Expensify, Inc. (EXFY) Earnings

Management highlights

- Ryan mentioned Q1 financials: revenue $34M down 6% Y/Y, average paid members $632,000 down 4% Y/Y, total interchange revenue $5.5M up 10% Y/Y, gap net loss $2.3M, non-gap net income $3.6M, adjusted EBITDA $6.2M, free cash flow $2.5M. Focus on maintaining fundamentals, investing in long-term growth, migrating customers to new Expensify, iterating on feedback. - David discussed product update: made progress in distribution and product adoption, accelerated bring your own card strategy, expanded partnership footprint with renewals and new partnerships, broadened commercial ecosystem with ERP relationships and travel integration, had over 30 improvements across the app in Q1 with updates in January, February, March related to finance workflows, insights, receipt handling, etc.

Guidance

- Reiterated full-year 2026 free cash flow guidance of $6 to $9 million. - April 2026 had 641,000 paid active members, an improvement from Q1 average, seen as an encouraging sign.

Segment performance

Revenue for the quarter was $34 million, down 6% year-over-year. Total interchange revenue was $5.5 million, up 10% year-over-year. Gap net loss was $2.3 million. Non-gap net income was $3.6 million and adjusted EBITDA was $6.2 million. Free cash flow was $2.5 million. There was a one-time legal payment of $2.6 million related to a class action lawsuit, but absent that payment, free cash flow would have been roughly $5 million. Revenue has declined, but profitability is strong with non-gap net income and adjusted EBITDA positive.

Analyst Q&A

• Q: Dave, just a question on a comment on your prepared remarks. You mentioned that you believe that the business was poised for an inflection point. I was wondering if you could just dig into that a little bit more.

  A: I think that this isn't a new thing. We've been talking for a long time. The whole strategy behind New Expensify is to shift away from kind of a more traditional expense management solution towards a more modern, collaborative, AI-focused solution. And so we knew this was going to be a huge investment. We knew it was going to take a long time. And we were at the tail end of that. So we've been migrating users over. And I think we're just extremely pleased with the reaction we're getting from traditionally classic customers moving to new Expensify, seeing the new capabilities, the AI, the collaboration, all that. And so I think on one hand, it's just a lot of kind of mostly anecdotal, but really positive evidence coming from customers migrating over. Also, just seeing these excitement from new customers, kind of what we refer to as new native customers, customers who've never seen Expensify Classic. they're just coming to the product and they really just get it and they like it and they really value it. And so it's validated a lot of our design decisions. And I think we feel really confident in that. And then, of course, there's just, you know, just kind of the green shoot indicators like, you know, April was pretty good from a paid member growth perspective, as we saw. And so, again, a lot of this is nothing new. This is the story we've been telling for a very long time. But the story has always involved basically making a kind of, you know, difficult, but big swing on what we think is still a massive, massive opportunity out there. Like when I think of it, you know, there's nothing that fundamentally has changed about the market in the sense that I still think there's something like a hundred to a thousand times more opportunity out there than this traditional opportunity has ever seen. New Expensify is designed to go out and get it. I think we're more and more confident that we can. It's not going to happen overnight, but We're a long-term business. We've always said that, and I think we just feel very excited and have a lot of conviction in that long-term strategy.

• Q: And then as a follow-up, maybe if you could just update us on the percentage of your classic customers that have migrated to the new platform. I think it's about 60%. I would say the main thing, the migration is going well. The nice thing about migration is we control the timeline of it and we are migrating customers over and then paying very close attention to any feedback they have. I would say the most important feedback we've had is simply just performance. The functionality is great and it's reliable, but it's just not fast enough for the larger customers. And so we never want to migrate over a customer that we're not confident is going to have a great experience. And so we're, I would say just in general, a lot of our engineering has shifted away from big sort of capital projects and more towards just rapidly integrating with the specific features that customers request, responding to feedback and so forth. And so right now, I would say a big thrust of our engineering is simply on hardening, improving the performance of our existing functionality in-house. And then along with that, you know, to date, your migration strategy for the new Expensify platform has relied mainly on carrots rather than sticks. And, you know, with about 60% migration so far, do you plan to shift that approach to move the rest over?

  A: I mean, I don't think so. I think the carrots work pretty well. They've been working well for us. And again, we have the ability to maintain classic. And so we don't, we're not, back into a corner in a sense like we don't have to push people over. We do it because we think we can give them a better experience. And so there's no reason to, I guess, threaten anyone. We want to pull them over with honey rather than vinegar. Is that how that saying goes? And And so I think we've got plenty of time to do that. I think we have plenty of good opportunity or super exciting functionality to pull them over. In fact, I would say one of the challenges is we have larger customers that want to come over and we're like, look, I know the functionality is really powerful. I know that it does all this new stuff, but the performance just isn't there yet. And so I would say kind of we're experiencing a bit of the opposite problem where we have enthusiasm to come over and it's just not quite there from a performance perspective. And so that's where a lot of our attention is at.