Q1 2025 Expensify Inc Earnings Call
Yeah.
[music] you have joined the meeting as an attendee and.
Speaker Change: Will be muted throughout the meeting walk up to the Q1 2025, except by earnings I'm, extending my CFO, Ryan Shay Bear with me I have founder and CEO discussed by David Barrett.
Yes.
Nikki: Now I will pass it off to Nikki for the legalese.
Speaker Change: Okay.
Speaker Change: 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.
Speaker Change: From those described in 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 we will not be updated as actual events unfold. Please.
Speaker Change: 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.
Speaker Change: 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.
Speaker Change: Please refer to today's press release or the Investor presentation for a reconciliation of these non-GAAP financial measure to their most comparable GAAP measures.
Nikki: Thanks, Nikki now, let's talk about the Q1 2020 financials.
Nikki: Our revenue was $36 1 million, which is.
Nikki: Up 8% year on year, our average paid members were 657000, which is down 5% year on year.
Nikki: Total interchange was five 1%, which is up 43% year on year.
Nikki: Okay.
Nikki: Our operating cash flow was $4 8 million, our free cash flow was $9 1 million the difference between those two numbers again.
Nikki: Customer funds.
Nikki: Our GAAP net loss was $3 2 million our non-GAAP net income was $4 8 million and our adjusted EBIT was $8 4 million.
Nikki: Yeah.
Nikki: Yeah.
Nikki: Now, let's talk about free cash flow, obviously, we had a really good quarter free cash flow wise.
Hello, I have just said our Q1 free cash flow was $9 1 million, which is 75% increase year on year and an increase of 45% squirrel.
Nikki: With our Q4 results, we initiated our free cash flow guidance of annual free cash flow guidance of $60 million and $20 million, we are increasing that to $17 million or $21 million.
Nikki: A bit of a conservative increase this is due to the tight tumultuous nature of the economy right now as we watch the impact of the tariffs on the economy and so again, we think this is a conservative number we have confidence we can hit this number and we will update this SBC kind of how the.
Current economic policy plays out.
Nikki: Yeah.
Nikki: As always just our flash April paid members.
Nikki: April paid members were 655000, which is just slightly down Q1, it's less than half a percent down so essentially flat.
Nikki: April is usually a little soft and this April is no different.
Nikki: Can see previous aprils.
Nikki: Noted by the bank lines on the graph.
Okay.
Nikki: Now, let's talk about Q1 business highlights.
Nikki: Like I mentioned before the extent of my card grew to $5 1 million, which is up 43% increase year on year expense by travel continues to grow very quickly, we saw 166% quarter over quarter increase in quarterly travel in Q1, and notably we.
Nikki: We are seeing customers adopt travel at twice the rate that they adopted the expenses like hard so we compare those two because it's a cross sell from our traditional expense products, but we're seeing travel adoption.
Nikki: <unk>.
Nikki: Be met by customers with.
Nikki: A lot of enthusiasm and we're very excited.
Nikki: Also we announced full Spanish supports so if you speak Spanish.
Nikki: Product will look great to you.
Nikki: We are finishing our product UI and our product messaging and also we're not even sales demos and customer spoke in Spanish and we're also adding more international support and more languages coming very soon.
Nikki: You might have also seen we announced a simplified pricing for our collect plan.
Nikki: Our legacy collect pricing, which is the same scheme that the control pricing is still under.
Nikki: The collect legacy pricing was 5% to $20 per active member per month, and we gave a 50% discount for any annual commitment our subscription and a 50% discount for expenses like card adoption.
Nikki: Notably no cost if you have employees who are inactive.
Nikki: Now this is great for more sophisticated customer that can.
Nikki: Forecast what their usage is going to be in the product. If you have let's say 100 employees about 33% of them will be active on the platform any given month, but at the same 33% so a different mix of employees each month.
Nikki: In that case, the customer would buy 33 seats search subscription in any employees and kind of sit in those seats.
Nikki: However that did take me a while to explain and it is more sophisticated and we saw that kind of point platform on the lower end of the market to collect customers generally self service and they're not talking to a salesperson. So we need to communicate what our pricing is under five seconds very simply so.
Nikki: This pricing is not a price reduction per se, it's more of a streamlining of our pricing and that's based on.
Vince: Vince is a research since you're watching user sessions.
Vince: Sessions talking to customers and sales feedback.
Speaker Change: Under the new scheme, that's $5 for any member per month. So you just enter how many employees you want to use the products at any time.
Speaker Change: And it's a multi at 10 $5 and that's your monthly price. So there is no annual spent mentor card required but they are built whether or not the user is actually active. So you are paying per account versus practices.
Speaker Change: The result is collected $5 per month per member simplified pricing for simple customers and control, which is 10% to 36 per month per active employee, which is advanced pricing for advanced customers. We think this is going to help us convert at the lower end of the market and we're really excited for it.
David Barrett: Now I'm going to pass it over to David right.
David Barrett: So last quarter, we talked a ton about AI and all the cool things that we're doing with it and so this quarter is basically you're just saying we did a bunch of that so last we talked about this idea of conversational corrections, meaning that when you scan received to create an expense we use AI to figure out what's the most like the category is based upon.
David Barrett: The type of merchant what that merchant named is what the category names are and so forth as well as everything you've done everything else coworkers has done with their merchant in the past.
David Barrett: We will either automatically categorize it or we will suggest most likely categories and then based upon that suggestion you can either say like meals or whatever or you can just respond to natural language. What you want done and then our AI will basically do the right thing with that what a human would do in a situation novelty we talked about that.
David Barrett: Aspirational in last quarter and now that's done and so that's in product and you can use a statement its very cool and Thats just a very powerful feature to bring AI and all these kind of mundane pulp.
David Barrett: Similarly, a feature that we've talked about for a while is that the idea of more advanced policy violations, where you can prohibits tobacco gambling alcohol expenses and things like this so now we do kind of deep receipt and analysis to figure out what actually is being purchased not nearly where did you go. So you can either.
David Barrett: Likewise, the one thing we talked about is the power of AI for our fraud reduction.
David Barrett: One who's basically doing anything online selling their products, but can travel things like this there's always some degree of like fraud, youre trying to control, especially when it comes to just trying to understand.
David Barrett: Per travel basis, what they're actually doing.
David Barrett: To make sure they're actually not booking any sketchy things to make sure that no one's account get taken over or whatever it might be wide variety of ways things can go wrong. However, we can control for that and we can basically detected and cancel this broad travel in real time. So all of this is basically it's stuff that we've talked about.
David Barrett: That's what we're bringing to market and a lot of the market right now are.
David Barrett: Looking forward I would say the stuff. We're the most excited for is this idea that we talked about in the past, we kind of call virtual CFO functionality I imagine if you had a CFO and I sat down with you to kind of optimize your workflow. They would say things like why are you spending a bunch of physical checks, let's actually streamline that with direct deposit.
David Barrett: Or even asking questions.
David Barrett: Saying like COO of my top Spenders, who spent most all other policy you should just be able to ask considers that and just get the answer directly <unk>.
David Barrett: Likewise.
David Barrett: On a monthly basis as CFO would tell you what's changed week on week month on month things like this analysis can be built out of the box and so you basically had this ability to just get enel.
David Barrett: Analysis pushed you automatically without thinking about it.
David Barrett: So AI is getting great AI is hitting us, but also the prep for F. One is really heating up we're getting super excited about just the amount of visibility and traction there.
David Barrett: We are seeing in the deleted F. One.
Speaker Change: Just to give one new thing that just happened and so judge a cat my personal favorites just launched this a music video and its wild like the first 20 seconds of this music video are just slowly zooming in on the expense. Upon me you've got to watch the video it's fantastic. So I can say for work, but it's still great.
Speaker Change: At the met Gala Denison and just has walked out its first drove up in a extensive fine grind at F. One car was always talking about that was also is kind of amazing and then locked into the met wearing an expensive Fi.
Speaker Change: Basically racing outfit and then it was dramatically torn often has a sweet suite underneath it but basically the part that I hear about is he walked into the met gala wearing the expenses by branding while driving up at the expense of high car and so this is just the kind of thing happening right now and its what is really hasnt effect, we saw actually.
Speaker Change: For the hours. After this particular things have happened.
Speaker Change: Sign ups are quadrupled basically just from this one small action depth just happens automatically that we didn't even planned for it and so there's all kinds of stuff like this happening every day around this and movie hasn't even launched and so we're pretty excited about this one.
Speaker Change: Promo, it's gonna be lining up to be one of the best product placements ever and so it's pretty cool we're excited.
Speaker Change: And also overall I think we're excited that users are really starting to notice just how cool. This design is a he was just an actual user who just posted a review unprompted to GTO crowd talking about how great expense, if I cabinets, because we've talked about sort of the.
Speaker Change: The challenge with expense management is you can automate like 80% of it but that remaining 20% the human interaction, that's where all your peanuts and so chat centric does not is whats streamlines that sort of last 20% by bringing in products. So you can just talk to your account you employees whoever it might be in the context of the thing you have a question on <unk>.
Speaker Change: Testing them to say like Hey, remember that thing you did two months ago and as you know like what are you talking about rather you are saying on this particular sense, what's it for and then you can fix it right in the context of that especially when confusions there and so if you say what the fix is because you can just apply it right away.
Speaker Change: That is really coming together is super excited I think the summer in my mind, it's really lining up to be kind of expensive new expensive Hy Vee one it's very complete vision of what we set out to do years ago, and it's actually I would say, it's even better than me and so it's a pretty exciting time overall.
Speaker Change: That's all I got for now and you can hear your questions.
Speaker Change: Thank you David.
Speaker Change: One quick note due to the amount of earnings calls happening today, we had a few scheduling conflicts with our analysts W. Down here from you on the COO.
Speaker Change: And we look forward to speaking with you on the one on one call pass first let's start off with city.
Speaker Change: I believe George you're here.
Speaker Change: Hey, David Ryan Nicky how are you all now George.
Speaker Change: Great.
Speaker Change: Maybe we can just stop start with the topic of the day macro and tariff impacts and you know you guys talked about kind of conservatively.
Speaker Change: Taking that into your guide to some extent have you seen any impact to date and maybe when you just think about your business macro headwinds have been an issue in the recent past.
Speaker Change: You guys have made some changes to the business. How do you just think about your resiliency in the face of this environment.
Speaker Change: So great question.
Speaker Change: I typically like to your question about resiliency, so I think a.
Speaker Change: Obviously, no one wants to say a bad economy, and the fact that for anyone but yes, we're going into kind of.
Speaker Change: Rough economic waters, I think that we are well positioned obviously, we had a nine.
Speaker Change: $9 million in free cash flow. This year, so I think that the way we can.
Speaker Change: Kind of restructure the business over the last.
Speaker Change: Year or two we're in a really good place to weather.
Speaker Change: Tough economic environment.
Speaker Change: Yeah.
Speaker Change: That is I mean, we're hoping for the best preparing for the worst.
Speaker Change: Okay. Okay.
Speaker Change: That makes perfect sense.
Speaker Change: I wanted to also ask about the paid user number and really just kind of the disconnect. It started to show up between what you've seen on revenue versus paid users I mean revenue up 8% year over year paid users down year over year. When you guys think about your business I think investors like we have been kind of trained on paid users is one of the most important metrics.
Speaker Change: For the business, but now you guys are becoming multi product I mean is that still how you guys are thinking about the business internally and kind of optimizing for paid users because it seems like there is.
Speaker Change: Levers here that are driving success that kind of extend beyond that that metric maybe you could just talk about what you've seen in that metric and then how you think about the business.
Speaker Change: It's one of many levers, yes, no great.
Speaker Change: Great questions. So.
Speaker Change: Obviously paid members is really important that hasnt changed.
Speaker Change: It's a huge focus for us, but we have diversified our revenue streams over the last couple of years. So it's not I think around the time, we IPO. There was revenue in and paid members were kind of in lock step and we have.
Speaker Change: Diversified kind of beyond that where we can make money in other ways other than subscription. So I think that we are.
Speaker Change: Hey members is still very important but we have other.
Speaker Change: Tools in our toolbox to increase revenue.
Speaker Change: You just got.
Speaker Change: Okay, Great and then maybe if I could just sneak one more in on the on the Formula One I think exciting.
Speaker Change: Exciting.
Speaker Change: Timeshare or I think where T minus a month and a half or so away.
Speaker Change: You guys talked about maybe some early impacts do you feel like.
Speaker Change: It had an impact in Q1 or do you think of this more as like a Q2 benefit and then presumably the bulk of the benefit is going to be felt kind of Q3 and beyond or how are you thinking about sequencing of of how does hits. The model I mean, I don't think we've seen much benefit in Q1 I think.
Speaker Change: It's definitely going to pick up obviously, we're just kind of we're seeing the almost like pre promotion type.
Speaker Change: I have impacts but.
Speaker Change: I mean to answer your question, we think it's going to be impact is going to incur.
Speaker Change: The increase over time and.
Speaker Change: Okay.
Speaker Change: Probably more in Q3.
Speaker Change: So I mean, it takes time in.
Speaker Change: Steve It you see the movie. Okay. Then you go to the website you get into kind of our conversion funnel.
Speaker Change: The in terms of like web traffic and stuff, obviously, we expect a lot around Q2.
Speaker Change: In terms of that representing new business, we wouldnt see that until a little bit after I agree with that.
Speaker Change: Okay, great. Thanks for taking the questions here Great question is George.
Speaker Change: Next we have citizens JMP Erin Hamlin.
Speaker Change: Yeah, Thanks, guys Hey, Eric.
Speaker Change: I forgot that one.
Speaker Change: So can you talk about what verticals falling up on George a little bit what vertical to your customer base is most exposed to today I think you have become less reliant on tech customers since the IPO.
Speaker Change: Alex This is Dan on what percentage of your customer base are the industries that may face tariff headwinds.
Speaker Change: Great question.
Speaker Change: So thats.
Speaker Change: Yeah.
Speaker Change: It's been a little challenging to track that because the.
Speaker Change: That are.
Speaker Change: Are the tariff is going to happen what industries are they affecting.
Speaker Change: Does it get pulled.
Speaker Change: Pulled back so I think that's been kind of tough to get a exact answer but.
Speaker Change: Yeah.
Speaker Change: I mean kind of the behavior, we're seeing is.
Speaker Change:
Speaker Change: Customers kind of in a wait and see.
Speaker Change: A lot of caution by holding pattern type thing.
Speaker Change: Obviously in a healthy economy, our customers are growing right at SMB customers grow faster than that.
Speaker Change: Enterprise customers generally.
Speaker Change: Smaller and.
Speaker Change: I think our customers, perhaps waiting right theyre not.
Speaker Change: Hiring a whole bunch of people they are not doing big big expenditures there trying to see how this shakes out.
Speaker Change: Our impact for them and all that so in Q1 I think.
Speaker Change: Yeah.
Speaker Change: Too early to really see that impact and it's something we're definitely monitoring, but it's tough to kind of pin down mid single number yes, like everyone's just kind of holding their best to see whats coming down the pipeline.
Speaker Change: Thank you.
Speaker Change: Eager to find out as everyone else.
Speaker Change: Got it and then a second one I'm looking at the slides right now correct me, if I'm wrong, but I think you usually share the paid member numbers for the first month of the next quarter or the April numbers in here.
Speaker Change: Yes, so it was flat.
Speaker Change: Slightly down flat less than 1%, but less than half a percent.
Speaker Change: Got it and then my last one would just be can you remind us from an accounting perspective, what the up one movie coming out in Q2, how we should think about how that's going to hit the cash flow statement in the income statement, yes, great question Aaron So the.
Speaker Change: The free cash flow impact of that has largely already been felt however, we have not recognized the expense yes. So the data movie comes out.
Speaker Change: We will recognize the expenses all of hands, we've made over multiple years, so a large.
Speaker Change: Expense being recognized but not necessarily a large cash flow impact that we do have one more payment. So there are some free cash flow.
Speaker Change: And when we're doing advertising next quarter or next quarter is going to expense a quarter. So it will impact free cash flow, but the <unk> expense will be substantially higher because we're recognizing all the past.
Speaker Change: Payments that have already been recognized and for cash flow.
Speaker Change: Great. Thank you guys. Thank you.
Speaker Change: Great smell must be competing CFO everybody have lives, we will fix the recipe.
Speaker Change: Alright short and Sweet Alright. Thank you all and we'll see you next quarter and go see the movie, yes see the movie.
Speaker Change: So see there alright. Thank you.