Expensify, Inc. — FY2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022. This is an annual report; the filing does not provide a standalone Q4 income statement. Expensify sells cloud-based expense management subscriptions and earns transaction-related consideration from its Expensify Card. In Q4, it averaged 779,000 paid members across approximately 53,000 companies.
Key financial metrics
| Metric | FY2022 | FY2021 |
|---|---|---|
| Revenue | $169.5 million | $142.8 million |
| Gross profit / margin | $106.8 million / 63% | $89.1 million / 62% |
| Operating loss | $15.2 million | $10.3 million |
| Net loss | $27.0 million | $13.6 million |
| Net loss per share | $0.33 | $0.36 |
| Adjusted EBITDA / margin | $42.5 million / 25% | $9.5 million / 7% |
| Operating cash flow | $32.9 million | $5.5 million |
| Cash and cash equivalents at year-end | $103.8 million | $98.4 million |
| Outstanding debt at year-end | $67.3 million | — |
Adjusted EBITDA is a non-GAAP measure; the company excludes stock-based compensation, among other items. FY2022 stock-based compensation was $52.3 million, versus $14.6 million in FY2021. Year-end current assets were $187.1 million and current liabilities were $60.4 million, including settlement assets and liabilities related to customer funds.
Changes versus FY2021
- Revenue rose 19%, primarily from more paid members and reimbursement activity as travel and office attendance normalized, and higher average fees associated with pay-per-use members.
- Gross margin edged up to 63% from 62%. Net cost of revenue increased 17%, partly due to higher stock compensation and payment-processing and support costs; higher Expensify Card adoption increased vendor consideration recorded as a cost reduction to $6.2 million from $2.9 million.
- Sales and marketing expense increased 80% to $49.9 million, mainly from advertising and marketing events. General and administrative expense fell 4%, largely because FY2021 included $21.2 million of IPO-related employee bonuses.
- Interest and other expense rose 55% to $5.4 million, reflecting higher borrowing rates and foreign-currency losses. The effective tax rate was negative 30.8%; the company recorded a $6.4 million tax provision despite a pretax loss.
- Annual gross logo retention was 83% in both years; net seat retention improved to 108% from 93%.
Liquidity, debt, outlook and risks
- Operating cash flow was $32.9 million; investing activities used $2.2 million and financing activities used $8.3 million. Cash and cash equivalents increased to $103.8 million. Management stated existing cash resources should fund operations and its growth strategy for the next 12 months and the foreseeable future.
- Debt included a $44.4 million term loan, $15.0 million drawn on a $25.0 million revolving facility, and a $7.8 million mortgage. The term loan’s stated rate was 9.75% at year-end 2022; the revolver rate was 8.50%.
- The company was out of compliance at year-end with a debt covenant restricting stock repurchases, including RSU net share settlements. CIBC waived the non-compliance; Expensify expected to meet all covenants by March 31, 2023. Failure to comply in the future could allow acceleration of debt.
- Expensify repurchased 599,080 shares for $6.0 million in 2022 under a discretionary program authorizing up to $50 million. The program has no required purchase amount and may be suspended or terminated.
- No specific financial guidance was provided. Management identified product investment, paid-member conversion and retention, Card adoption, and brand marketing as strategic priorities. Risks include competition and economic weakness affecting SMB customers, dependence on expense management subscriptions, cybersecurity and service reliability, financial-services regulation, foreign exchange, and reliance on a single Card vendor and associated issuing bank and network.
- The company reported no legal contingency matters expected to have a material adverse financial effect. The FEC notified Expensify in May 2022 that it was cleared of alleged wrongdoing concerning complaints related to a 2020 CEO email.
- Ernst & Young issued unqualified opinions on the financial statements and internal control over financial reporting. A material weakness identified in prior years was reported remediated as of December 31, 2022.
Important facts for investors to verify
- Whether Expensify met the debt covenant requirements after the filing’s stated expectation for the quarter ended March 31, 2023, and how higher variable rates affect interest expense and liquidity.
- Whether revenue and paid-member growth, Card adoption, and retention remain durable as business travel and office activity normalize.
- How much of reported adjusted EBITDA depends on excluding substantial stock-based compensation, and the prospective effect of remaining unvested awards.
- Whether increased advertising and marketing spending produces customer growth and sustainable returns, given the FY2022 operating and net losses.
- Whether the company continues to maintain effective financial controls and complies with money-transmission, data-protection, and cybersecurity requirements.
- Governance implications of the Voting Trust’s reported 85.9% voting power and the company’s controlled-company status.