Expensify, Inc. — FY2023 Form 10-K
Business context and reporting period. This annual filing covers the fiscal year ended December 31, 2023; it is not a standalone Q4 report. Expensify provides cloud-based expense management and related financial tools. For the year, it averaged 719,000 paid members across 47,000 companies; in Q4, paid members averaged 719,000. The company reported more than 15 million members and 1.5 billion transactions processed since inception.
Key financial results
| Metric | FY2023 | FY2022 | Change |
|---|---|---|---|
| Revenue | $150.7 million | $169.5 million | Down 11% |
| Gross profit / gross margin | $83.8 million / 56% | $106.8 million / 63% | Gross profit down 22%; margin down 7 percentage points |
| Operating loss | $33.1 million | $15.2 million | Loss more than doubled |
| Net loss / diluted loss per share | $41.5 million / $0.50 | $27.0 million / $0.33 | Loss widened |
| Adjusted EBITDA / margin | $13.2 million / 9% | $42.5 million / 25% | Down materially |
| Operating cash flow | $1.6 million | $32.9 million | Down $31.3 million |
Cash, debt, and liquidity
- Cash and cash equivalents were $47.5 million at year-end, versus $103.8 million a year earlier. Including restricted cash, total cash and restricted cash was $96.7 million, down from $147.7 million.
- Year-end debt was $22.7 million: $15.0 million outstanding on the revolving credit line and approximately $7.7 million on the Portland building mortgage. The $36.0 million term-loan balance was repaid in October 2023.
- Current assets were $137.2 million and current liabilities $67.9 million. These totals include settlement assets and liabilities and restricted cash associated with customer funds, so they do not represent freely available liquidity.
- Management said existing cash resources should fund operations and its growth strategy for the next 12 months and the foreseeable future. Contractual obligations totaled $34.3 million, including $22.7 million of debt principal and $9.5 million of operating lease commitments.
Material changes versus FY2022
- Revenue fell $18.8 million, mainly because billable activity declined, including higher-fee pay-per-use activity. Cashback rewards tied to Expensify Card adoption also increased contra-revenue.
- Paid members declined from 779,000 in Q4 2022 to 719,000 in Q4 2023. Annual gross logo retention fell to 74% from 83%; net seat retention fell to 99% from 108%.
- Cost of revenue rose 7%, partly due to outsourcing to maintain the platform. Card-program vendor consideration offset $10.1 million of cost of revenue, versus $6.2 million in 2022. Gross margin contracted to 56%.
- Research and development expense rose 71% to $23.4 million as employee and external contributor time increased on product initiatives. General and administrative expense fell 16%, largely because 2022 included one-time public-company compliance work. Sales and marketing expense fell 11%, reflecting lower advertising spend partly offset by higher outsourcing and event costs.
- Stock-based compensation was $41.2 million, down from $52.3 million, but remained a substantial expense. Excluding it, non-GAAP net loss was $0.2 million, compared with non-GAAP net income of $25.3 million in 2022.
- Investing cash outflow was $7.3 million, including $5.9 million of software development costs. Financing cash outflow was $45.3 million, primarily due to debt principal payments, including repayment of the term loan.
Outlook, risks, and unusual items
- The filing provides no specific revenue or earnings guidance. Management expects to continue investing in product development and promoting the Expensify Card, and says research and development expense may increase.
- On February 21, 2024, after year-end, Expensify amended its CIBC facility: the $25 million revolver maturity was extended to September 2025, and covenants were revised. At December 31, 2023, the company was out of compliance with several covenants under the prior agreement; CIBC granted a waiver. Management expected compliance with the amended covenants by March 31, 2024.
- The principal identified business risks include declining paid-member and customer retention, competition and pricing pressure, dependence on expense management subscriptions, economic weakness among SMB customers, cybersecurity and service outages, data privacy and payments regulation, and reliance on third parties for the card program.
- The Updated Expensify Card Program, using Bancorp as issuing bank, had not launched by year-end. Expensify said it planned to operate it alongside the Legacy Card Program during transition; card-program consideration is recorded as a reduction of cost of revenue, not revenue.
- A putative securities class action filed in November 2023 alleges misleading statements in the IPO offering documents and seeks unspecified damages. The company intends to defend the case. It reported no legal contingency matters expected to have a material adverse financial effect at year-end.
- The Expensify Lounge campaign did not meet expectations and closed in late 2023. The company also reported $7.0 million of cashback rewards costs in 2023, versus $2.8 million in 2022.
- The financial statements received an unqualified audit opinion, and the auditor also gave an unqualified opinion on internal control over financial reporting as of year-end. The auditor identified employee and employee-related expense allocation as a critical audit matter involving management judgment.
Most important facts for investors to verify
- Whether paid-member levels and retention stabilize, and whether revenue returns to growth after the 11% decline.
- Whether operating cash flow improves and cash usage remains consistent with management’s liquidity assessment, considering restricted customer funds and debt obligations.
- Compliance with the amended CIBC covenants and repayment or refinancing of the $15 million revolver when it matures in September 2025.
- Whether card adoption can sustain vendor consideration without cashback costs and other program economics further pressuring revenue or margins.
- Progress, customer uptake, and investment requirements for the new card program and open-source financial chat initiative.
- Developments in the securities class action, money-transmission licensing and compliance, and cybersecurity or data-privacy matters.
- Stock-based compensation, share issuance and repurchases: the company repurchased $3.0 million of stock in 2023, while employee equity plans and matching-plan issuances affect dilution.