Hi. Welcome to the Q4 2024 and Fiscal Year 2024 Expensify Earnings. Before we get started, we're going to kick it over to Nikki, who is going to read the legal disclaimers.

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. 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. Thanks, Nikki. All right. Let's get started by reviewing the Q4 2024 financials. Revenue was $37 million. That's a 5% increase both quarter-over-quarter and year-over-year, which is great. Let’s the revenue go up. Average paid members were 687,000, which is also up slightly. It's essentially flat, but last quarter, we were essentially flat and down very slightly. Now we're slightly up. So we'll take slightly up over slightly down. And interchange was $5.1 million, which is a 62% increase year-over-year. The card continues to grow at a greater cliff is a bright spot in the company. Operating cash flow was $7.4 million. Free cash flow was $6.3 million. Our net loss was $1.3 million, almost there to get profitability. Hopefully, we get there soon. Our non-GAAP net income was $8.7 million, and our adjusted EBITDA was $12.4 million. Now let's talk about fiscal year 2024. Our revenue was $139.2 million. Our average paid members were 686,000 and our interchange was $17.2 million. Our operating cash flow was $23.9 million. Our free cash flow was $23.9 million as well. Those numbers aren't usually equal. There's a reconciliation in the appendix that you can take a look at just coincidence, we double checked that we’ve had [indiscernible]. Our net loss was $10.1 million. Our non-GAAP net income was $23.5 million, and the adjusted EBITDA was $39.4 million. Great. Now let's dive into free cash flow. For Q4, free cash flow was $6.3 million, a 272% increase year-on-year. For fiscal year 2024, free cash flow was $23.9 million, a 4,200% increase year-on-year. I know that's a large percentage increase. We're just highlighting it to really signal what a one day difference, our free cash flow situation is from where we were in 2023. Now let's talk about guidance. So last year, we…

Great. Thanks. So, as we just saw, Q4 was a great quarter. If every quarter were like that, everyone here would be incredibly happy. But we set out to do is more than just have, sort of just, uptick quarters. We set out to do something really big. So kind of going backwards, if you will, to the start of our IPO and talking about what has happened since then and what’s changed to now. So starting with basically what hasn’t changed. Basically, the opportunity size is still enormous. If we look back to kind of our initial TAM and so forth, so much of it is still untapped and so much of it is still largely the same in terms of competitive dynamics. Viral lead gen is still the most scalable model out there, and we’re the ones that are focused on bottom up adoption. So the core acquisition model hasn’t changed. Likewise, the payment super app is still a huge hub of data that captures basically the same viral lead gen transaction revenue, subscription revenue, all packaged just in place. That strategy is still a great strategy. So fundamentally, the core tenants of what we set out to do are still in play. The strategy is still a sound strategy. But some things have changed in a very significant way. I’d say AI is finally here. And most interestingly, AI is based upon chat. It's not called e-mail GPT, it's called ChatGPT. It's called that for a reason because the language of AI is English. And the way you communicate on English and computers is primarily through chat. So I know there's been a lot of questions as to why we've been leaning so heavily into chat, basically, what is the chat-based attention for and so forth. And…

Perfect. Can you hear me?

Yes.

Okay. Great. Let's get started with Citi. George and Stephen, I think you're both on the line. Q – Steven Enders: Yes. Hi. You got Steven here. Thanks for taking the questions from our end. But I really appreciate the deep dive on the AI side. I just want to get a little bit better understanding for kind of where the capabilities sit today, kind of what's still on the -- what's still kind of in the pipeline that you're working on and have everyone engaged on? And I guess secondarily, for these initiatives to work the way you're thinking like does all of this need to sit within the Expensify app in the chat today? Or can you go out to third-party systems like Slack or other financial systems to integrate all that data view there?

Great questions. And so as for what sort of exists today and what's coming, I would say the things that we talked about in deep AI already done, basically, the concierge SmartScan and the QAing of calls, that's all done in practice right now. I mean, obviously, we're improving in all of these. And so -- but I'd say that these are real systems creating real benefit right now. For a lot of kind of the more surface AI stuff in terms of user interactions, I'd say that's all under active development hasn't been released yet, but it's real. It's coming -- as we think more on sort of the future virtual CFO stuff, it's like prototype, it's basically -- it's demonstrated, but it's not kind of like production ready. Everything here, however, is it's fundamentally real. Like if there’s stuff exists, we know that it can be done. It hasn't been launched yet, but it's coming. And so we don't have a specific time line for that. The stuff we need to do work really well before it's worth launching. But this is not vaporware.

Okay. That makes sense. And then from, I guess, an integration perspective, like does all this adoption need to happen within Expensify itself, like, specifically some of the chat stuff or -- and I guess, again, like the third-party system integrations kind of…?

Sure, sure. So one thing we certainly talked about is integrating with other server chat systems, we’re not opposed to that. As was sort of mentioned, one of the advantages of a chat system is that we can kind of meet you where you are. And so right now, we focus on our app, e-mail and SMS, but we certainly talked about what's a Slack integration as well. One of the challenges, however, is that as we do this, the benefit of the technology is that we can build it in the context of the expense management itself. So for example, with Slack, we can't show you your expenses inside of Slack, and it's weird to have a conversation about your expense report outside of your expense report. And so I think there's some kind of an impedance mismatch for how our data is structured and how a traditional chat application is structured. But fundamentally, I agree with the thrust of where you're going and that is we need to meet the customer where they are. And for the right use cases, it would make sense to talk to concierge in different chat systems. The more deep you get into the expense management stuff, the more it just makes sense to be part of the expense management system itself. Is that correct?

Yeah, that's great. I guess that then kind of leads to the next question of if your customers aren't, I guess, necessarily using the chat functionality to that degree today, what's kind of the pull to get people to then I guess, drive broader adoption of expensive and use it kind of the way that you're hoping that we'll take that on?

Well, first, I would say, I don't know if I agree to using it this way right now. The process of migrating customers over, and one thing we found is that it's pretty sticky. When customers migrate over, they typically stay in Expensify. So they like what they find. Now we're I would say, fundamentally, what we're doing is just scaling it up for larger companies. We're scaling it up for more advanced flows and so forth. But it's a working system that people use and enjoy today. Again, everything is getting better, but it's already pretty good according to the users who are using it right now. But I also do think that what's nice about the sort of chat-centric stuff, especially like I would say, some of these virtual CFO functions, I'm super excited for because they start to show how we can pull customers into a chat context by giving them something to talk about. So, for example, ChatGPT right now, it just sits there idly waiting for you to have a question and then it gives you an amazing answer to that question. But because ChatGPT doesn't know anything about you fundamentally, it's just kind of idle. We're different. We're basically working for you 24/7. And so as a result, we have a lot of things that we can observe. And I think this creates the opportunity for Concierge to reach out proactively in these different contexts and then pull you into these highly contextual chats, thereby, demonstrating the value of this integrated contextual chat. That’s maybe a lot of words said there. But fundamentally, I'd say, I think that this functionality is a way to demonstrate the value of chat rather than having to sort of imagine what would I do with this chat function. Did that answer your question at all?

Yes. No, that's great context there. So I definitely appreciate that. And, sorry, last question for me. Just on the travel side of it, good to see that's out there NGA now. But I guess, how are you kind of -- what adoption have you seen so far? How are you kind of thinking about what that could look like over 2025?

Yes. So in the initial group, we saw a lot of enthusiasm. We saw a very large increase month-over-month in the travel book. Now that was for a small portion of our customer base. Now that we've launched to everyone else, I think it's -- we launched this week. So it's too soon to be drawing trends, I think, but our account managers have basically been overwhelmed with interest in a million different questions and all that. So I do think that, it's going to be exciting for Expensify Travel in terms of will it be material to revenue? I think it could be -- I think, it will be likely like the card, for some period where it keeps telling its growing. That is small now. That is small now. And it was like, okay, and then eventually that actually, it's gotten quite large and it moves revenue in a meaningful way, even if subscriptions aren't necessarily going up. So I think I view the same ID card. Does that help?

Yeah. No, that's perfect. So I appreciate you taking the questions from our end and turning back in the queue here.

Great. Next, Aaron from JMP

Hey. Thanks so much.

Hey Aaron.

Hey guys. So we've talked in the past, you've discussed trying to get to a new normal by summer 2025. What does the new normal look like in terms of the day-to-day of the business and progress with New Expensify? And does summer 2025 still sound like a reasonable timeframe?

Sure. Great question.

Maybe I'll take a crack at this. I see what you have to say. I would say new normal means every customer signs into Expensify and sees the new brand. And it goes through basically a New Expensify Centric sales model, all of our -- and then we have a sizable contingent of customers, basically talking about New Expensify, because fundamentally, your brand is what your customers tell their friends. But most of our customers today are using our Classic product. And so Classic is still kind of our brand. And so the new normal would be, when we get enough customers over to the new product, that, that becomes our new brand that generates a new word of mouth. And it sort of creates the expectations of when someone comes to Expensify, they're coming based on a description of this AI-Centric Expense Management application, as opposed to kind of a traditional Travel & Expense Tool. And so I think that by summer, like now summer is obviously a big deal for us. Obviously, you probably know, we're sponsoring the Apples F1 movie. It's going to be a big deal. And so it's kind of like -- I know we did a Super Bowl ad a while ago, but that was 30 seconds. This is two hours of seeing the team expensive name on the giant screen in front of you. The impression on that is so much bigger. And so we expect that that's going to create a lot of awareness. And we're going to try to capture that awareness. So all of the first half of this year is building up to make sure that we're ready to absorb that interest and the second half of the year is really about converting that interest into action.

I agree. Got it. I actually saw the trailer the other day. And I agree, great logo placement for you guys. Second question, on the spectrum potentially of kind of potentially in 2025, so far out in the future, where we see you are in terms of maybe being able to use price as a lever to drive growth when weighing kind of the choppy macro for SMBs versus increased product functionality? What's been a sticky inflationary environment for a few years now and then not having taken price, I think in, call it, three years, if that's right?

I think my instinct is we're going to keep the price where it's at for the near-term future.

Yeah.

I think when we have all of our -- when the platforms are a little more mature than it's now and we have a broad suite of super hardened products then at that point, I think our price becomes kind of silly low. We won't really see any backlash from customers on a price increase. But I don't think we're there yet. But just to remind you, so the plan is expense management, free corporate card with 1% or 2% cash back, full corporate travel management invoicing, bill pay, chat, hold much AI functionality and also P2P, consumer money transmission for $9 a month. So, that is the goal, and that's steel, it will cost probably $100. There's something to have to buy all that individually. So, I think that we are building the conditions where we would have immense pricing power, but we don't want to put the car in front horse.

Yes. I agree with that. Sort of one thing we talk about internally is this idea of like this kind of a Red Ocean strategy versus the Blue Ocean strategy. Red Ocean is like highly competitive blood and water sermons fighting each other to the death. But there's a huge opportunity out there that's largely uncontested. And so I think the way that we go after this large market is really about bringing a tremendous lot of innovation and producing it at an incredibly low price. And so I think that there's a huge opportunity out there. Our primary method, we expect of making money in the long run is by growing to acquire new customers, not just basically squeezing existing customers hard.

Got it. Thank you.

Thank you.

All right. Next, we have, I believe, Mark is on the line with us.

Hi good afternoon. Thank you for taking my question. David, let me start off with you. Could you just walk us through your investment priorities for the coming year?

Investment priorities for the coming years. So, I'd say the most important, as I sort of mentioned before, is lining all of product and marketing and go-to-market basically up for this F1 release in the summer. And so what that means in a more practical basis, a lot of testing, a lot of QA, a lot of just polishing up functionality. Like one thing that we do is when customers come over, we analyze basically their usage of the product itself, we proactively -- without waiting for them to report bugs, we find the issues, we fix them, we optimize and so forth. So, a lot of mundane stuff. I mean, it doesn't sound truly revolutionary, but it's really important stuff. And so I do think the nice thing about AI functionality is that if you have a platform like ours, which is a chat-centric design, designed to allow you to communicate to an AI as well as the AI communicate to you in every context, it's actually quite easy to bring in more AI functionality. We don't need to create a bunch of like new UI elements and controls and so forth. It's already pervasive. We've done the hard work to build a platform to allow AI functionality to basically engage with you. Now, I would say when we roll in some of this AI functionality, it's relatively low financial investment because the hard work is done to get the data into the same place to get the UI ready and to get all this in place. It's -- so the bulk of our effort really is on just more mundane testing and migration of existing customers and supporting existing customers and dialed in. But we sprinkle in kind of like the appropriate AI investments along the way. I don't know that really answer the question because if you have any -- if that answers your question for you.

Does that answer your question, Mark, I can expand if there's -- if it did not.

No, that's helpful. And then, Ryan, a question for you. Maybe you can just talk a little bit about how customer churn trended in the quarter?

So, we did have users go up, which is good, right? We're not seeing a huge change in churn -- obviously, the paper-use users are always kind of volatile. But I think as our new expense a continues to get better. I believe increased the performance of our sales team with Dave talked about kind of our investments there. And we're -- and it's seen some encouraging signs.

Yeah. I think so. We’ve put a lot of effort into account management, and I think that’s really, had good effects as well. So, fundamentally, I think it’s just a stable trend, I would say.

Thank you. That’s all for me. Thanks.

Next up, we have Lake Street Capital. I believe, Max, are you still on the line?

Yep. I’m still on the line. Thanks for taking my question, guys. Great quarter. Just looking at all these product launches, I mean, with AI then you have expense or the travel product coming online. I mean, if we think about maybe after the Apple deal, in 2025, like what areas do you want to go to next? I mean, what area haven’t you tackled? Maybe that’s in the back of your mind on maybe that’s the next area or space you want to get into.

I think next I’m not sure if you agree. I think next is, invoice and bill pay. I think next is, so we have invoice and bill pay. We know it is, it can be better. We know what needs to be done, to make it, you know, truly competitive. It’s great for a small business, but, you know, there’s really strong competitors out there. So I think in terms of investment, travel’s in a great place, expenses in a great place. I think it builds invoicing is the next logical one.

So I would agree with that, but also emphasize that I don’t know that there needs to be a big next thing fundamentally. I think the next thing is getting our all of our customers to use what we currently have. And the next thing is really getting people to understand the value and capture the value and use the value that was already being created. Because we think that fundamentally you know, again, AI is hard to talk about because it’s so eye roll inducing because everyone just says whatever they want and they make it up and it makes it sort of like hard to talk about and feel credible. But I’d say because especially because everyone makes the same claims that they’re going to like, we’ve reinvented everything with AI. And then you look at their product and it looks exactly the same. Like every product, all of our competitors look the same and they all claim that they’re like the most AI centric thing in the world. We look quite different, and there’s a reason for that. We look different because, we were actually building a different kind of AI centric environment. What we see here, the user experience that we’re making, it might seem radical now in the same sense that ChatGPT seemed like a radical user experience when it first came out. But this is the future of user experience, and everyone’s going to be copying this in ten years or however long it takes them to catch up. And so I think that really the main investment is yes. Bill payment and invoice. Absolutely. We need to dial that in. But really, it just comes down to we just need to we’ve built out this broad product. We need to really consolidate it, get all of our customers on it, and just keep investing and improving that.

Great. And I’m guessing the there’s a price tag that comes with that Apple ad. But I mean, in theory, should we see any dramatic changes, I guess, to the non GAAP operating expense structure throughout 2025?

Yes. So, great question, Max. I’ve touched on this in the past, but it’s good to kind of go back over. So movie accounting by GAAP is kind of interesting. You recognize -- you do not recognize any of the expense, until the movie comes out. Because like if the movie doesn’t come out, then what do you do? So we, the money spent for the movie has, that’s already reflected in our free cash flow. That money’s already gone, but we have not recognized it in our sales and marketing expenses yet. So, what you can expect is a large increase on the expense level. But I want to be clear that money has been spent already. So it’s kind of one of the situations where reality and gap kind of, look a little different.

Yes. Understandably, yes, I was just wondering if there was any other reason to see CapEx…

We’re also discussion on marketing around movie. We’re not just going to the movie seen ourselves there. So in addition to what we've paid for the movie, there's kind of additional go-to-market there as well.

All right. Again, thanks for taking my question.

All right. FT Partners, Matthew, are you still there?

Yes. Hi. Good afternoon to all. Thanks for taking the questions. A lot of the questions asked and answered. Maybe just quickly, good to see the debt pay down and the reload of the share repurchase authorization. Maybe you can just outline sort of your capital allocation plans as a result above and beyond maybe stock-based comp and so forth?

Yes. So a big debate internally and then also just in general is, we've gone from not having much free cash flow at all to having a lot all of a sudden, which is great. And to what extent should that be put towards buybacks first debt, we obviously decided to focus on debt which to be clear. We're paying a lot interest. Interest rates went up. So we have more free cash flow as a result of paying down the debt. And I think our first priority is obviously, let's invest in sales and marketing to the extent that we need to. And we've done that, and we still think we're going to have a sizable amount of free cash flow after that. And I think that we're also hiring. So -- but beyond that, we think buybacks are great. We've done buybacks throughout the years when we were private. We were doing by tax which is -- what's the kind of strange for a private company, but we’ve a long history doing buybacks deliverer’s dilution. So nothing to announce right now, but we like buybacks.

Understood. That makes a lot of sense. And I think philosophically, a lot of what you guys are doing probably you answers this question, but just to kind of cement it as you get a lot of unit cost improvements through automation, AI, right, like the smart scan, 80% for escalations, et cetera. And so as far as the willingness to kind of drive more sales and marketing budget into customer acquisition, things like through the movie and otherwise, is that -- we think about that right that as the sort of operating leverage in the model improves, it makes more sense to sort of push into paid user growth efforts going forward?

Absolutely. I mean we'll see how the movie goes. Yes, I mean -- I agree with you that when you have more cash, you can put more towards sales and marketing for sure.

Yes. I mean we've never been shy about taking big swings when we see a big opportunity. But I think that we run a very efficient shop, and because their free cash flow didn't come from nowhere. They came from efficiencies and discipline. And so I think we take big swings and we see the opportunity, and we're not afraid to you in the future.

But we also get in -- I guess, it's not our culture to spend -- just to spend we need to feel good about it. It's not like --you always use it or lose it, we better spend that they're on to reduce our budget. That's not part of our portfolio. So the dollars we spend, we feel good about. And if we don't feel good about it, we pull it back as quick as we can.

Yes.

Great. Thank you both. That’s all for me.

Great

That was everyone.

All right. Thank you, everyone. No questions about the Card migration first time in since IPO, so happy that we got that migration done. Thank you all for the time, and we'll see you next quarter. Thank you very much.

Thanks everyone.