Q3 2025 Expensify Inc Earnings Call

For the legalese.

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 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.

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.

Thanks, Nikki now, let's dive into the Q3 financials.

Revenue was $35 1 million average paid members was 642000.

Total interchange was $5 4 million.

Our operating cash flow was $4 2 million our free cash flow was $1 2 million net loss was $2 3 million. Our non-GAAP net income was $4 3 million and our adjusted EBITDA was $6 5 million.

Q3 free cash flow was.

A little less than in prior quarters, thats, mostly due to seasonal timing of some annual payments.

We also reiterate our fiscal year 2025 free cash flow guidance of 19% to $23 million.

As always here's our Q4 flash numbers for.

Our paid members in October.

Up from the Q3 average, which we always like to see.

653000.

And now to jump to some business highlights for Q3.

We had some.

Rate Mark key customer wins, we are now the official traveling expense partner of the Brooklyn Nets was a longtime customer of our expense product and they have adopted expense by travel that shows just the power of the platform and the fact that customers are really excited about this so we're very happy to have the Brooklyn nets as a new expense might travel customer.

On the topic of travel bookings continued to climb growing 36% from Q2 and 95%.

Since Q1.

Travel continues to be a bright spot in the business and something both us internally and our customers are very excited about.

We also repurchased $1 five and change shares of our class a common stock.

That totaled approximately $3 million.

And now I'll hand, it over to David for a product update.

It has been an extremely exciting quarter when it comes to the product side first off talking about migration as you know.

Hinges upon our ability to move existing customers over to new expenses, that's what triggers that we think everything.

And the business is recovery and growth and so forth.

And so we've made incredible progress on that at this point, we would say we're targeting what we saw 90% feature parity BT, we want to support essentially 90% of the functionality of classic on new expenses.

We're very close to that right now we are of course, we will always maintain classic for existing customers as long as they need it but the main thing right. Now is the new expenses is largely complete when it comes to the functionality of classic. We've also migrated to basically the data of nearly all customers to new expenses, meaning that customers can switch back and forth between new and classic.

As they like which is a huge accomplishment. So we're to the point, where essentially new expenses is essentially done from a feature perspective and now we're just carefully what we called nudging customers over meaning that we will make.

Make them sign into new expense by the next time they sign in but then they can optionally switched back to classic we've nudged all of our collect customers over now to be clear, we have basically two plans collecting control and so our customers are smaller simpler customers we.

We migrated nearly all of them over to new expenses.

The vast majority choose to stay on new expenses.

Rather than going back to classic and so this is a huge testament to the power of new expenses. Additionally, I'd say this is one of the most exciting things now we're closing all new customers new expensive I mean that we will start every sales conversation on <unk> and we will still switched back to classic if theres. Some long tail features some esoteric integration or something.

Like this is they might need but we start every new conversation on nuc Fancify and so that's been really really powerful, especially at the conferences, especially as we rollout new leads so it's been great great progress when it talks about migrating existing customers from classic to new.

Additionally, it's been very exciting on the <unk> side, so we've been talking with us for a while.

<unk> been paying attention to AI is kind of a big deal and so.

We've been talking about AI for a long time, because new expense device entire design anticipates basically modern AI and the way that we view it as AI is incredible, but it's also not foolproof and so whereas.

Some sort of some people really focus on AI and absolute we view.

Great feature for a certain level of functionality and we will take the AI as far as it can and then have humans take it the rest of the way and so our design was very unique is its a hybrid system. When you talk to <unk>, if it's a simple common.

<unk> or even just something very detailed about the product and sort of like from a help page whatever it might be the AI is really greater handle that question. It can do it better than the human honestly, but if you get to a super complicated topic for diagnosis or if you have more of a kind of an emotional issue, that's where we bring in our human agents now we can seamlessly switch back and forth between AI and humans.

Sort of intercept to lead to the customer and so to the customer all they get is an incredible chat support experience, but on our side, it's handled using AI or human seamlessly depending upon who is best for the job. Likewise. This is a contextually, meaning that it's built into the product rather than sort of on top of the products I think you've seen a lot of AI solutions versus kind of.

Windows 95, Clippie, where basically its a something kind of stuck on top that's very clearly not designed around the product ours is different with <unk>, it's built into the product and that replace and so wherever it is natural for you to talk about talk to the AI weather.

You are talking directly to <unk> or maybe you're inside of an expense report or even commenting on a particular expense. Our AI appears everywhere. So you can basically talk to it naturally in the context of that.

Additionally, we are building more what I would call a general intelligence I think theres a lot of different approaches towards this and demonstrate forward approach that people start with us they'll have kind of a collection of very purpose built agents and so maybe a specific agent will reach out to you in a particular narrow context and talk about one topic. It makes sense that's a very.

Easy place to start and I think thats kind of where everyone starts our designers are going for more of a general intelligence, meaning that we have built a singular AI that can operate in a multimodal fashion. So you can talk to the same AI AI and you can ask it to scan recede categorized in expense you can ask it.

Very complex questions about.

How to configure expensive Fi.

And so the same AI can do all of these different functions. What's nice about that is that really supports architectural design. So it's not like you have to have 10 different AI is hanging up in every single context, and then you have to choose the right. One based upon the question that you have rather you can send any question of concierge and will always be able to answer it just works, especially well across platforms.

So you can talk to our concierge sort of like single General intelligence over chat, obviously, but you can just E mail at <unk> com or does Texas for 777, and because it's a single general intelligence you can ask any questions on any of those and so you can ask it to create expenses asking about your expenses about your workspace wherever it might be this.

Yes.

A really powerful platform that we think is unique and novel in the market. We don't think anyone else has this level of sort of general purpose financial AI out there and so and this is just a start to give some examples of kind of how this works in practice. So there's some basic stuff of course, obviously detecting not just whether the expense from like the merchant and amount is out of <unk>.

But looking into the receipt itself, making assessments about what type of merchant it is and so forth and so we can do more detailed prohibitively expensive detection.

Likewise, it's all the rage these days.

It is a big deal for not just the <unk>, but also for the employees and so we detect AI generated receipts and flag them.

We have a feature called conversational corrections, meaning of course whenever you swipe the card or scanner received we will categorize it to the best of our ability based upon the information just on the receipts and merchant itself, but every company is different and sometimes of ambiguity as to the correct way to categorize. It. So we'll narrow it down to a short list of the most likely.

Options in this ask you, which one is it if you're in the App you can as to what we want to tap into responding via text or E. Mail you can just respond with number or whatever and you don't have to pick from these options. You can also just say something else entirely. This is the advantage of a general AI, where if it asks you a question youre not trapped into whatever conversation. It wants you to do you could absolutely.

Switches the script and ask maybe like what are all the categories available or what's the last time that I did this whatever might be and so this general intelligence allows for a much more natural ability to correct and sort of categorize information.

And as mentioned this is a truly universal agent you can have the same conversation in a wide variety of context, whether it's chat email SMS and so forth. So this is a major release for concerts AI, but it's really just the start we think this is an incredibly powerful foundation that we've ironed out the kinks for and Youre going to see more and more incredibly powerful functionality being built across it over the quarters.

So just to kind of summarize everything at a high level.

Increasingly and continued selling.

Successful fashion traveling card to existing customers, which has been great.

We've been putting our free cash flow to work, which is great.

And despite all of this beside all the chaos of everything we've really stayed focused on investing in AI first design and I think this is a big deal because obviously, everyone thinks a lot about AI, but I think that everyone's kind of gotten through the first wave of a lot of the easy stuff, here's where it starts to get much harder going on now and so we think that chat as such.

The UI is AI, if you can't talk to it how smart can it really be and so our design is to bring a chat first design everywhere into the product such that it makes our entire product into an AI first design. It is a very very different design and encourage you to check it out and I think you'll see a glimpse of the future because I think everyone's going to be designing something like this over time.

Likewise, our new expense by migration is on track and we've got really great customer reception. This puts everyone into a position to talk with our AI in a much better way than they could with a previous product and at the end of the day, it's really about anything that you can do via the UI you should be able to do via AI and so building a truly AI first product, where you can talk to the AI in a primary Mac.

And to them as opposed to just as a sort of a secondary flow anyway.

They're going to have lots more to talk about in the quarters to come but for now we'll take any questions. We can.

Perfect well, let's get started with Citi I believe Georgia on the line.

Okay.

Great. Thanks for taking my questions here I'm on for Steve vendors, maybe just on this at this point about chat as the UI for AI. This is something that you guys have been early to it's interesting from our perspective to watch other people kind of catch up to where where you guys are in terms of building in natural language, driven UI and other.

Our software apps Im just curious from that head start that <unk> had would've been some of the big learnings or capabilities you've incorporated into the platform that you know when you watch others you can see maybe missteps.

Missteps or where do you feel like you have an advantage there.

That's a great question and I think it really comes back to this idea of being built in versus built onto the products in that.

The expense of that design is that you can go into any context.

And inside that context.

You can talk about that particular thing, that's just kind of a nuanced point, but <unk>.

Imagine for example, euro texting with <unk>.

In AI in a general context, and you want to change yesterday's expense 200 basically.

Categorize it or you want to highlight that actually there was an accident that didnt mean to submit that wherever it might be referencing that outside of the context is actually quite hard you have to remember the merchant to date the amount for some key indication of how to do it.

And that's just a really impractical thing that's going to drive it back to the U S. Now if you're talking to your assistant you would just say hit I think that either yesterday or whatever it might be and you'll give a kind of a relative reference and it would be able to figure it out based upon the contextual clues the conversation and so I think that our UI is about trying to infuse the AI throughout the entire <unk>.

<unk> such that you can use it in whatever context you are in.

Leave your context to use the AI, it's already there.

Makes it very different UI design, you can see it as a very tech centric design in many ways. It looks like kind of chat GBT interface I mean, I think that it's hard to argue your business as a AI first product if it looks like concur I think that has to look a lot more like chat GBT to really incredibly say that this is an AI based thing it's kind of like.

But what makes an AI intelligence.

Isn't that is it has a bunch of kind of the AI branding on a bunch of algorithms I think you need to be able to talk to it you have to be able to ask questions. Whenever you want you have to explain why it did what it did.

It has to go to learn from its mistakes.

The idea that you can have automation in place and that you can't talk to it and figure it out it doesn't seem very smart like let's say you had you hired some sort of an accountant and they said that they approved a report and you ask them why did you move their core kind of like I don't know you wouldnt be like this was a genius do you feel like this is pretty stupid I think a lot of sort of algar.

Mick automation is very powerful, but it's that intelligence and AI I think intelligence is about getting into a place where you can ask questions get answers and make changes all through natural language and I think our designs really optimize for that I don't think I also think it's important that you're unlocking a new use case.

Charts with AI is not interesting but.

That's a very common use case people have been making short for a long time and doesn't require AI, it's not a good use of it.

So I think the fact that we're able to.

Do new things, new functionality and offer new value to the user because we're using AI is what sets us apart versus replacing code with AI, but the customer doesn't care about that yeah, yeah I got that.

Okay very interesting I appreciate the detailed answer there maybe something more tactical you know the government shutdowns and the news it seems like maybe there might be some impact on <unk>.

Travel.

I can appreciate that probably if there is any impact to you guys. It would basically be a timing risks, but just any thoughts there from shutdowns in the past or just general scenario analysis, you guys maybe have thought through there.

So I think it's.

I guess it depends on.

To the extent it impacts travelers right if you're stuck somewhere you are probably going to actually end up spending more.

Sure.

Extra hotel night, because you are stuck in new York or something but.

In terms of.

Is it going to keep people from.

Using expensive I travel less or something.

Because they are worried about being stuck I think back.

That's probably a realistic risk.

It depends on whether people are going to change their travel plans or just risking basically I think yes, I don't think uncertainty is good for anyone's business.

Yeah I appreciate that I appreciate you taking the questions.

George.

Great, let's see JMP I believe Aaron Youre on the line.

I'm here, Thanks, guys, Hey, Erinn.

Right.

Wanted to dig in on migrations from expense by classic the new expenses, including what percentage of your revenue today is on new expensive by after migrating your collect customers and the timeframe over which you expect to get your control customers that I think are a substantial majority of your revenue on some of the expenses.

It's a good question I don't think we know the or were less than it's less than 50% of revenue. So we're not.

Over 50% hump in terms of.

Revenue yet.

The huge priority right now is moving people over.

I mean, we're as I mentioned earlier, we're aiming to have new extensive I match.

Classic from a functionality perspective by end of years and I think we're very good on that target now the real question is how fast can we migrate everyone over.

We control the timeline here, if theres no sense migrating a little faster than than they're comfortable with and so we're going at the fastest rate that they're comfortable with.

I think we're really hoping to have a significant progress on that if not completion or near completion by the end of the year, but I don't think we can control we don't know exactly yet because we don't know where they don't have yes. I think it's we're also listening to the feedback of customers nudged and.

Iterating very quickly because it's.

People, who are new to expense by it and they come in they love it right because it's.

That's all they know it works great very cool.

Someone switching from reduced classic for maybe five years 10 years to new that's a different audience and they have a different reaction if not negative but they have a different set of feedback and what we have gotten just from <unk>.

New customers coming in so we've been.

A little slow moving people over and really focusing on those user sessions and getting feedback and making small changes quickly and iterating and I think it's quite real wear it.

It goes faster and faster, but the the.

The existing customers.

Are an interesting source of feedback compared to net.

They say different things. So we're just working through that I said, it's a great point the bottom of the slide that talks about a major goal. We had was to make sure every new customer conversations started on <unk> and so that has been the priority that's done into another priority is getting existing customers over.

That makes sense and then the follow up here are you seeing any incremental monetization from our customers that are migrated to the new expense by or is that more of a TBD and I assume that the more relevant piece of this question at this time, but what type of an internal cost savings do you anticipate from a time series agent once you get everyone migrated over.

And too expensive.

Okay.

A great question, so the support cost should be.

Uh huh.

Definitely less when we get everyone over because new expense by.

Handles everything better than classic a lot of the problems.

No problems, but there are there are some complaints with classic that we had soft with new expenses.

In general it should be less of a support burden also just the fact of maintaining two platforms at once is expensive and it feels like a split brain problem. So it will be really important too.

Solving that well yet in terms of increased monetization I think it's much easier to.

Issue, new cards manage everything get into travel Theres a lot of.

Travel functionality that only exists on new expensive.

It's using expenses like travel with new expense via the better experience than classic. So I do think that it's it's a net positive for everyone that we moved over is a net positive on the business. So that's why it's a huge focus for us right now absolutely.

Alright, Thank you guys.

Yes.

Alright, we were double book with some of our other analysts. So we will talk to them offline that's everybody for now.

Great Alright, Thank you all and we'll see you next quarter. Thanks, everyone.

Anuradha Muralidharan: I'm going to hand it over to Nikki for the legalese.

[music].

Niki Wallroth: 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 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 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.

Niki Wallroth: 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.

Anuradha Muralidharan: Thanks, Nikki. Now let's dive into the Q3 financials. Revenue was $35.1 million, average paid members was 642,000, and total interchange was $5.4 million. Our operating cash flow was $4.2 million, and our free cash flow was $1.2 million. Net loss was $2.3 million. Our non-GAAP net income was $4.3 million, and our adjusted EBITDA was $6.5 million. Q3 free cash flow was a little less than in prior quarters, mostly due to seasonal timing of some annual payments. We also reiterate our fiscal year 2025 free cash flow guidance of $19 to 23 million. As always, here's our Q4 flash numbers. Our paid members in October, up from the Q3 average, which we always like to see, 653,000. Now to jump to some business highlights for Q3. We had some great marquee customer wins.

Anuradha Muralidharan: We are now the official travel and expense partner of the Brooklyn Nets, who is a longtime customer of our expense product, and they have adopted Expensify Travel. That shows just the power of the platform and the fact that customers are really excited about this. We're very happy to have the Brooklyn Nets as a new Expensify Travel customer. On the topic of travel, bookings continue to climb, growing 36% from Q2 and 95% since Q1. Expensify Travel continues to be a bright spot in the business and something both us internally and our customers are very excited about. We also repurchased 1.5 and change shares of our Class A common stock. That totaled approximately $3 million. Now I will hand it over to David for a product update.

David Barrett: Great. It has been an extremely exciting quarter when it comes to the product side. First off, talking about migration, as you know, everything hinges upon our ability to move existing customers over to new Expensify. That's what triggers, we think, everything in the business's recovery, growth, and so forth. We've made incredible progress in that. At this point, we would say we're targeting what we call 90% feature parity, meaning we want to support essentially 90% of the functionality of Classic on new Expensify. We're very close to that right now. We will, of course, always maintain Classic for existing customers as long as they need it. The main thing right now is that new Expensify is largely complete when it comes to the functionality of Classic. We've also.

David Barrett: Migrated basically the data of nearly all customers to new Expensify, meaning that customers can switch back and forth between new and Classic as they like, which is a huge accomplishment. We're to the point where essentially new Expensify is essentially done from a feature perspective. Now we're just carefully, what we call, nudging customers over, meaning that we will make them sign into new Expensify the next time they sign in, but then they can optionally switch back to Classic. We've nudged all of our collect customers over. Now, to be clear, we have basically two plans: collect and control. Our collect customers are smaller, simpler customers. We've migrated nearly all of them over to new Expensify, and the vast majority choose to stay on new Expensify rather than going back to Classic.

David Barrett: This is a huge testament to the power of new Expensify. Additionally, and I'd say this is one of the most exciting things, now we're closing all new customers on new Expensify, meaning that we will start every sales conversation on new Expensify. We'll still switch back to Classic if there's some long-tail features, some esoteric integration, or something like this that they might need. We start every new conversation on new Expensify. That's been really, really powerful, especially at the conferences, especially as we roll out to new leads. It's been great, great progress when it talks about migrating existing customers from Classic to new. Additionally, it's been very exciting on the concierge side. We've been talking about this for a while. If you've been paying attention, AI is kind of a big deal.

[music].

David Barrett: We've been talking about AI for a long time because new Expensify's entire design anticipates basically modern AI. The way that we view it is AI is incredible, but it's also not foolproof. Whereas some people really focus on AI in absolute, we view AI as a great feature for certain levels of functionality. We want to take the AI as far as it can and then have humans take it the rest of the way. Our design, which is very unique, is it's a hybrid system. When you talk to Concierge, if it's a simple, common question or even just something very detailed about the product and sort of like from a help page or whatever it might be, the AI is really great at handling that question. It can do it better than a human, honestly.

David Barrett: If you get to a super complicated topic for diagnosis or if you have more of kind of an emotional issue, that's where we bring in our human agents. Now, we can seamlessly switch back and forth between the AI and humans sort of imperceptibly to the customer. To the customer, all they get is just an incredible chat support experience. On our side, it's handled using AI or humans seamlessly, depending on who's best for the job. Likewise, this is a contextual AI, meaning that it's built into the product rather than sort of on top of the product. I think you've seen a lot of AI solutions which are kind of like Windows 95 Clippy, where basically it's just something kind of stuck on top. It's very clearly not designed around the product. Ours is different.

David Barrett: With Concierge, it's built into the product in every place. Wherever it's natural for you to talk to the AI, whether you're talking directly to Concierge or maybe you're inside of an expense report or even commenting on a particular expense, our AI appears everywhere. You can basically talk to it naturally in the context of that. Additionally, we're building more what I would call a general intelligence. I think there's a lot of different approaches towards this. The most straightforward approach that people start with is they'll have kind of a collection of very purpose-built agents. Maybe a specific agent will reach out to you in a particular narrow context and talk about one topic. It makes sense. That's a very easy place to start. I think that's kind of where everyone starts.

David Barrett: Our design is going for more of a general intelligence, meaning that we've built a singular AI that can operate in a multimodal fashion. You can talk to the same AI and you can ask it to scan a receipt, categorize an expense. You can ask it very complex questions about how to configure Expensify. The same AI can do all of these different functions. What's nice about that is it really supports our contextual design. It's not like you have to have 10 different AIs hanging out in every single context, and then you have to choose the right one based upon the question that you have. Rather, you can send any question to Concierge and it'll always be able to answer it. This works especially well across platforms.

David Barrett: You can talk to our Concierge sort of like single general intelligence over chat, obviously, but you can just email it at concierge@expensify.com or just text it at 47777. Because it's a single general intelligence, you can ask it any questions in any of those. You can ask it to create expenses, ask it about your expenses, about your workspace, whatever it might be. This is a really powerful platform that we think is unique and novel in the market. We don't think anyone else has this level of sort of general purpose financial AI out there. This is just the start. To give some examples of kind of how this works in practice.

David Barrett: There's some basic stuff, of course, obviously detecting not just whether the expense from the merchant and amount is out of policy, but looking into the receipt itself, making assessments about what type of merchant it is, and so forth. We can do more detailed prohibitive expense detection. Likewise, it's all the rage these days. AI is a big deal for not just the admins, but also for the employees. We detect AI-generated receipts and flag them. We have a feature they call conversational corrections, meaning, of course, whenever you swipe the card or scan a receipt, we will categorize it to the best of our ability based upon the information just on the receipt and merchant itself. Every company is different, and sometimes ambiguity is the correct way to categorize it.

David Barrett: We'll narrow it down to a short list of the most likely options and just ask you, which one is it? If you're in the app, you can just do it in one tap. If you're responding via text or email, you can just respond with a number or whatever. You don't have to pick from these options. You can also just say something else entirely. This is the advantage of a general AI, where if it asks you a question, you're not trapped into whatever conversation it wants you to do. You could actually just switch the script and ask maybe like, well, what are all the categories available, or what's the last time that I did this, whatever it might be? This general intelligence allows for a much more natural ability to correct and sort of categorize information.

[music].

David Barrett: As mentioned, this is a truly universal agent. You can have the same conversation in a wide variety of contexts, whether it's chat, email, SMS, and so forth. This is a major release for Concierge AI, but it's really just the start. We think this is an incredibly powerful foundation that we've ironed out the kinks for. You're going to see more and more incredibly powerful functionality being built across it over the quarters to come. Just to kind of summarize everything at a high level, we've increasingly and continued selling in a very successful fashion travel and card to existing customers, which has been great. We've been putting our free cash flow to work, which is great. Despite all of this, beside all the chaos of everything, we've really stayed focused on investing in an AI-first design.

David Barrett: I think this is a big deal because obviously everyone thinks a lot about AI, but I think that everyone's kind of gotten through the first wave, a lot of the easy stuff. Here's where it starts to get much harder going on now. We think that chat is the UI of AI. If you can't talk to it, how smart can it really be? Our design is to bring a chat-first design everywhere into the product, such that it makes our entire product into an AI-first design. It's a very, very different design. I'd encourage you to check it out. I think you'll see a glimpse of the future because we think everyone's going to be designing something like this over time. Likewise, our new Expensify migration is on track, and we've got really great customer reception.

David Barrett: This puts everyone into a position to talk with their AI in a much better way than they could with their previous product. At the end of the day, it's really about anything that you can do via the UI, you should be able to do via AI. Building a truly AI-first product where you can talk to the AI in a primary mechanism as opposed to just as a sort of secondary flow. Anyway, we're going to have lots more to talk about in the quarters to come. For now, we'll just take any questions we can.

Anuradha Muralidharan: Perfect. Let's get started with Cindy. I believe George is on the line.

[Analyst]: Great. Thanks for taking the questions here. I'm on for C vendors. Maybe just on this point about chat as the UI for AI. This is something that you guys have been early to. It's interesting from our perspective to watch other people kind of catch up to where you guys are in terms of building in natural language-driven UI into other software apps. I'm just curious, from that head start that you've had, what have been some of the big learnings or capabilities you've incorporated into the platform that when you watch others, you can see maybe them making missteps or where you feel like you have an advantage there?

David Barrett: That's a great question. I think it really comes back to this idea of being built in versus built onto the product. Expensify's design is that you can go into any context, and inside that context, you can talk with their AI about that particular thing. Now, this is kind of a nuanced point. Imagine, for example, you're texting with an AI in a general context, and you want to change yesterday's expense. You want to basically categorize it, or you want to highlight that actually that was an accident. I didn't mean to submit that, whatever it might be. Referencing that outside of the context is actually quite hard. You have to remember the merchant, the date, the amount, or some key indication of how to do it. It's just a really impractical thing that's going to drive you back to the UI.

David Barrett: Now, if you're talking to your assistant, you would just say, hey, that thing that I did yesterday, or whatever it might be, and you'd give it kind of a relative reference, and it would be able to figure it out based upon the contextual clues of the conversation. I think that our UI is about trying to infuse the AI throughout the entire product, such that you can use it in whatever context you're already in. You don't have to leave your context to use the AI. It's already there. This makes a very different UI design. You can see it's a very chat-centric design. In many ways, it looks like a kind of ChatGPT interface. I mean, I think that it's hard to argue your business is an AI-first product if it looks like Concur.

David Barrett: I think that it has to look a lot more like ChatGPT to really credibly say that this is an AI-based thing. It's kind of like what makes an AI intelligent isn't that it just has a bunch of kind of AI branding on a bunch of algorithms. I think you need to be able to talk to it. You have to be able to ask it questions, whatever you want. You have to be able to explain why it did what it did, and it has to be able to learn from its mistakes. I think that the idea that you can have automation in place and that you can't talk to it and figure it out doesn't seem very smart. Let's say you hired some sort of an accountant, and they said that they approved a report, and you asked them, why did you approve the report?

David Barrett: I don't know. You wouldn't be like, this is a genius. You'd be like, this is pretty stupid. I think a lot of sort of algorithmic automation is very powerful, but it's not intelligent in an AI sense. I think intelligence is about getting into a place where you can ask questions, get answers, and make changes all through natural language. I think our design is really optimized for that.

Ryan Schaffer: I also think it's important that you're unlocking a new use case. Making charts with AI is not interesting, but that's a very common use case. People have been making charts for a long time, and it doesn't require AI. That's not a good use of AI. I think the fact that we're able to do new things, new functionality, offer new value to the user because we're using AI is what sets us apart versus replacing code with AI, that the customer doesn't care about.

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David Barrett: Yeah, yeah, yeah. I get that.

[Analyst]: Super interesting. I appreciate the detailed answer there. Maybe something more tactical. The government shutdowns in the news, it seems like maybe there might be some impact on travel. I can appreciate that probably if there is any impact, you guys would basically be a timing risk. Just any thoughts there from shutdowns in the past or just general scenario analysis you guys maybe have thought through there?

Ryan Schaffer: I think it depends on, to the extent it impacts travelers, right? If you're stuck somewhere, you're probably going to actually end up spending more because you have extra hotel nights because you're stuck in New York or something. In terms of, is it going to keep people from using Expensify Travel less or something because they're worried about being stuck, I think that's probably a realistic risk. It depends on whether people are going to change their travel plans or just risk it, basically, I think.

David Barrett: Yeah, I don't think uncertainty is good for anyone's business.

Ryan Schaffer: Yeah.

[Analyst]: Yeah, I can appreciate that. Appreciate you taking the questions.

Ryan Schaffer: Yeah, thanks, George.

Anuradha Muralidharan: Great. Let's see. JMP, I believe Aaron, you're on the line.

Aaron Kimpson: I'm here. Thanks, guys.

David Barrett: Aaron.

Aaron Kimpson: Hey, Ryan. I want to dig in on migrations from Expensify Classic to New Expensify, including what percentage of revenue today is on New Expensify after migrating your Collect customers, and the time frame over which you expect to get your Control customers that I think are a substantial majority of your revenue on some New Expensify.

David Barrett: That's a good question. I don't think we know.

Ryan Schaffer: We're less than, it's less than 50% of revenue. We're not over the 50% hump in terms of revenue yet, but that's the huge priority right now, moving people over.

David Barrett: Yeah. I mean, as mentioned earlier, we're aiming to have New Expensify match Classic from a functionality perspective by end of year, and I think we're very good on that target. Now, the real question is how fast can we migrate everyone over. We control the timeline here. There's no sense migrating them over faster than they're comfortable with, and so we're going at the fastest rate that they're comfortable with. I think we're really hoping to have significant progress on that, if not completion or near completion by the end of the year. I don't think we can control. We don't know exactly yet because we don't know what we don't know.

Ryan Schaffer: Yeah, I think we're also listening to the feedback of customers nudged and iterating very quickly because it's people who are new to Expensify and they come in, they love it, right? Because it's all they know. It works great. Someone switching from who's used Classic for maybe five years, 10 years to new, that's a different audience and they have a different reaction. It's not negative, but they have a different set of feedback than what we've gotten just from new customers coming in. We've been a little slow moving people over, really focusing on those user sessions, getting feedback, making small changes quickly, and iterating. I think it's a flywheel where it goes faster and faster. The existing customers are an interesting source of feedback compared to net new because they say different things. We're just working through that.

David Barrett: Actually, that's a great point. The bottom of the slide that talks about a major goal we had was to make sure every new customer conversation started on New Expensify. That has been the priority. That's done. Now the priority is getting existing customers over.

Aaron Kimpson: That makes sense. The follow-up here, are you seeing any incremental monetization from the customers that have migrated to New Expensify? Or is that more a TBD? I assume the more relevant piece of this question at this time is what type of internal cost savings do you anticipate from the concierge agent once you get everyone migrated over to New Expensify?

Ryan Schaffer: That's a great question. The support cost should be definitely less when we get everyone over because New Expensify handles everything better than Classic. A lot of the problems—not problems, but there are some complaints with Classic that we have solved with New Expensify. In general, it should be less of a support burden. Also, just the fact of maintaining two platforms at once is expensive, and you have like a split brain problem. We're really looking forward to solving that.

David Barrett: Oh, yeah.

Ryan Schaffer: In terms of increased monetization, I think it's much easier to issue new cards, manage everything, get into travel. There's a lot of travel functionality that only exists on New Expensify. Using Expensify Travel with New Expensify is a better experience than Classic. I do think that it's the net positive. Everyone that we move over is a net positive on the business. That's why it's a huge focus for us right now.

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David Barrett: Absolutely.

Aaron Kimpson: All right, thank you, guys.

David Barrett: Of course.

Anuradha Muralidharan: All right, we were double booked with some of our other analysts, so we will talk to them offline. That's everybody for now.

David Barrett: Great. All right. Thank you all, and we'll see you next quarter. Thanks, everyone.