Q1 2024 Expensify Inc Earnings Call

Ryan Schaffer: Hello, everyone. Welcome to the Q1 2024 Expensify earnings. I'm Expensify CFO Ryan Schaffer. I'm joined by Expensify CEO and founder David Barrett. Later, we have our COO Anuradha Muralidharan joining for the Q&A. But first, let's get started with the disclaimer. Nikki, take it away.

Hello, everyone welcome to the Q1 'twenty 'twenty four expense by earnings IMAX since I CFO, Ryan Shaper I'm joined by extensive <unk> CEO and founder David Barrett later, we have our C O O. Our newmar led her joining for the Q&A.

Ryan Schaffer: But first let's get started with the disclaimer Nicky take it away.

Nikki: Before we begin, please note that all the information presented on today's call is unaudited, and during the course of this call, management may make forward-looking statements within the meaning of the federal securities laws. These statements are based on management's current expectations and beliefs and involve risks and uncertainties that could cause actual results to differ materially from those described in these forward-looking statements. Forward-looking statements in the earnings release that we issued today, along with the comments on this call, are made only as of today and will not be updated as actual events unfold.

Nikki: Before we begin please note that all the information presented on today's call is unaudited and during the course of this call management may make forward looking statements within the meaning of the federal Securities laws. These statements are based on management's current expectations and beliefs and involve risks and uncertainties that could cause actual results to differ materially from those described in.

Nikki: These forward looking statements.

Nikki: We're looking statements in the earnings release that we issued today along with the comments on this call are made only as of today and will not be updated as actual events unfold. Please refer to today's press release and our filings with the SEC for a detailed discussion of the risks that could cause actual results to differ materially from those expressed or implied in any forward looking.

Nikki: Please refer to today's press release and our filings with the SEC for a detailed discussion of the risks that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today. Please also note that on today's call, management will refer to certain non-GAAP financial measures. While we believe these non-GAAP financial measures provide useful information for investors, the presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. Please refer to today's press release or the investor presentation for a reconciliation of these non-GAAP financial measures to their most comparable GAAP measures. All right. Now, let's talk.

Nikki: Statements made today. Please also note that on today's call management will refer to certain non-GAAP financial measures. While we believe these non-GAAP financial measures provide useful information for investors. The presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance.

Nikki: 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.

Ryan Schaffer: All right, now let's talk about the Q1 2024 financials. Our revenue was $33.5 million. Our average paid member was 688,000.

Nikki: All right now, let's talk about the Q1 2020 for financials.

Ryan Schaffer: Our revenue was $33.5 million. Our average paid members were 688000, our net interchange was $3 5 million.

Ryan Schaffer: Our net interchange was $3.5 million, and our operating cash flow was $3.5 million. Our free cash flow was $5.2 million, a significant increase quarter over quarter. Our gap net loss was $3.8 million, and our non-gap net income was $3.7 million. Our Net Loss and our Non-Gap Net Income Income Income Income Income Income Income Income Income Income and our adjusted EBITDA was $7.19. I mentioned free cash flow, and I want to talk about that a little bit more.

Ryan Schaffer: Yeah.

Ryan Schaffer: Our operating cash flow was $3 5 million, our free cash flow was $5 2 million.

Ryan Schaffer: Significant increase quarter over quarter, our GAAP net loss of $3 8 million and a non-GAAP net income was $3 $7 million the difference between.

Ryan Schaffer: Our net loss and our non-GAAP net income and stock based compensation and our adjusted EBITDA was $7 1 million.

Ryan Schaffer: I mentioned free cash flow I want to talk about that a little bit more so in Q4, we initiated a full year free cash flow guidance.

Ryan Schaffer: So in Q4, we initiated... full year free cash flow guidance. We did that to provide the market with our view on how cash flow is going to go for this year. And we're actually increasing that guidance to $11 million to $13 million for fiscal year 2019. And, like I mentioned earlier, our free cash flow is $5.2 million. That's a 242% increase from the previous quarter, something we're very proud of, and that is the impact of the cost cutting that we have discussed in the past. I also want to talk about the Expensify card.

Ryan Schaffer: We did that to provide the market with our view on how cash flow is going to go for this year and we're actually increasing that guidance to 11 million to 13 million for fiscal year 2024.

Ryan Schaffer: And like I mentioned earlier, our free cash flow was $5 2, million% to 242% increase from the previous quarter something we're very proud of and is that is the impact of the cost cutting that we have discussed in the past.

Ryan Schaffer: We've seen strong growth, 57% year-on-year growth to 3.5 million. We actually have seen 13% in just the last month alone, so the card is growing at a great clip. Also, everyone's favorite topic is the accounting and treatment change that we're going through. We're changing program managers, and the impact of that is that our interchange from the card will no longer be a contract expense in the cost of revenue.

Ryan Schaffer: Yes.

Ryan Schaffer: I also want to talk about the expense of a card.

Ryan Schaffer: We've seen strong growth of 57% a year on year growth to $3 5 million, we actually have seen 13% in just the last month alone. So the card is growing at a great clip.

Ryan Schaffer: Also everyone's favorite topic is the.

Ryan Schaffer: Accounting treatment change that we're going through we're changing program managers and the impact of that is our interchange from the card will no longer be a contra expense and cost of revenue it'll be moving to revenue and we expect that transition to be finished by end of year. Additionally, we will expect we will get 20% more interchange.

Ryan Schaffer: It'll be moving to revenue, and we expect that transition to be finished by the end of the year. Additionally, we will get 20% more interchange on those same transactions, so we're very excited about that, and that transition is underway. Also, we always leave you with how the current quarter is going. In April, we had 685,000 paid members. And now, I hand it over to David Barrett for the business highlight. Thanks, sir. All right.

David Barrett: And those same transactions. So we're very excited about that and that transition is underway.

David Barrett: Also we always leave you with our current quarters going in April we had 685000 paid members.

Ryan Schaffer: Yeah.

Ryan Schaffer: And now I hand, it over to David Barrett for the business highlight thank Sir alright.

David Barrett: All right. So to catch up, Q1 was a great quarter. We basically dialed in all of the cost optimizations from Q4. We continued or improved the core trends, and overall, we're just investing in the things that are working. To give an example of that, SEO is going really well. We've had almost a 100% year-on-year increase in sort of general keywords that are ranking across the Internet. But most importantly, we've had a huge increase in the number of first-page SEO keywords.

David Barrett: So, to catch up, Q1 was a great quarter. We basically dialed in all of the cost optimizations from Q4. We continued or improved the core trends. And overall, we're just investing in the things that are working. To give an example of that, SEO is going really well. We've had almost a 100% year-on-year increase in sort of general keywords that are ranking across the internet. But most importantly, we've had a huge increase in the number of first-page SEO keywords.

David Barrett: Alright, so the catch up Q1 was a great quarter, we basically dialed in all of the cost of our positions from Q4, we continue to improve the core trends and overall, we're just investing in the things that are working given example of that and C. O is going really well we've had almost 100% year on year increase in sort of general keywords that are ranking.

David Barrett: Ross.

David Barrett: But most importantly, we've had a huge increase the number of first page.

David Barrett: So, this is something we continue to invest in. I think that, as a word-of-mouth business, people are searching for and specifying a wide variety of names. And so, if we can capture by the branded keywords but also just the wide range of long-tail unbranded keywords as well, that's a huge sustainable lead generation path for a long time. Likewise, global reimbursement continues to grow by leaps and bounds, which is wonderful. We are a global product with customers all over the world, and so this is a way that we can support them well. Additionally, as Ryan mentioned earlier, CARD keeps growing up and to the right.

David Barrett: So this is something we continue to invest in. I think that, as a word-of-mouth business, people are searching for and specifying a wide variety of names. And so if we can capture by the branded keywords but also just the wide range of long-tail unbranded keywords as well, that's a huge sustainable lead generation path for a long time. Likewise, global reimbursement continues to grow by leaps and bounds, which is wonderful. We are a global product with customers all over the world, and so this is a way that we can support them well. Additionally, as Ryan mentioned earlier, CARD keeps growing up and to the right.

David Barrett: Keywords. So this is something we continue to invest in so I think that is a word of mouth business people are searching for expense vine a wide variety of names and so if we can capture by their branded keywords, but also just the the wide range of long tail unbranded viewers as well as a huge sustainable lead generation path for a long time.

David Barrett: Likewise global reimbursement continues to grow by leaps and bounds, which is wonderful.

David Barrett: We are a global products with customers all over the world and so this is the way that we can support the MAU.

David Barrett: <unk> as Ray mentioned earlier card keeps growing up into the right. So it is growing by leaps and bounds and so that's great. It's been really strong growth channel for us as well.

David Barrett: So it's growing by leaps and bounds, and so that's great. It's been a really strong growth channel for us. So, the most exciting thing, I would say, is that the product has been developed in an incredible way this past quarter. And so there's a lot to talk about here.

David Barrett: So it's growing by leaps and bounds, and so that's great. It's been a really strong growth channel for us. So, but most exciting, I would say, is that the product has been developed in an incredible way this past quarter. And so there's a lot to talk about here.

David Barrett: So, but most exciting I would say is that the product has been developed in an incredible way and this past quarter and so there's a lot of talk about here to start as we always do a reminder of the strategy. We believe that there is an enormous opportunity out there something like 100 times larger than the traditional markets and so we think that we're the goal of excellent device the <unk>.

David Barrett: To start, as we always do, a reminder of the strategy. We believe that there is an enormous opportunity out there, something like 100 times larger than the traditional market. And so we think that we're, the goal of Expensify is to capture that kind of untapped 99%, which is substantially with the VSB and SMB. The only way to do that is with a viral model that can sort of turn every customer into a lead generator. It's been done before. It's basically how we've grown to where we are right now. And that's something we're doubling down on going forward.

David Barrett: To start, as we always do, a reminder of the strategy. We believe that there is an enormous opportunity out there, something like 100 times larger than the traditional market. And so we think that we're, the goal of Expensify is to capture that kind of untapped 99%, which is substantially larger than the VSV and S&P. The only way to do that is with a viral model that can sort of turn every customer into a lead generator. It's been done before.

David Barrett: <unk> that kind of untapped, 99%, which is substantially with the VSP in F&B. The only way to do that is with a viral model that can sort of turn every customer into a lead generators and done before it's basically how we've gotten to where we are right now and that's something we're doubling down on going forward and of course. It all comes down to monetizing these leads with high margin monthly subscriptions.

David Barrett: It's basically how we've grown to where we are right now, and that's something we're doubling down on going forward. And, of course, it all comes down to monetizing these leads with high-margin monthly subscriptions, which is our business model. It's always been that way, and so it will continue to be that way.

David Barrett: And, of course, it all comes down to monetizing these leads with high-margin monthly subscriptions, which is our business model. It's always been that way. And so it continues to be that way. It's a reminder of kind of how this market is shaped. There are like a billion potential paying users in the VSB and SMB globally, and so we were going to go out and get them. Now, it's not impossible to get them; it's just hard. And the way it's been done...

David Barrett: As our business model has always been that way and so it continues to be that way.

David Barrett: It's a reminder of kind of how this market is shaped. There are like a billion potential paying users in the VSB and SMB sectors globally, and so we were going to go out and get them. Now, it's not impossible to get them, it's just hard, and the way it's been done in the past is through a viral model. There are chat systems, document management systems, payment systems that have captured hundreds of millions or even billions of users at this scale, and they always do it through some sort of viral word-of-mouth model. It is the only method to capture on this scale, and it's worked for others.

David Barrett: As a reminder of kind of how those market shares shaped, there's like 1 billion potential paying users in the DSP and SMB globally, and so we were going to go out and get them now.

David Barrett: It's not impossible to get them, it's just hard in the way it's been done in the past is that the viral model. There a chat systems Doggy management system is payment systems that are captured hundreds of millions even billions of users of this scale and they always do it through some sort of a viral word of mouth model is the only method to capture on this scale and it's worked for others expense management has.

David Barrett: Expense management has the unique benefit of being at the intersection between the three most common use cases on the internet. It's basically chat meets payments meets document management, and so we're doubling down on the viral, sort of inherent viral dynamic of these use cases in order to make a product that can capture the full range. To give an example of how that works,

David Barrett: The unique benefit of being at the intersection between the three most viral use cases on the Internet is basically chat. These payments means document management and so we're doubling down on the viral sort of inherent viral dynamic of these use cases.

David Barrett: Order to make a product which can capture the full range to give you. An example of how that works.

David Barrett: Now, we're going to go through some illustrations of how the product is basically going to capture this viral dynamic. And to tell this story, I want to talk about how, you know, we'll start with Alice, a construction worker that's basically going to Home Depot to scan a receipt to submit to Bob, her boss, who turns around and sends an invoice for that work to Kathy, who splits that invoice with basically her flatmates, one of whom is David, who works for the company that's. All of this, on an end-to-end basis This is truly a uniquely extensible flow. There's nothing else like it on the internet.

David Barrett: Now we're going to go through.

David Barrett: Some illustrations of how the product is basically going to capture this viral dynamic and to tell the story I wanted to talk about how it will start with Alice construction worker, that's basically going to home depot to scanner receipt to submit the Bob her her boss, who turns around and then sends an invoice for that work to Kathy who split.

David Barrett: That invoice was basically at her Flatmates, one of which is David who works for the company that's using our corporate travel feature all of this on an end to end basis happens in the same product. This is truly a uniquely expensive high flow, there's nothing else like in the Internet and so this is a really powerful case in southern kind of breaks down how each of these works one by one.

David Barrett: And so this is a really powerful case, and so I'm going to break down how each of these works one by one. To start, we start with, let's say Alice is a construction worker. The unique aspect of Expensify is that, as an employee, you can download, or not even download, you can just go to our website and start using Expensify without an account, just enter your phone number, just say you want to start tracking some expenses for yourself. It's an incredibly easy product to get going without waiting for your company to ask permission.

David Barrett: To start we start with let's say Alex is a construction worker the unique aspect of expense of five.

David Barrett: As an employee you can download or not even download you can just go to our website and start using expensive high without an account. It is injury a phone number to say you wouldn't start tracking some expenses for yourself is an incredibly easy for her to get going without waiting for your company to ask permission. We are inline training explaining basically how it works and then also.

David Barrett: We have online training explaining basically how it works, and then also our concierge system is there kind of stepping you through to explain exactly what you should do next at any point in time. When you start to use the product, you can sort of capture receipts. And we talk about business travel a lot for expense management, but for our users, business travel isn't necessarily flying coast to coast. It's driving to Home Depot to pick up materials for the job site, whatever that might be, scanning a receipt and so forth.

David Barrett: Our concierge system as they are kind of stepping through to explain exactly we should do next at any point in time.

David Barrett: When you start to use the product you can sort of capture of seats and we talk about business travel a lot for expense management, but for our users business travelers not necessarily flying coast to coast its drive into home depot to pickup materials for the job site whatever that might be scanning receipt and so forth home depot is actually one of.

David Barrett: Home Depot is actually one of our most commonly scanned receipts. And so the idea of scanning a receipt and then just submitting it to your boss, again, not waiting for your boss to ask you to use Expensify. Just recognizing that you have a personal problem, getting reimbursed, and then pulling your company in, whether it wants to or not. What's powerful about this is that when we think about this massive market, most of it is unaddressed, but it isn't unaddressable.

David Barrett: Most commonly scanned receipts and so the idea of scanning receiver and then just submitting it to your boss again not waiting for your boss to ask to ask you use expensive high just recognizing that you have a personal problem getting reimbursed and then pulling your company in whether it wanted to or not what's powerful about this is when we think about.

David Barrett: This massive market most of it is unaddressed, but not unaddressed the ball it just hasnt been addressed by the traditional business model. So these are hundreds of million businesses around the world, which have an excellent management problem was not when they're trying to solve so another searching for it they're not taking calls on us not clicking ads or whatever it might be but employees.

David Barrett: It just hasn't been addressed by the traditional business model. So these are hundreds of millions of businesses around the world which have an expense management problem, but it's not one they're trying to solve. They're not out searching for it. They're not taking calls on it.

David Barrett: They're not clicking ads for it, whatever it might be, but employees actually do experience that problem. And so we're giving a tool to employees to go out and solve their own personal employee problem and, in the process, pull their company into it. Once the company is pulled in, and again, maybe the employee submitted it to their boss via text message or whatever it is. We have a bi-directional system where even if the system sends you a text message, you can respond in text, and basically, the communication goes back to the user in the native platform.

David Barrett: Do experience that problem and so we're giving a tool to the employees to go out and solve their own personal employee problem and in the process pulled our company into it.

David Barrett: Once the company has pulled in and again, maybe the employee submitted it to with to their boss via text message or whatever it is we have a bidirectional system, where given our systems essentially a text message you can respond in text and basically the.

David Barrett: Communication goes back to the user in a data platform.

David Barrett: We have what we call sort of a top-down self-service model. So no matter how you're pulled into the system, maybe an employee has submitted a receipt, maybe you actually sign up via the website yourself, whatever it might be, everything you need to convert, you don't have to talk to a salesperson. You can just sit down and configure everything for the product automatically. So likewise, when you go to pay a receipt for an employee, for example, the ACT symbol that we see that you're trying to pay with a business bank account indicates to us that you are a business.

David Barrett: We have a what we call sort of a top down self service model. So no matter, how you pulled into the system, maybe an employee submitted to receive maybe you actually sign up via the website yourself whatever it might be everything you need to convert you don't have to talk to a salesperson you can just search on sit down and configure everything.

David Barrett: To further product automatically so likewise when you go to pay a receipt for an employee for example, this is a symbol of act that we see that you're trying to pay with a business bank account indicates to US that you are a business I guess, you could pay venmo style Athena a PDP transaction, but if you choose to pay with the business Bank account then we set you up with basically our <unk>.

David Barrett: Again, you could pay Venmo style with a P2P transaction, but if you choose to pay with a business bank account, then we set you up with basically our universal payment engine, which not only can reimburse expense reports but can also do corporate travel and invoices, send corporate cards, and things like this. Now, invoices, there are two major flavors, B2B and B2C. What's particularly nice about business to consumer invoicing is that it's incredibly viral. We can turn every one of your customers into a viral link generator for the expense of time.

David Barrett: Interventional payments engine, which is not only can reimburse expense reports, but can also do corporate travels and invoices sent corporate cards and things like this.

David Barrett: So I mentioned, how you can send invoices now invoices theres, two major flavors, <unk> and BDC, what's particularly in us as a business to consumer invoicing is it's incredibly viral we can turn every one of your customers into a viral lead generator for specified and so we can take that receipts that was just submitted to the company for reimbursement and we can invoice.

David Barrett: And so we can take that receipt that was just submitted to the company for reimbursement, and we can use that receipt to generate an invoice that's sent out to the client. In this particular case, saying, you know, we're sending it out to Kathy who is paying for basically having her deck finished on her house or something like this. Again, this is the exact same platform, and it's switching back and forth between, you can sign up on the web, you can have a mobile app, you can use it on desktop and mobile. It all works the same, sort of going back and forth.

David Barrett: Use that receipt to generate an invoice is sent out to the clients in this particular case, saying and thinking that we're sending that to Kathy who.

David Barrett: Is being or paying for basically having her duct finished for her house or something like this again. This is the same exact platform and its switching back and forth between you can sign up on web you can have a mobile app you can use it in desktop and mobile at all it works the same sort of going back and forth like wells you noticed that.

David Barrett: Likewise, you notice that when the company goes to set up a payment using their business bank account, it's the same basic flow as when Kathy goes to set up her payment for paying the invoice itself. Again, it's a universal payments engine. It doesn't matter how you want to pay.

David Barrett: When the company went to go set up payments using their business banking account is the same basic flow as when Kathy goes instead of her payments for paying the invoice itself against the Universal payments engine. It doesn't matter, how you want to pay it all us behind the scenes to figure out the appropriate payment rails, and then show a very simple experience for the end user.

David Barrett: It's on us behind the scenes to figure out the appropriate payment rails and then show a very simple experience to the end user. Next, we say, OK, maybe Kathy got this deck installed for her house. And then she turns around and invites, creates a chat group for everyone in the house to basically split this expense so we can talk about, you know, hey, we got this invoice. It's basically a WhatsApp-style group, except better than WhatsApp; it actually works with both email addresses and phone numbers.

David Barrett: Next we say, okay, maybe Kathy got this deck expense for her house and then she turns around and invites Christmas a chat group for everyone in the house to basically.

David Barrett: This expense. So if you could talk about you know hey, we got this invoice is basically a whatsapp style group.

David Barrett: Except better than what's that it actually works with both email addresses and phone numbers and you also don't need her to wait for the other side to downloading for that.

David Barrett: And you also don't need to wait for the other side to download any sort of app. Using Expensify is a personal decision. If you choose to use Expensify to manage your group communications, you can invite someone by email, invite someone else by text, and then you use the Expensify app. We will facilitate the conversation on whatever native platform they want to be on. Likewise, when you choose to split a bill with everyone, we'll notify them by email, phone number, whatever it might be, and they don't need to create an account. They don't need to download anything.

David Barrett: Using expensive I as a personal decision if you choose to use <unk> to manage a group communications you can invite someone by email invite someone else buy taxed at an EU use the extensive app and we will facilitate the conversation then whatever native platform. They want to be likewise, when he chooses to split the bill with everyone, we'll notify them by email.

David Barrett: <unk> funded or whatever might be and they don't need to create an account that doesn't need to download anything. They can just use the web site to sort of pay to slip bill. So it's like a venmo, except it doesn't require any app installation and it works for both of our email instead of a phone number.

David Barrett: They can just use the website to sort of pay the split bill. So it's like Venmo, except it doesn't require any app installation, and it works with both email and a sort of phone number. Similarly, we can say maybe one of those people that the bill is split with has already worked somewhere, already worked with a company that's basically using corporate travel. And so, in this particular case, David is basically using the mobile app to book full travel on the client base so that it's full corporate travel, but simplified down for the SMB.

David Barrett: Similarly, we can say, maybe one of those actually people that the bill as Louis already worked similar already worked with a company that's basically using corporate travel and so in this particular case, David is basically using the mobile app to book full travel on the client base so that.

David Barrett: It's a full corporate travel, but civil tied down for the SMB now whats nice about this and I think that as you travel management has been around for a long time I think one of the greatest features expense by travel personally as we call soft approvals now this will dial in again whenever you want depending upon the level of control you want you can get that but I would say.

David Barrett: Now what's nice about this, and I think there's, travel management has been around for a long time. I think one of the greatest features of Sensify Travel personally is what we call soft approvals. We'll dial in, again, whatever you want; depending upon the level of control you want, you can get that. But I would say you can configure it such that the client can, or the employee can book travel, and there's no approval needed, or you can book travel for soft approval, meaning we'll notify the company that travel's approved, that travel's been booked, and then they can have 24 hours to sort of cancel the booking before it goes into effect, or it can require hard approval, meaning that it requires actual specific approval before it actually gets booked itself.

David Barrett: You can configure it such that the clients can or the employee can book travel and there is no approval needed or you can book travel for soft approval meeting will notify the company that travels approved the travels in books and then they can have 24 hours to sort of cancel the booking before it goes into effect or can require heart approval, meaning that it requires actual specific approval.

David Barrett: Before it actually gets booked itself and so this is a very flexible tool to bring corporate travel on the mobile basis down to employees and of course on the management side for the travel manager or for any sort of financial management. There's a full search experience says that you can actually pull in all the information necessary to manage complete expenses now we can.

David Barrett: And so this is a very flexible tool to bring corporate travel on a mobile basis down to employees, and of course, on the management side, for the travel manager or for any sort of financial manager, there's a full search experience so that you can actually pull in all the information necessary to manage complete expenses. Now, we kind of had two major flows in the product. One's called the inbox, which is really optimized for real-time expense management.

David Barrett: I have had two major flows in the product once called the inbox, which is really optimized for real time expense management whenever you configure your workflow and we know what your workflow is then we can surface to the user exactly what they should do next but from any flows we don't really know what to do next if you had to do a one off analysis or you need to find a particular receipt whatever it is that's.

David Barrett: Whenever you configure your workflow, and we know what your workflow is, then we can surface to the user exactly what they should do next. But for many flows, we don't really know what to do next. If you have to do a one-off analysis or you need to find a particular receipt, whatever it is, that's where our universal search comes in. And so you can basically do a search for a particular keyword, and then we'll search across all of the data types in the application.

David Barrett: Our Universal search comes in and so you can basically do a search for a particular keyword and then will search across all of the data types and application. As you can see is not just expenses will search chats tasks invoices trips and so forth. So if you need to pull up you know everything related to Greg or maybe everything related to vegas or whatever it might be we will show you where every day.

David Barrett: As you can see, it's not just expenses. We'll also search for chats, tasks, invoices, trips, and so forth. So if you need to pull up everything related to Greg, or maybe everything related to Vegas, or whatever it might be, we'll show you where every data object is that relates to your keyword, and then pull it into this very flexible system where you can export it to CSC, and later add analysis features and so forth. So that was a lot that I just threw at you.

David Barrett: Every data object is that relates to a keyword and then pull it into this very flexible system, where you can export to CSC and <unk>.

David Barrett: Alex analysis features and so forth.

David Barrett: So there was a lot that I just threw at you to kind of review what we saw here Alice basically.

David Barrett: To kind of review what we saw here, we saw Alice basically first scanned her receipt for herself without asking her permission, then turned around and submitted that receipt to Bob for reimbursement. In the process of reimbursing the receipts, Bob configured expense management for his entire company, and then used that same Universal Payments account to send an invoice to Kathy, and Kathy paid that with a credit card.

David Barrett: First scans receipt for herself without asking permission.

David Barrett: Then turnaround and submitted that seat to Bob for reimbursement in the process of reimbursing that receipt, Bob configured expense management for her for his entire company and then use that same universal payments account to send an invoice to Kathy Kathy pay that with a credit card again, there is no additional setup here.

David Barrett: Again, there's no additional setup here. It's basically, it happened automatically as a consequence of setting up the Universal Payments account. Then Kathy, after paying that invoice, turned around and split it with basically her flatmates using a WhatsApp-style app. One of those members already had the app installed, was already using it inside of a company, and then used, David used the same app to turn around and book travel. Again, this is a very unique flow that involves a tremendous amount of functionality happening all in the span of a single consumer app. Now, building a great app like this is hard. It requires a lot of really advanced technology.

David Barrett: Basically it automatically happened as a consequence of setting up the universal famous counts then cathie after paying that invoice turnaround the split it with basically her flatmates using a whatsapp style sort of group chat platform.

David Barrett: One of those members already had they have installed already using inside of a company and then used David use are the same app to turnaround and book travel again. This is a very unique flow that involves a tremendous amount of functionality happening all in a span of a single consumer app.

David Barrett: Building a super App like this as hard as it requires a lot of really advanced technologies. It's why it's taken us quite a while to do because this is not a bunch of stuff you can do off the shelf. This requires a bunch of bespoke technologies just to give a quick review of some of them are as we use our bedrock database, which is a blockchain synchronized basically <unk> database has gigantic.

David Barrett: It's why it's taken us quite a while to do this because this is not a bunch of stuff you can do off the shelf. This requires a bunch of bespoke technologies. Just to give you a quick review of some of them, we use our Bedrock database, which is a blockchain synchronized, basically, unpartitioned database that has gigantic servers. We're talking about 384 CPU servers. No one has technology like this

David Barrett: Service Youre talking like 384, CPU servers, no one has technology like this but what's nice about this is allows for context switching between these different environments. So that's what having everything stored in the same database at a scale. Like this is what allows you to use the same application between work and personal and use it between different organizations.

David Barrett: But what's nice about this is it allows for context switching between these different environments. So having everything stored in the same database at a scale like this is what allows you to use the same application between work and personal life and use it between different organizations. Likewise, we use React Native, which is a very powerful technology for creating a consistent experience between iOS and Android, web and mobile, mobile and desktop, and so forth.

David Barrett: Likewise, we would react native which is a very powerful technology for creating a consistent experience between iOS and Android web and more.

David Barrett: Mobile mobile and desktop and so forth. This means that there is no application need to install and likewise when you're deploying this that's your organization that you don't need to retrain Your company based upon different platform. So it works the same everywhere.

David Barrett: This means that there's no application you need to install. And likewise, when you're deploying this at your organization, you don't need to retrain your employees based on different platforms. It works the same everywhere.

David Barrett: As I mentioned, this is designed to work seamlessly with email and SMS. It doesn't require an account, and you don't need to create a password.

David Barrett: As I mentioned this is designed to work seamlessly with email and SMS. It doesn't require an account you don't need to create a password anyone who has email and SMS can receive messages from accent defined collaborate that's what means that expensive I as a personal decision to use my decision to use expensive is independent of yours. If you have an email address or SMS I can communicate with you.

David Barrett: Anyone who has an email address and a mobile phone can receive messages from Expensify and collaborate. That's what makes Expensify a personal decision to use. My decision to use Expensify is independent of yours. If you have an email address or a mobile phone, I can communicate with you, and you can respond to me.

David Barrett: And you can response to me and so this is there's no tyranny of the straggler, where everyone. In the company is waiting for one person to adopt you can adopt expense by by yourself and get value out of it whether or not your friends or company does and then finally, the universal payments engine.

David Barrett: And so there's no tyranny of the straggler, where everyone in the company is waiting for one person to take charge. And then, finally, the Universal Payments Engine. In order to make this work, we actually move money a bunch of different ways. If we're moving domestically over ACH or credit cards, or maybe we'll cut checks in certain situations, we'll move it over a whole bunch of international payments networks. But to the user, this looks like you have set up your account.

David Barrett: In order to make this work, we actually move money a bunch of different ways. If we're moving like domestically over ACTH over credit cards, or maybe we'll cut checks in certain situations, we'll move over a whole bunch of international as sort of a payments networks. Because these are it doesn't so it just looks like you said if your accounts and then we take care of all of that complexity and so you didn't don't need to worry about it.

David Barrett: And then we take care of all that complexity, and so you don't need to worry about it. This creates a consistent symbol app experience across all these different payment networks. So all of this, again, there's quite a lot here. I'd love to go into a lot more detail.

David Barrett: This creates a consistent sort of symbol app experience across all these different payment networks. So all of this again, there's quite a lot here I'd love to go into a lot more detail you can go back to our roadmap room, where you can see actually using expensive by and chat with our product management team and me, but all of this in a whole lot more and so please scan the QR code click the link whatever it might be.

David Barrett: You go back to our roadmap room, where you can see Expensify in action and chat with the product management team and me about all of this and a whole lot more. And so please scan the QR code, click the link, whatever it might be, and I'd love to keep talking. So in conclusion, Q1 was a great quarter where I think we delivered an incredibly strong sort of cashflow and cashflow growth. New Expensify has had incredible development progress, and I think we're moving away from the core engineering and product development to the final stretch, which is polished performance and improving reliability. So that's where we are right now. Everything we demoed there, it's like 95% real.

David Barrett: And I'd love to keep talking so in conclusion Q1 is a great quarter. We I think we've delivered incredibly strong sort of cash flow.

David Barrett: Cash flow growth.

David Barrett: <unk> developed our new expense by has had incredible development progress and I think we're moving away from the core engineering and product development to the final stretches of polished performance improving reliability.

David Barrett: So that's where we are right now everything the demo there that's like 95% real and so it's going to be 100% real by the time, we talk again.

David Barrett: And so it's going to be 100 percent real by the time we talk again. Next time we talk, New Expensify is going to be fully in the market and generating paying customers. Expensify Travel is going to have paying customers, generating new incremental revenue. And also, the new card program that Ryan mentioned is already fully underway. And so it's going to take time to convert all our cards over, but that process is going to be started. So it's been a great quarter. We've made a bunch of tremendous progress across the board, and I can't wait to talk again next quarter. But for now, it's time for some questions.

David Barrett: Next time, we talk new offensive I is going to be fully in market and generating paying customers in country travel is gonna have paying customers generate new incremental revenue and also the new card program that Ryan mentioned is already fully underway and so it's going to take time to convert all of our cards over but that process is going to be started so it's been a great quarter.

David Barrett: We had a much of a bunch of tremendous progress across the board and I can't wait to talk again next quarter, but for now it's a good question.

Operator: Sorry about that. We're having some technical difficulties. We had a cup of coffee spilled on the laptop that we used to do this.

Speaker Change: Sorry about that we're having some technical difficulties, we had a cup of coffee spilled on the laptop and do.

Operator: So we had to swap out one and.

Operator: We had to swap out one. We have some technical difficulties, but here we are. Thank you for staying with us. So, first, I believe we have.

Speaker Change: We'll go back and technical difficulties, but here, we are still staying with us.

Speaker Change: Perfect. So I believe we have.

Operator: So, first, I believe we have Hoji on the line.

Hoji: <unk> on the line.

Operator: Sure.

Operator: Hi.

Operator: Yes.

Operator: Okay, let's go over to Citi.

Citi: Okay, let's go over to Citi.

Operator: Okay.

Operator: May have lost some keepers because of technical difficulties.

Speaker Change: And lawsuits ibama the technical difficulties.

Operator: Matt are you there.

Operator: Yeah, hey there. We're back. Let's do it. All right, we got one.

Citi: Yeah, Hey, there.

Operator: Jim.

Operator: That Jon Stewart.

Operator: Lee Allen.

Speaker Change: You guys are having a similarly, a eventful afternoon as Ian so without further Ado.

Operator: And I guess the first question I was just curious on going back to the the paid member as a charter you guys showed the April data point is at least historically April is generally shown a little bit of a jump.

Operator: Sounds like you guys are having a similarly eventful afternoon as I am. So, without further ado, I guess the first question I was just curious about, going back to the paid members chart where you guys showed the April data point, at least historically, April generally showed a little bit of a jump. I don't know if there's any kind of nuances to this April, but it looks like it sequentially came down a tiny bit.

Operator: I know there is any kind of nuances to this April but it looks like it is sequentially came down a tiny bit.

Operator: And then it might be interrelated. So I'll just ask my short follow up now, but I think last quarter, you guys had talked about leveraging certain incentives to get people to more proactively switched from sort of old cards, a new card yeah. How do you guys deployed does can you talk a little bit more about how those are kind of coming into the market and working in and maybe that has an interim.

Operator: Places to paid members.

Operator: And then it might be interrelated, so I'll just ask my sort of follow up now, but I think last quarter you guys talked about leveraging certain incentives to get people to more proactively switch from sort of old cards to new cards. Yeah, how do you guys deploy those? Can you talk a little bit more about how those are kind of coming into the market and working, and maybe that has an interplay with paid members?

Speaker Change: Yeah, Yeah, Great question and thank you. So the car transition I think is going well.

Operator: Thanks. Yeah. Yeah. Great question. And thank you.

Operator: We do have some financial incentives bets.

Operator: So the car transition, I think is going well. We do have some financial incentives that we can deploy. We haven't deployed for those yet, but I think the biggest kind of carrot to get people over is that we've deployed new functionality that is only available on the new card, specifically the ability to create an unlimited number of virtual cards, which people use on like a per vendor basis. So that's a highly desired feature that we're only putting on the new card. Customers come over as soon as they hear that.

Operator: That we can apply we have an appointment as yet, but I think the biggest kind of carriage to get people over is we've deployed new functionality that is only available on the new card specifically the ability to create an unlimited amount of virtual cards, which people use on like a per vendor basis and I'd.

Operator: So that's a highly desired feature that we're only putting on the new card and we're seeing.

Operator: Customers come over as soon as they hear that so are we a financial incentives we haven't used them yet.

Operator: So we do have financial incentives; we haven't used them yet. But we do have full confidence that we're going to get everyone transitioned over by the end of the year. And we're very incentivized to get it done quickly. So it's a high priority for us. Yeah. Okay.

Operator: But we do have full confidence that we're going to Gabriel transitioned over by end of year, and we're very incentivized to get it done quickly. So it's a high priority for us.

Operator: Okay, got it. So you haven't used the incentives, the financial incentives yet. Okay, that's helpful. Thank you.

Speaker Change: Okay got it so you haven't used the incentives and the financial times, yes. Okay. That's helpful. Thank you.

Speaker Change: Jim The second question are we going to plan. It is a two part already okay great.

Operator: Elyse.

Operator: Do you have a second question, or are we good? There's a two-part already. Okay, great, over here. Hi, yes, this is Elise Kenner from JPMorgan on behalf of Alexi Gogolev. My question was, is your raised free cash flow guidance more of a result of the potential monetization of the new Expensify and the new card interchange revenue recognition plus your new travel feature, or is it all more due to cost optimization? Great question. I actually think it's a combination of both.

Operator: Switch over here Hi, Yes. This is Elise Khanna from J P. Morgan on for electric O'glove. My question Wise as you raised free cash flow guidance more of a result of the potential monetization of new expensive high in the new card interchange revenue recognition cluster, new travel feature or is it all more due to cost optimization.

Operator: Great question. I actually think it's a combination of both.

Elise Kenner: Great question and I actually think it's a combination of both.

Operator: When we issued guidance last quarter I you know, we're not we're not very bombastic will give you a very realistic view of how we feel.

Operator: When we issued guidance last quarter, you know, we're not very bombastic. We'll give you a very realistic view of how we feel at that point in time. More time has passed, you know; we're closer to the end of fiscal year 2024 than we were last quarter, and our views have changed a little bit, and that's why we're updating you all that we're raising the guidance a little bit. And it's a combination of cost cutting and new products we have coming to the market.

Operator: At that point in time more time has passed we're closer to the end of fiscal year 'twenty 'twenty four I remember last quarter and our views have updated a little bit and that's why we're updating you all that were.

Operator: Raising the guidance a little bit and it's a combination of the cost cutting but also the new products, we have coming to the market.

Speaker Change: Great. Thanks.

Operator: Erin.

Operator: Aaron Kimson is on the line.

Operator: With an Crimson is on the line.

Operator: Hey, thanks so much. This is Aaron Kimson from Citizens JMP. I want to ask first about open source contractors. In 2023, you paid out over $8 million to open source contractors. As you progress with the ambitious product roadmap and with full-time heads coming down to five, almost 4% of your full-time heads, is it fair to assume you'll be relying more on the open source community going forward? And how has the cost per job trended since you stopped? I think Ryan talked about surge pricing on the 3Q call. How has it come down so far? It's a great question.

Aaron Jacob Kimson: Hey, Thanks, so much Larry pencil consider to Sam I want to ask first on open source contractors employing 23, you paid out over $8 million Dalton contractors as you progressed with the ambitious product roadmap.

Operator: With full time, hence coming down by patents about 4% of your pulp ipads.

Operator: Is it fair to assume you'll be relying more on the open source community going forward in house cost per job trended from T. Stop I think Brian talked about surge pricing on the <unk> demo talent to come down.

Operator: It's a great question. So the open source community is actually an incredible resource. It's so great to work with them. Super fast.

Ryan Schaffer: It's a great question. So the open source community is actually an incredible resources and yes, so grateful to all of them suite.

Operator: It's basically an unlimited amount of supply, and we just have to give them demand, and they kind of build it for us. It's really great.

Operator: Superfast has basically in an unlimited.

Operator: The.

Operator: The amount of supply and we just have to thank Anne.

Operator: Give them demand and Steve to kind of build it for us its really great.

Operator: Now, we've talked about in the past that we were doing surge pricing in order to build the community up. At this point, we've reduced the rates that we're paying out, and in this quarter, we saw more.

Operator: Now we've talked about the path that we were doing search pricing energy build the community up at this point, we've reduced the rates, which were which were paying out in in this quarter, we saw more.

Operator: More pull requests and less per pull request. So we actually got more done, and we paid less on average than we did before. So those costs are coming down. It's part of the cost-cutting initiatives, but we haven't seen any decrease in output.

Operator: More pull requests or that the metric <unk> was more pull requests and less.

Operator: Herb will request so we actually got more done than we paid less on average and we did so those costs are coming down it's part of the cost cutting initiatives, but we haven't seen any decrease in output.

Operator: Yeah.

Operator: Got it. That's great to hear.

Speaker Change: Got it that's great to hear and then secondly, a quick one you.

Operator: Arthur shareholder owns about 15% of the outstanding shares obviously, you don't have meaningful voting power different share structure have you had any read the dialogue with the shareholder and as a token you'd be open to doing.

Operator: And then secondly, a quick one. Your largest shareholder owns about 15% of the outstanding shares. Obviously, he doesn't have meaningful voting power given the share structure. Have you had any recent dialogue with this shareholder? And is it something you'd do?

Operator: Hum.

Operator: Yeah.

Speaker Change: I don't know.

Operator: I mean, will we talk with anyone? Yeah, yeah, we talked to, you know, anyone that emails us, but also, we have a whole chat room to talk to investors. Yeah, I think so.

Operator: I mean, it will be hawkish on there with anyone I know yeah, yeah, we talked to.

Operator: Anyone that E mails us drive.

Operator: And also we have a whole chat room to talk to investors yet I think.

Operator: VAG.

Operator: Okay.

Operator: We don't probably comment on individual investors. I know that's not really the answer you want, but we know Steve well from when we were a private company.

Operator: We don't comment on individual investors I know, that's not really the SKU launches, but we know we know Steve well from when we were private company, but.

Operator: We don't have any active dialogue with them at this point in time. Yeah, anyone who wants to talk to us.

Operator: We don't have any active dialogue with them at this point in time, yes, anyone who wants to talk to us just cost.

Operator: You know, like I said, thank you.

Operator: At this time.

Operator: Okay.

Operator: Great. Zachary Gunn, are you on the line?

Operator: Great Zachary gun are you on the line.

Operator: Phil.

Operator: I am, but I believe Matt asked all my questions, so we're good here. Okay. Synergy. Easy. Love it. Okay, last chance then, do we still have anybody from Luke Capital?

Zachary Gunn: I am by I believe mass all my questions. So worked out here.

Operator: The synergies.

Speaker Change: Got it.

Operator: Okay last chance then do we have anybody from loop capital sale.

Operator: I think that's everybody that we have on the line. Okay.

Speaker Change: I think that's everybody that we have on the line cool great Alright, Thank you Tom Cullen Zalman.

Operator: Cool. Great. All right. Thank you, all.

Operator: After reducing expenses last quarter, do you have a timeline on when you could see greater investment back into sales and marketing? Good question.

Speaker Change: Okay, Great Yeah Amman for you I'm on for Erik Morton Newsy from Lake Street, just a couple of quick things.

Operator: After reducing expenses last quarter do you have a timeline on when you could see greater investment back into sales and marketing.

Operator: Hmm.

Operator: I think that right now we've been doing a lot of experimenting over the last couple of years, and this year, we're focused on investing in what's been working. Yeah, I do think that, maybe towards the end of the year or next year, we'll see an uptick in sales and marketing. Right now, we're focused on getting the most out of the dollars we're deploying and doing what's worked versus more moonshot stuff, which is what we did in the past.

Speaker Change: So your question I think that right now where we've been doing a lot of experiment in our last couple of years and this year we're focused on.

Operator: Investing in what's been working yeah, I do think that.

Operator:

Operator: Maybe towards the end of the year or next year, we'll see an uptick in sales.

Operator: Sales and marketing, but right.

Operator: Right now we're focused on.

Operator: Getting the most out of dollars, we're deploying in doing what's work versus more moonshot SUNFISH is what we're doing in the past, yes, I think it's about doubling down on the winners right now.

Operator: Yeah, I think it's about doubling down on the winners right now.

Operator: Understandable. Appreciate that. A couple other quick ones. Given the softer SMB market, have you made any pricing changes?

Speaker Change: Understood appreciate that couple of other quick ones given the softer our SMB market have you made any pricing changes.

Speaker Change: No we have not made any pricing changes.

Operator: We have not made any pricing changes. We are very excited about the new travel product, which brings in transactional revenue, which is something we're obviously very excited about. There's a booking fee and also a revenue share component. So we think that is going to be positive for the business. But in terms of our subscription pricing, there is no change.

Operator: We are very excited about the new travel product, which brings in a transactional revenue, which is something we're obviously very excited about there's a booking fee and also a rev share components. So we think that is going to be positive for the business, but in terms of our subscription pricing no changes.

Operator: Okay, and then this is kind of a combined question, but do you still expect all the customers to be shifted over to the credit card program by year end, and related? What was the churn in the quarter, and do you expect that to turn throughout the year?

Operator: Okay and then this is kind of a combination question, but do you still expect all the customers to be shifted over to the credit card program by year end and related what was the churn in the quarter and do you expect that to trend through the year.

Operator: So, yes, we do expect to have the program that everyone on the new card program by the end of the year. That's a huge focus internally for us. And in terms of churn, we did see a little bit of churn, but just kind of a normal amount. A big component of the decrease in users is the decreasing activity in our existing user base, which we think is more macro and ultimately temporary.

Operator: So yes, we do expect to have the program ever.

Operator: Everyone on the new card program by the end of the year.

Operator: That's a huge focus internally for us and in terms of Ah <unk>.

Operator: <unk>, we we did see a little bit of churn, but just kind of a normal amount that a.

Operator: Big.

Operator: Component of the decrease in users is the.

Operator: Decrease in activity in our existing user base, which we think is more macro and ultimately temporary but I mean, there is some element of churn, but also we think that travel is one of the best.

Operator: But I mean, there is some element of churn. But also, we think that travel is one of the best tools we have to combat churn. It's a reason people mention when they do leave for a competitor. And now that we've announced this, we have a lot of interest. So we're very excited about it.

Operator: Tools, we have to combat churn, it's a it's a read and people.

Operator: Site when they do leave for a competitor and now that we've announced this week, we have a lot of interest. So we're very excited about it.

Operator: I appreciate that. Thanks very much.

Operator: I appreciate good thanks very much.

Speaker Change: Thank you.

Operator: Aaron, did you have another question? Your hand came back up.

Operator: Aaron did you have another question your hand came back up.

Operator: No, all good. Thank you. Okay, okay.

Speaker Change: Okay. Thank you.

Operator: Okay.

Operator: That is everybody that we've got then.

Operator: That is everybody that we've got alright. Thank you all again apologies for the technical.

Operator: All right. Thank you all again. Apologies for those technical difficulties. You never know when a cup of coffee is going to come spilling down on your laptop.

Operator: Difficulties you never know when a cup of coffee is going to come splashing.

Operator: Splashing down on your laptop.

Operator: But, you know, we got through it. So thank you all for your for your time. And we'll talk to you next quarter.

Speaker Change: Got through so thank you all for your for your time and we'll talk to you next quarter on also checkout. The chat room, we posted a kind of a summary of everything we discussed here.

Operator: Oh, and also check out the chat room. We've posted a kind of summary of everything we discussed here. We've been told that there is kind of an image over some of the slides. All those slides are in the chat room. It's exfy.com slash roadmap, or use the QR code in the slides. Also, all this information is on our IR website. So thank you all, and we'll see you next quarter. Great. Thanks, everyone.

Operator: Being told that there is kind of.

Operator: And image over some of the slides all those Pfizer in the chat room. Its E X F Y dot com slash roadmap or use the QR code in a slides also all of this information is on our IR website. So thank you all and we'll see you next quarter great. Thanks, everyone.

Operator: Goodbye.