Q2 2025 Expensify Inc Earnings Call

Hi. Welcome to the Q2 2025 expense fire earnings. I'm excited CFO Ryan. Shaver I'm with me. I have founder and CEO David Barrett.

And now, we're going to pass it over to Nikki for the legal ease.

please note that all the

presented on today's call.

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 different material 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 will not be updated as actual events unfold.

Please refer to today's press release and our filings with the FEC 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.

Great. Thank you, Nikki.

All right, let's talk about the financials.

Revenue was $35.8 million, which is up year-over-year, which is really exciting. Average paid members were 652,000 in total. Interchange was $5.3 million, which is also up year-over-year.

Operating cash flow was 8.9 million, free. Cash flow is 6.3 million. Again the difference between those is free cash flow does not include customer funds.

Our net loss, 8.18 million are non-gaap. Net loss was 1.9 million and our adjusted Eva was 1 a negative 1.4 million. Again, these numbers are impacted by the release of the movie as we've discussed in previous

earnings calls. The way movie accounting works, is we've been making payments for multiple years, but the expense is all recognized this quarter. So the reason these numbers look worse than they normally do is because we just recognize multiple years of payments. All In 1 quarter, we expect next quarter for these to go back to normal.

Like, I just mentioned our free cash flow is 6.3 million at 10% increase, uh, from last year.

Last quarter, we updated our guidance to $17 to $21 million in annual free cash flow. We're now increasing that free cash flow guidance to $19 to $23 million.

As the year goes on our confidence in this number increases, and we continue to increase it, we'll let you know next quarter. Uh if there's any updates there,

July payment, members were 641,000, July is usually a pretty soft month. A lot of people are on summer vacation with their families. Usually not a great month for us. And so we saw that seasonality, this quarter.

or we saw this seasonality in July, which was expected,

Let's talk about uh some highlights here. So expense high was on screen for an estimated total of over 35 minutes which is insane. We did this uh, Super Bowl ad in 2019, we paid a lot of money for 30 seconds and our logo was only on screen for about 2 seconds of the 35 seconds cuz we had to make it entertaining and funny. So the logo, not all that time for the logo. This was very logo based and a huge increase from 2 seconds to 35 minutes.

Given the box office numbers and the fact that we were on screen for 35 minutes. We estimate that the Sensei logo was on screen and viewable for 1.3 billion minutes.

Uh, over the last, you know, month and change.

Additionally, we estimate over 100 million was sent marketing the movie in which our logo featured heavily. So you probably saw a lot of ads, probably saw our logo In Those ads. We think over 100 million was spent doing that.

Promoting our logo.

uh, by companies other than us, which is

Great, a great deal.

Additionally, there was a lot of Buzz around the movie, uh, so the pr it what's called earned media. I generate an estimated equivalent value of 61 million marketing dollars,

What that means is, how much would it cost to get all the Articles written about us all the time? Seals on talking about on the news social media. If you were to take all that activity and then figure out how much would it cost to buy that that cost would be 61 million. So the urn me around the movie we estimate at this point is 61 million.

The movie's also been green lit for a second theatrical release IMAX. Then it's going to go to Apple TV, so it'll continue to drive interest for a long time to come. So these numbers are just as up right now, these are not the final numbers. And we think that uh, it's going to continue to be seen by people be loved by people and continue to pay dividends for us as a business.

1 of the ways, we measure the effectiveness of this, um,

investment we made is in brand awareness so we do brand awareness, that studies.

Basically uh the general population of surveys that we're not surveying specifically accountants or any specific population just you know, normal everyday people because we grow through bottom up adoption. We Market to just regular employed people and they hear about us, They download the app and then they bring you into the business. So that's a big piece of our business model. So that's why we uh, do these awareness surveys. So you can, as you can see the increase from April to July is quite significant over a 50% increase in our core demographic, which is ages 18 to 54,

I am very excitingly in our in the basically the future. Our future bottom up adopters 18 to 24, which is a hard demographic to uh get in front of, we saw a 350% increase in brand awareness. And again this is unadded awareness. What that means is

In the survey, they're they're asked.

Do you know anything about expense management? Do you use expense management? And if they say, no, then, you know, they're ignored. If they say yes, the next question is, okay, can you name any of them? So, they're and then they type in the ones that they can name.

Way more people were able to Name expensify by name.

than any other uh, of our competitors in the space now, obviously the next question is

Do you know any of these companies in a list and that's much easier. So unneeded awareness is the hardest metric to increase and we've seen huge increases there. So we're very excited. We think that

this is going to be great for the business. Obviously, way more people know about us now and we think that's going to kind of trickle down and create a halo effect. A positive halo effect on the business for a long time to come. Yep.

All right. Now, I'm going to pass it over to David great.

Maybe doesn't issue corporate cards their employees. Now, those reimbursements work even more countries around the world. Uh, We've added support for um, buying expensive in Euro. Uh, so previously you could buy it and, you know, pounds US Dollars things like this, but now you can also support the Euro as well. Again, just making it a little bit easier to adopt, um, throughout Europe. Uh, also very exciting because icard itself is being expanded to work in the UK and EU. Uh, that's coming out very soon here, and so we're very, very excited about that. So, overall, it's about basically making sure that there will be capture this launch from investment F1 is about making sure that the markets where F1 is really popular are also good markets for expense fee.

Uh, 1 thing, I've been putting a lot of my time in my top sort of priority is working on our concierge AI. You know, we talked about it in a lot in the past. Um, I'd say probably the biggest change here is, uh, really dialing in sort of the, the technical Foundation of our AI. Now, I know it's about a world where salad here, but for the buzzwords basically saying 1 thing is uh, making sure that the concierge is multimodal meaning that it can natively process, not just chat but also um, images and so forth. So if you upload an image, you can identify. If it's a screenshot of maybe our app or a screenshot of something else versus maybe it is a receipt that he needs to take to an action on things like this. Additionally using technology called a tree of throat design basically. Um 1 of the challenges for any AI system is allowing them to do a wide variety of things and this new technique basically, you

Uses a, a hierarchical design that will uh categorize the intent of the user and then take it down to different, sort of train of reasoning for different types. Of intents whether you're doing customer support, whether you're trying to like modify expenses or whatever, it might be, we're going to have a lot more to say about that probably in the upcoming quarter. But this is a major focus of my personal time and I know a lot of the companies. Very, very excited about this.

Another highlight is expensive. I travel has been doing really good um just in the last quarter up 44% um I think July has been very strong as well. I think overall the way to think about expensify travel is it's really the new expensify card in the sense that just like uh since my card has really shown that it can contribute in such a positive way, to Topline revenue and especially free cash flow generation. I think travel is going to uh do the same thing. I believe it's actually outperforming the initial days of since my card and so it's very excited about that. Um and then of course finally uh we've always had a long-term strategy of positive cash flow generation and that we use as to, you know, steadily uh repurchase shares return, some of that money back to investors. And so all of this is in in line with this a high level strategy that we've had for a long time. Um but basically the kind of review the the big plan here,

Step 1 is we've invested for years to build this entirely new technology Foundation that we think can power the next, you know, decade of growth expensify. And that this is a major major upgrade to the fundamental technology of the app of the, um,

Of the product to have what we call kind of a real-time infrastructure. Meaning that if 2 people are looking at the page, at the same time, the things will update automatically think like Google Docs or other sort of more real-time applications. But bring that into the expense management space. Uh, it's a chat Centric design, which is really important because that allows you to collaborate in real time on any object in the application but also collaborate with our AI, which is increasingly important. Um, and fundamentally, it's just a, it's a cross-platform design, everything works, extremely well, not just on desktop, but all of the functionality works on mobile. This is a major differentiation in the industry. And we've seen this as really resonated with customers that they don't have to pull out a laptop to do things with an

Increasingly mobile Workforce, and the admins on the road and so forth. And as there's just more capabilities in the product, if you need to issue a card, stop a card, whatever it might be, you can do everything on the road as well. Anyway, everything I just mentioned there, all of this sort of, uh, fundamental upgrade to the technology platform itself is done. It's in production. It's being used by customers. And so that's been a huge lift, but thankfully it's behind us all of our attention right now is focused on. I'd say 2 things. 1 is just migrating customers from classic to new expense of time. Uh, our business model is Ryan, mentioned earlier, is a bottom-up business model, it's just all driven by word of mouth. It's all about basically encouraging people to talk to

Friends and then their friends, uh, adopt expenses by inside their company as an individual. And then we turn every expense report into a marketing message, directly to the decision maker. And so, this has been our business model from the start. It's with sort of powers us all along and the word of mouth is a fundamental numbers game. You need to get enough people talking about you to their friends, in order to generate that long-term lead stream. And so, it's so important for us to get back to growth requires getting our customers onto expensive on to new expensify. So that our existing users have something to talk about, uh, word of mouth is about novelty to a degree and 1 of the most novel. Things is adopting a new platform seeing all the new capabilities and seeing the result of our investments into this new functionality.

All of our customers from classic to new. That's where so much of our attention is.

On the other side, as they mentioned that, uh, We've made some bold claims about trying to become, you know, we think the world's foremost expert and, uh, financial aid, which is a bold claim I understand. But we're working very hard to make that true. And so, a lot of our time is being spent on focusing on not just the fundamental, uh, AI technology itself because I think that the key to making a good AI, uh,

even smarter than the super intelligence already out there is to tightly integrate with the data that you have, so that you can act upon it in a real time manner. Collaborate on it with the AI. It's a very different design and I think you're going to see a lot of applications going forward are going to look more and more like expensive time because the UI of AI is chat. And if anything you can do to infuse chat throughout your system, puts your system um more in touch with the capabilities of AI and allows your customers to communicate with the AI in more context. So anyway, we're going to have a lot more to talk about that in the future is just something that I'm personally very excited about.

And then I would say in the future, uh, after we've migrated our customers from classic to new, after we've rolled out this Ai and Infused it throughout the application. Then of course, there's still the, don't forget about the super app design. You know, right now we're focused on expense card travel, uh but we haven't give up on our Ambitions on invoicing bill pay. Even a payroll in future, things like this. And so the goal is to build out this platform that has a universal and Global Payments engine and then we can use this engine for a wide variety of use cases, not just

The ones that we currently support but those in the future as well. And then, because of sort of this uh, singular design behind all of this, we think that we can offer all of these use cases and are really compelling fashion, and a super low price and a very low cost of sales. So, if we can roll out 8 products for 9 bucks a month, we think that's an incredibly compelling value, proposition to customers. And so that's still major part of the future strategy. And then finally, after that, uh, I think the long-term lead generation is really about simplifying. The functionality down for the consumer such that it's not just about talking to your friends who are in other companies about doing extension reports. But talking to your family, talk to anyone in in anyone who spends money and trying to be relevant to a much broader range of people. That's ultimately what creates uh the the household name, the the broad awareness of expensify and the ability to do something with it. Talk to the friends and the word of mouth that can generate uh positive lead, generation for years and years to come. Anyway, to the plan that we've had the plan that we've been working on and that I think we feel very confident, uh, in the planning of the future.

As in that um, I think that's about it. So I think we'll open it up for questions.

Perfect. First up, we have City, I believe. Georgia you on the line with us?

I'm here. Hi, David Ryan, Nikki. Thanks for having me here George. Good to see you. Yeah, good to see you guys too. Maybe just to start with the uh the exciting news F1 movie. I think I'm 1 of the few people on the planet who still hasn't seen it. So I'm glad it's coming back to theaters off to catch it in the second round. Um you know you guys talked a lot about some of the brand awareness increases their at least in terms of its conversion to paying users. It seems like that metric hasn't, you know moved much yet as at least as it relates to this this initiative. Can you just talk to us about what you're expecting on that front? Is this kind of like a a still to come maybe in the next quarter or 2 or is it more of a a slow and steady type of uh Improvement? How should we think about that? Yeah, great question. So the movie came out with I believe 3 business days left in the quarter so basically the end of Q2. So in terms of

Impact for Q2 not a lot, right? These all these numbers that we talked about today, that those are things that we've seen in

Uh, you know, since the movie has been released. So some

they, they're not in the Q2 results, so we would expect the impact from the movie to be, uh, in the future and

Uh again with the Big Brand awareness play, it's not Performance Marketing, right? This this is an AdWords. So it's not a, you know, direct 1 to 1. It's kind of a longer time Horizon.

and so, we expect that this will kind of

Uh, you know, Rising tide lifts All Ships produce, kind of a, a halo effect on everything we do, uh, going forward in the future.

SEO. And so, I think we've got incredibly good just general search engine, sort of placements, across a huge range of keywords. I think we've talked about that in the past years, or past quarters and so forth. Um, and nice thing about that is because all of the AIS are trained to the internet Because the Internet is already talking about expensive Pi. That means the AI themselves. Talk primarily about the expensive. I don't have the data off the top of my head, but I know that, um, we've looked into it in the past and expensify this ranks. Very highly in chat BT, Claude Gemini and so forth. And so, I think that our SEO strategy, uh, has already put us into a good position to be recommended as a top option, by these tools and furthermore, we've doubled down on that by making sure that we're optimizing for the tools even more. And so, I, I'm with you, in terms of, uh, the future of search is really about these chat based Ai and we are, uh, certainly not going to be left unaware about that. And so we're definitely preparing for that and taking advantage of that. Now,

Okay, great. Thanks for taking the questions here, of course.

Great Aaron. I believe. I have you on the line um as a dial in. So let me get you unmuted here.

Aaron great. Thank you.

I can hear you. Can you hear me?

Yes, perfect.

Um, you put 14% of your payroll into Gap R&D, this quarter, 9%, adjusted ramps was closed in March, that 50% of payroll goes into R&D there. Do you think the small scale of your business is ahead? When the keeping up with the pace of product delivery, we're seeing some scaled vendors in the space.

That's a good question, I think.

That we have an extremely large.

you know, group of our employees, um, focused on R&D and

I think we're trying to build maybe different different products. Right? We're building 1 product. That is tightly integrated with each other and I think the rest of the market is building.

more siloed products so that, you know, you have your expense, then you have a different product, which is your invoicing, and they are all

Kind of like mini companies within 1 large company and we're building, just something different, which is 1 product. Basically 1 payments engine that can handle

Everything in the back office, uh, no matter what you need, so it's very integrated. Uh, it doesn't require as many people.

Do you? Yeah, I agree with that, and I think that you're right with respect to R&D. I think that is tricky from an allocations perspective because

so much of our work is about improving technology that's already in in production. And so the the separation between ways that with R&D and sort of expanding something for new use cases, as opposed to just as Ryan was saying, standing up an entirely new system. It just produces kind of different allocations. Now, I'm not going to, I'm not an accountant here, but I would say that fundamentally. I know, I spend all my time in R&D and a lot of people do as well, but I understand that the, uh, the accounting of how that comes out for a public company versus a private company, might sort of produce different results as well. Mhm.

That's really helpful. And then, I guess a similar question to follow up.

Do you think the increasing application of AI a product development for expense management? Use cases has the potential to erode them all? You've built around SMB and vsb customers. Where historically you've been the only 1 who could get the unit economics to work down Market, but 96% of that cost out.

That's, that's interesting. Um, I kind of think it's the opposite. Um, in that

I mean, so a lot of ink has been spilled in this topic and we could talk forever about it, but I think that, um, we're going through a shift in user experience design, uh, just kind of like, you know, initially it was all desktop software and there's a bunch of patterns built up around that. Uh, and then it went to web. And then, basically, all the software was reinterpreted through more of a web Centric design. And then, uh, then mobile came out and then all those existing software was reinterpreted, through sort of, more of a small screen, application design. And I think we're going through a kind of a fourth transition here where every application is going to be reimagined through a chat Centric design. And I think, I kind of like where you're going in terms of, it can be kind of a normalizing effect because it strips away so many differences. Um, and that

The Enterprise space is primarily focused on building complicated products sold to, uh, a part of the market that can weather and endure and appreciate that complexity. And it's very hard for an existing product, especially very existing. Complicated product, to be reduced down to the Simplicity of a chat based interface now, I think that's why we've worked so hard for a long time to do exactly that. We're speaking from experience here it's not a straightforward process to make something this simple and it's not as straightforward process to make something as infused with AI throughout the entire thing. When you look at I think um you know again who knows every company's there's a lot of good companies out there and we're all taking our our swing at this world but I think that we're going to see most of them.

Um take sort of a uh a chat agent on the side where basically your applications largely unchanged, and then there's like a clippy like thing that appears in the side that basically tries to navigate around. And I think people take that design because that's an easy technical design to do, uh, because it separates your AI functionality from the rest of your UI. And I think we're going to see a lot of the more Enterprise competition doing that because there's they're forced into it by their architectural decisions. We've taken a very, very different path. Concierge is truly at every part of our application and it's infused in very, very deep level. No 1. Has a design like us and I think that's what I was saying earlier on. I think you're going to see more and more applications kind of moving in the direction, like expensify recognizing that kind of, you know, the Windows 95 clicky style, AI

Just isn't going to do the trick, it's not going to get you. The kind of integrated experience that's going to compel uh the next generation of customers. And so I think it's actually um it's it's very hard for them to come down to simplify their product to go after the SMB. But I think it's much easier for us because we've already put the work in there. It already built our business in the sap. We've already seen it's much easier for us to sort of attack the Enterprise. I mean that's how we get our Enterprise customers historically is that we get them while they're small and then we just hold on to them forever. Um and so it's I would rather be in our position going after their Market than in their Market going after ours.

It also doesn't fund manually change their business model. They still have huge sales teams.

So that the economics aren't, I mean, they're still Fielding a huge sales Army basically. Yeah. Um, so

It could enable a new Challenger to come in and do what we're doing. But we haven't seen

Competitors, do that. They've come at it from a different, you know, card first angle, but

that's,

AI based. I mean, that's just, they have a card angle versus an AI angle. Agreed. Yeah. I think that they had their big play and it was a card first angle and they leaned

really far over their skis to push it, and they did a great job with that, but I think that

That's their thing. Their thing is card based, uh, I I'm with you. I think our thing is more AI based and that would be more concerned about some new entrant um sort of stealing the the industry than than them.

That's great perspective. Thank you guys.

Thank you.

Fabulous, uh, Lake Street. I believe Max for you on the line.

Yeah. Hey guys, thanks for taking my questions. Um, first 1's kind of a 2-part round go to market strategy. Uh, just with the new F1 movie, I'm curious to know. I'm not sure if you guys, uh, get this attractive information, but in terms of new customer adds maybe, um, information that the team would have. But what percentage of these new ads, maybe joined expensify uh because of the F1 exposure. And then on top of that, I know word of mouth is kind of a big deal with you guys and getting the expense of my name out there. I mean, is there any other investment initiative you guys can Implement to kind of gain Traction in like the Legacy subscription business?

Okay, great question. So

uh, we don't have any

F1 based new customer had information to share right now in Q2 because again, it came out, uh, you know, right at the end. Yeah, I guess maybe. Maybe for July and August, I guess.

We don't have anything to share right now. Uh, it's something that we can definitely talk about in the future but uh to answer your

Other question which is do we have other kind of follow-on plans to F1? Uh we are we do certainly have uh you know more marketing plans in place. Um

That we're going to we're going to do obviously not the scale of this, you know, Blockbuster movie. But uh you know this isn't a 1 and done you know, see you in a couple years type of thing um where we're going to we're going to continue to uh invest in marketing and also uh, you know,

Try to harvest this great awareness that we've created.

Positive business for a reason. I think it's is built up quite a nice War chest even while paying off our debt. And so I think that we have shown that we're very willing to take big swings uh when we think this is a big swing to be taken and so we don't have any announcements right now but certainly you know this is

The first time we've done something big and it won't be the last.

Yeah, and then the last one for me, and I'll get back in the queue. But it looks like Expensify Travel is trending. Well, is there any other color you can add around that?

So I just got back from GBTA, the Global Business Travel.

Alliance conference, and it went great, uh,

Like we said before, a lot of customer enthusiasm, uh, we saw great quarter on quarter growth. And even in July, we saw a huge growth just, you know, month on month. So it is growing extremely well and customers.

Are trying it, loving it. It's kind of a

a a flywheel in terms of you know the the sales Cycles a little longer, you know they do demos, they do a a pilot and then they start to roll it out and then

It grows and grows. So I think we're starting to see that. So, um, nothing specific to share with them what we did, but I guess the, the color commentary is that it is

Uh, continuing to accelerate and it's great.

All right. Thanks guys.

Great. And then I have our last 1, I apologize. I'm not sure who it is of our last few analysts but I've got someone on a 415.

Dial in.

I'll give you just a second to try and unmute here.

A little bit of a mystery caller, you know, I like it; they're authenticated. Um, but it didn't come through. Long-time listener, first-time caller—kind of situation. That's cool.

All right, let's wrap it up. Cool. All right. Well, thank you so much, everyone. As always, it's a pleasure. I'm very excited to be sharing the results of Q2 and looking forward to Q3.

All right. Thank you.