water.

<unk> unless activity and so I'd say like we can't control the macro environment, but we can sort of a shield ourselves from it as much as possible and take advantage of it when it's when it's good and fundamentally I think.

David: I'll try. Yeah. Well, I think I would say, you know, it's kind of reiterating what I mentioned earlier. Fundamentally, acquisitions and churn are stable. And I would say those are the most important metrics basically for us to control. Because I think those really signify the health of Expensify as a business in terms of our economics of acquisition and retention. But I would say, and the challenge is, yes, our 2022, what was good for our customers, and that they were actually expanding as businesses and adding seats, you know, hiring, and things like this. 2023 was bad for customers and that they were reducing seats, they were lowering, they weren't necessarily leaving Expensify, they just needed less Expensify because they had fewer employees and less activity. And so I'd say, like, we can't control the macro environments, but we can sort of shield ourselves from them as much as possible and take advantage of them once when it's good.

The the takeaway here is that the business itself is healthy, but we are basically subject to the macro effects of a customer expansion construction, okay really answered the question.

[laughter] Yeah [laughter].

Yeah, no that makes sense.

Okay follow up in your conversation with customers I guess that helped you at all with getting <unk> in terms of potential trough I know, it's been a couple of quarters of.

Increasing contraction.

Sorry could you say that one more time.

Yeah, just your conversation customers that helping you at all in getting a line of sight in terms of a potential trough and the contraction.

Oh I see customers just basically.

Have customers indicated.

That they're gonna continue downsizing, Oh, Oh, Oh interesting I don't think we have insight into that we have.

We have a lot of customers. So it's Ah you know tens of thousands so it's tough to have like a.

David: And fundamentally, I think the takeaway here is that the business itself is healthy, but we are basically subject to the macro effects of customer expansion and contraction. I don't know if that really answers the question. He does, yeah.

Statement, and we feel super confident cause it but many of them it it's not.

The reduction in seek attraction isn't from you know our 10 largest customers is from.

Speaker: Yeah, no, that makes sense. I guess, a quick follow-up in your conversation with customers, I guess, that helped you at all with getting on site in terms of potential troughs. I know, just been a couple quarters of increasing contraction. Sir, could you say that one more time? Yeah, just your conversations with customers, is that helping you at all in getting going to site in terms of a potential trough in the contract? Oh, I see. Have customers... Basically, customers have indicated that they're going to continue downsizing. Oh, oh, oh. It's interesting.

Yeah, a lot of customers you you've never heard of very small businesses ends of thousands of your house is yeah. It's that we.

We are.

Really popular with a tech actually text been laying people off but.

We don't have any definitive statement from customers on how they're going because there's no customer group I can speak on behalf of everybody, Yeah, Oh, I wish I knew [laughter] shy anyway, but I don't know.

Perfect. Okay, So, let's move in and see if emails here.

Speaker: Um, I don't think we have insight into that. We do. We have a lot of customers, so it's tens of thousands, so it's tough to have like a statement that we feel super confident on because there's so many of them. It's not...

Daniel <unk>.

We can circle back, let's go to like Street capital.

Hey, guys, we went to the previous provider before just on the customer contraction. I mean is there any data you can point to that maybe you're seeing a scientific movement and that metric tomato you, obviously, you're gonna turn you're using January cause it's historically softer, but I guess it is there any date that you can point to maybe that you can give help us understand if you're seeing any sort.

Speaker: The reduction in C-contraction isn't from, you know, our 10 largest customers; it's from a lot of customers you've never heard of, right? Small businesses. Tens of thousands of businesses, yeah. It's not.

Speaker: We are really popular with tech, and obviously, tech's been laying people off, but we don't have any, you know, definitive statements from customers on how they're going because there's no customer group that could speak on behalf of everybody. Yeah. I wish I knew. I wish I knew, but I don't know.

Improvement with customer spent I guess.

Nothing to announce other than you know obviously, what we've presented here.

We have we go way of January data and obviously, we have our historical data.

Speaker: Perfect. Okay, let's move in and see if Beemo's here. Do we have Daniel or Kyle?

Speaker: We can circle back. Let's go to Lake Street Capital. Hey guys, we went to that previous slide that we read before, just on the customer contraction. I mean, is there any data you can point to that maybe you're seeing signs of improvement in that metric? I know you're going to churn users in January because it's historically softer, but I guess is there any data you can point to maybe that you can give help us understand if you're seeing any sort of improvement with customer spend? Um, nothing to announce other than, you know, obviously what we've presented here. We, you know, we have January data, and, you know, obviously, we have our historical data. We, I think...

B I think.

They take away.

From this five is that.

You know our customers have been having a difficult time is reflected kind of in our financials, but we also don't think that this.

Is a permanent situations you think the economy is going to improve and obviously S. B M. Economic pressures decrease we expect to see you know recovery and our customer base.

Speaker: The takeaway from this slide is that, you know, our customers have been having a difficult time, as reflected kind of in our financials, but we also don't think that this is a permanent situation. We think the economy is going to improve. And obviously, as the economic pressures decrease, we expect to see recovery in our customer base. All right, thanks, guys. And then just last one for me.

Alright, Thanks, guys and then just last one for me so with this cough skirts implement midway through the corridor. So Q1 are you expecting to sequentially decline in <unk>, how should we expect opex throughout the remainder of 2024.

Speaker: So with these cost cuts implemented midway through the quarter, I mean, so Q1, are you expecting a sequential decline in OPEX? And then, I guess, how should we expect OPEX throughout the remainder of 2024? So... Yeah, so we initiated full-year guidance, but given that we saw a big recovery in OPEC in Q4 and those changes didn't take place until halfway through the quarter, we expect to feel the full benefit of those cost cuttings in Q1. So, yes, we do expect that to improve quarter over quarter. Thanks, Jeff.

So.

Yeah. So we we initiated for your guidance, but given that the we saw.

Big recovery in Uhm Opex in M G.

Two four and those changes didn't take place until halfway to report or we expect to feel the full benefit of those cost cuttings in Q1. So.

We do expect that to improve of course of course.

Thanks, guys.

Speaker: Great. Let's check in with FT Partners. Okay, let's circle back to BMO, see if we can get you unmuted. Daniel, are you there?

Great let's.

Let's check in with F T partners.

Okay, Let's circle back to Pima, let's see if we can.

Get you unlimited.

January there.

Daniel: Yeah, can you hear me? Yes. Awesome. All right, great. Appreciate it. Thanks for taking the question. So I joined late.

Yeah can you hear me.

Yes.

Awesome Alright, great I appreciate it thanks for taking my question. So I joined late so I apologize. If this is a topic that was already discussed at length, but <unk>.

Speaker: So I apologize that this is a topic that was already discussed at length. But in the last couple quarters, you talked about sort of building the top of the funnel and some of the investments you're making there to kind of accelerate the customer acquisition trajectory. Can you just spend a moment on sort of what you have been doing there and anything that we should be on the lookout for as you're thinking about the gait plan for 24?

The last couple of quarters, you talked about instead of building the top of the funnel in from the investment you're making there to kind of accelerate the the customer acquisition trajectory and you just spend a moment on sort of what.

You had been doing there and anything that we should be on the lookout for is your thinking about the the game plan for 20 for.

Speaker: Sure, I think that one of the advantages of having a business that kicks off a lot of cash is that you can take big swings on things. And so I think that throughout 2023, we're trying a lot of different things. And I think what ultimately stuck best was our investment in SEO, and that's why I think we're really, you know, really pleased with the results there. We're also making, you know, additional investments that have longer-term returns and so forth. Fundamentally, I don't have any sort of, you know, crystal ball as to exactly how this is going to play out in the future, more than what we've already suggested for our cash flow guidance. And so I'd say, fundamentally, we feel very confident about the investments that we're making. But, you know, it's just a lot of experimentation, so I know it's kind of like a wishy-washy answer. But in general, there's, there's no one thing.

Sure I think that I mean.

So what are the advantages of having visit that takes up a lot of cash is that you can take big swings on things and so I think that throughout 2000 twenty-three or try and a lot of different things and I think with ultimately stuck the best was our investment in S. D. L and that's why I think we're really you know we've been really really pleased the results. There. We're also making you know additional investments that.

Have longer term returns and so forth.

Fundamentally I don't have any sort of you know crystal ball as to exactly how this is gonna play out in the future more than what we've already suggested for a castle guidance and so I'd say fundamentally we feel very confident investments are making but you know it's just a lot of experimentation cause I know it kind of like a wishy washy answer but in general there's just there's no one.

Speaker: It's not like we're basically putting all of our eggs in one basket; we're trying a whole range of things, some work, some don't. And I think that, in particular, the SEO has been really good. Gotcha, and then, on user churn, I understand some of that is certainly macro-driven and completely outside of your control. But maybe, again, sort of your latest thoughts about what you can do to the extent that you can to limit churn, if there's any additional leverage that you're thinking about. Oh, yes.

It's only for basically putting all of our eggs in one basket, we're trying a whole range of things some works them down and I think that in particular V. S. U has been really good.

Gotcha and then.

On the user sure I understand some of that is certainly macro driven and completely outside of your control.

But maybe again sort of your latest thoughts about thinking what you can do to the extent that you can to to limit churn if there's any additional that you're thinking about.

Okay, Yes, so we have been.

Speaker: So we have been making some investments in reducing churn. David spoke about global reimbursement. This is really more of a more enterprise, mid-market focused feature for companies that have multiple subsidiaries in different countries.

Making some investments in reduced insurance.

David spoke about global reimbursement this is really more of a.

More enterprise mid market focused feature.

<unk> subsidiaries in different countries. We also have some announcements that were.

Speaker: We also have some announcements that were, product announcements that we have coming up that we think will be beneficial to helping churn as well. Again, nothing to announce for Q4, but we have been developing quite rapidly. David spoke about the success of our outsourced contributor program.

Ah <unk> announcement that we have coming up that we think will be beneficial to helping turn as well.

<unk> announced for two four but we have.

Been developing a white rabbit.

David spoke about the success of our our social security program.

Speaker: It took us a little bit to kind of get going, but now it's a well-oiled machine, and the rate of development has increased, dramatically increased, and we're going to be deploying products quite quickly here in 2024. And we think that is going to be beneficial. Yeah, I think the contributor program has been a real secret weapon in that we've been able to effectively double, triple the engineering team, and, yes, vastly increase the engineering team. And that just accelerates just development overall.

It took us a little bit to kind of get.

But now it's a well oiled machine at the rate of development.

Has <unk>.

Dramatically increased and we're gonna be deploying products quite quickly.

Quickly here in 2024, and we think that is going to be uhm beneficial yeah. I think the contributor program, it's been a real soon.

Secret weapon and that we've been able to I mean.

Furtively double.

Triple the engineering.

Increase the engineering team and and that just accelerated development overall, and so I'd say, yeah, I think that we're really really happy that we've been making these major investments into the foundation of the platform.

David: And so I'd say, yeah, I think that we're really, really happy that we've been making these major investments in the foundation of the platform. And now I think we're to a point where we can begin really rapidly rolling out functionality that our customers are asking for. I mean, global reimbursement was one, but I think there's a long, long list of requests.

And now I think we're going to a point, where we can begin really rapidly rolling out functionality that our customers are asking for global reimbursement was one but I think there's a long long list of Ah request <unk>, We just released budgets to budgeting and insights. So do we just even though we didn't or the slides are basically a list of every single release, but yes, I'd say, there's a whole bunch of features.

Speaker: And we just released budgets, too. Oh, and budgeting and insights. And so did we just, you know, we didn't, or the slides are basically a list of every single release. But yes, I'd say there's a whole bunch of features that basically are directly kind of hand-delivered to the customer. Okay, gotcha. And then maybe just one last one for me.

That basically are directly kind of fan service to the customers.

Okay Gotcha, and then maybe just one last one for me I appreciate the free cash flow guidance.

Speaker: Appreciate the free cash flow guidance. Great. Great to see that. I guess philosophically, how should we approach your thinking about the guidance? Like, does it assume kind of like a stable macro?

Great great to see that I guess philosophically, how should we approach you're thinking about the guidance like does it assume kind of like a stable macro does it like what are the you know the fundamental pillars that underpin the guidance. So we can think about your progression.

Speaker: Do you like what are the, you know, the fundamental pillars that underpin the guidance so we can think about your progression against that this year? Thank you. So it does not rely on the macro environment improving.

Against that this year. Thank you.

So it does not rely on a macro environment, improving it's a there's some conservatism baked into that but given kind of the revenues been soft in recent quarters I think that conservatism is uhm.

Speaker: There's some conservatism baked into that, but given the kind of revenue has been soft in recent quarters, I think that conservatism is warranted, but it isn't. It's not wishful guidance. Like we really hope this happens. We do feel good about this number, and we don't need some change in the world for that to happen. We feel pretty good about it hitting those targets. Yeah. It doesn't require a bunch of things to go right for that to work.

<unk>, but it doesn't.

<unk> that is is not well wishful guidance, we really hope this happens we feel good we do feel good about this number and we need some change in the world after that to happen, we feel pretty good about it even though starting up yeah. It doesn't require a bunch of things to go right for that to work that's basically like if everything stays as we <unk>.

Speaker: That's basically it's like if everything stays as we plan, then it should be fine. Great. All right. Thank you very much. Thank you. All right. To the end of the Q&A.

<unk> then it should be fine.

Alright, alright, thank you very much.

Thank you.

Alright.

To the end of the CUNY.

Operator: All right, thank you all for joining us. And, as David mentioned, we have opened up a public room in our new product. We're not going to talk about financials there for obvious reasons, but if you want to join us and talk to us about the product roadmap, we would love to talk to you. We think this is really exciting. It's also a great opportunity for retail investors to get access to our executive team, our product management team, on a level that is not traditionally seen in public companies. So we think it's kind of novel and exciting, and we're looking forward to talking to you all there. So thank you all for your time, and we'll see you next quarter. Thanks, everyone.

Alright, Thank you all for joining and as David mentioned, we have opened up a.

Public room in our new product and we're not gonna talking about financial Sir for obvious reasons, but if you want to join and talk to us about the product roadmap. We would love to talk to you. This is a really exciting. It's also a great opportunity for retail investors to get access to our executive team <unk>, a product management team on a level that.

Is traditionally seen in public companies. So we think it's kind of novel and exciting and we're we're looking forward to talking to all their so thank you all for your time and we'll see you next quarter. Thanks, everyone.