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

Before we begin, please note that all the information presented on today's call is unaudited. And during the course of this call, management may make forward-looking statements within the meaning of the federal securities laws. These statements are based on management's current expectations and beliefs and involve risks and uncertainties that could cause actual results to differ materially from those described in these forward-looking statements. Forward-looking statements in the earnings release that we issued today, along with the comments on this call, are made only as of today and will not be updated as actual events unfold. Please refer to today's press release and our filings with the SEC for a detailed discussion of the risks that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today. Please also note that on today's call, management will refer to certain non-GAAP financial measures. While we believe these non-GAAP financial measures provide useful information for investors, the presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. Please refer to today's press release or the investor presentation for a reconciliation of these non-GAAP financial measures to their most comparable GAAP measures.

All right. Now let's talk about the Q1 2024 financials. Our revenue was $33.5 million. Our average paid members were $688,000. Our net interchange was $3.5 million. Our operating cash flow was $3.5 million. Our free cash flow was $5.2 million, which is a significant increase quarter-over-quarter. Our GAAP net loss was $3.8 million and our non-GAAP net income was $3.7 million. The difference between our net loss and our non-GAAP net income and stock-based compensation. And our adjusted EBITDA was $7.1 million. I mentioned free cash flow. I want to talk about that a little bit more. So in Q4, we initiated a full year free cash flow guidance. We did that to provide the market with our view on how cash flow is going to go for this year, and we're actually increasing that guidance to $11 million to $13 million for fiscal year 2024. And like I mentioned earlier, our free cash flow was $5.2 million. That's a 242% increase from the previous quarter, something we're very proud of and that is the impact of the cost cutting that we have discussed in the past. I also want to talk about the Expensify card. We've seen strong growth, 57% year-on-year growth to $3.5 million. We actually have seen 13% in just the last month alone. So the card is growing at a great clip. Also, everyone's favorite topic is the accounting treatment change that we're going through. We're changing program managers and the impact of that is our interchange from the card will no longer be a contract expense and cost of revenue. It will be moving to revenue and that we expect that transition to be finished by end of the year. Additionally, we will get 20% more interchange on those same transactions. So we're very excited about that, and that transition is underway. Also, we always leave you with how the current quarter is going. In April, we had 685,000 paid members. And now I hand it over to David Barrett for the business highlights.

Thanks, sir. All right. So the catch up, Q1 was a great quarter. We basically dialed in all of the cost optimizations for Q4. We continue to improve the core trends. And overall, we're just investing in the things that are working. I give an example of that, SEO is going really well. We've had almost 100% year-on-year increase in sort of general keywords that are ranking across the Internet. But most importantly, we've had a huge increase in number of first page SEO keywords. So this is something we continue to invest in. So I think that is a word-of-mouth business, people are searching for Expensify a wide variety of names. And so if we can capture either branded keywords, but also just the wide range of long-tail unbranded words as well. It's a huge sustainable lead generation path for a long time. Likewise, global reimbursement continues to grow by leaps and bounds, which is wonderful. We are a global product with customers all over the world. And so this is a way that we can support them well. Additionally, as Ron mentioned earlier, card keeps growing up into the right. So it's just growing by leaps and bounds, and so that's great. It's been a really strong growth channel for us as well. So but most exciting, I would say, is that the product has been developed in an incredible way in this past quarter. And so there's a lot to talk about here. The start, as we always do, a reminder of the strategy. We believe that there is an enormous opportunity out there, something like 100x larger than the traditional market. And so we think that we're the goal of Expensify is to capture that kind of untapped 99%, which is substantially with the VSP and…

Perfect. So first, I believe we have [indiscernible] on the line. [indiscernible] Matt, are you there?

I guess the first question, I was just curious on -- going back to the paid members chart where you guys showed the April data point, at least historically, April has generally shown a little bit of a jump. I don't know if there's any kind of nuances to this in April, but it looks like it sequentially came down a tiny bit. And then it might be interrelated, so I'll just ask my sort of follow-up now. But I think last quarter, you guys had talked about leveraging certain incentives to get people to more proactively switch from sort of old cars to new card. How do you guys deploy those? Can you talk a little bit more about how those are kind of coming into the market and working and maybe that has an interplay to paid members.

Yes, great question, and thank you. So the car transition, I think, is going well. We do have some financial incentives that we can deploy. We haven't deployed for those yet. But I think the biggest kind of carrot to get people over is we've deployed new functionality that is only available on the new card, specifically the ability to create an unlimited amount of virtual cards, which people use on like a per vendor basis. So that's a highly desired feature that we're only putting on the new card, and we're seeing customers come over as soon as they hear that. So we do have financial incentives. We haven't used them yet, but we do have full confidence that we're going to get everyone transitioned over by end of the year, and we're very incentivized to get it done quickly. So it's a high priority for us.

So you haven't used the incentives -- the financial inserts yes. Okay. That's helpful.

Second question we got on.

He's a 2-part already.He's a 2-part already.

Okay. Great. Elyse, switch over here.

Great question I actually think it's a combination of both. When we issued guidance last quarter, we're not very basic. We'll give you a very realistic view of how we feel at that point in time. More time is passed. We're closer to the end of fiscal year 2024 than we were last quarter, and our views have updated a little bit, and that's why we're updating you all that we're raising the guidance a little bit. And it's a combination of the cost cutting but also the new products we have coming to the market.

Aaron Kimson is on the line.

This is Aaron Kimson from Citizens JMP. I want to ask first on open source contractors. In 2023, you paid out over $8 million to open source contractors as you progress with the ambitious product road map and with full-time heads coming down 5, but it's almost 4% of your full-time heads. Is it fair to assume you'll be relying more on the open source community going forward? And how is cost per job trended since you stopped, I think, Ryan, you talked about surge pricing on the 3Q -- how has it come down since then?

It's a great question. So the open source community is actually an incredible resource. So the super-fast. It's basically an unlimited amount of supply, and we just have to give them demand, and they kind of build it for us. It's really great. Now we've talked about in the past that we were doing search pricing in order to build the community up. At this point, we've reduced the rates, which we're paying out. And in this quarter, we saw more pull request so that's a metric was more pull requests and less per pull request. So we actually got more done and we paid less on average than we did. So those costs are coming down. It's part of the cost-cutting initiatives, but we haven't seen any decrease in output. Yes.

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

I don't…

I mean, we talk with anyone.

We talked to anyone that e-mails us, and also, we have a whole chat room to talk to investors, but I think that we don't probably comment on individual investors. I know that's not really the answer you want but we know Steve well from when we were a private company, but we don't have any active dialogue with them at this point in time.

Yes. Anyone who wants to talk to us, just call us.

Great. [indiscernible] are you on the line still?

I am, but I believe [indiscernible] all my questions. So we're good here.

Okay. Last chance then, do we have anybody from [indiscernible] Capital still? I think that’s everybody we have on the line.

All right. Thank you all.

I'm on from Eric Martinuzzi from Lake Street. Just a couple of quick things. After reducing expenses last quarter, do you have a time line on when you could see greater investment back into sales and marketing?

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

Yes, I think it's about doubling down on the winners right now.

A couple of other quick ones. Given the softer SMB market, have you made any pricing changes?

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

And then this is kind of a combination question. But do you still expect all the customers to be shifted over to the credit card program by year-end? And related, what was the churn in the quarter? And do you expect that to trend throughout the year?

So yes, we do expect to have the program -- everyone on the new card program by the end of the year. That's a huge focus internally for us. And in terms of churn, we did see a little bit of churn, but just kind of the normal amounts that a big component of the decrease in users is the decrease in activity in our existing user base, which we think is more macro and ultimately temporary. But I mean, there is some element to churn. But also, we think that travel is one of the best tools we have to combat churn. It's a reason people cite when they do leave for a competitor. And now that we've announced this, we have a lot of interest. So we're very excited about it.

Aaron, did you have another question in your hand came back up.

No, [indiscernible]. Thank you.

Okay. That is everybody that we've got then

All right. Thank you all. Again, apologies for those technical difficulties. You never know when a cup of coffee is going to come splashing down on your laptop, but we got through it. So thank you all for your time, and we'll talk to you next quarter. I want also check out the chat room. We've posted kind of a summary of everything we discussed here. We've been told that there is kind of an image over some of the slides -- all these slides are in the chat room, it's exfy.com/roadmap or use the QR code in the slides also all this information is on our IR website. So thank you all, and we'll see you next quarter.

Great. Thanks, everyone.