Expensify, Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024. Expensify provides cloud-based expense management software and the Expensify Card. Unless otherwise noted, financial amounts below are in U.S. dollars.
Financial performance and position
| Metric | Q1 2024 | Q1 2023 / comparison |
|---|---|---|
| Revenue | $33.5 million | $40.1 million; down 16% |
| Gross profit / gross margin | $19.0 million / 57% | $24.3 million / 61% |
| Operating loss | $1.8 million | $2.7 million |
| Net loss / diluted loss per share | $3.8 million / $0.04 | $5.9 million / $0.07 |
| Operating cash flow | $3.5 million | $7.6 million |
| Adjusted EBITDA and margin (non-GAAP) | $7.1 million / 21% | $8.7 million / 22% |
Cash and cash equivalents were $49.3 million at March 31, 2024; cash, cash equivalents and restricted cash totaled $98.1 million. Current assets were $143.2 million and current liabilities were $70.3 million. Outstanding debt was approximately $22.6 million: a $7.6 million mortgage and $15.0 million drawn on a $25.0 million revolving facility, with $10.0 million available. The revolver rate was 9.50% at quarter-end. The mortgage’s remaining balance is due in full in August 2024; the revolver matures in September 2025.
Investing cash outflow was $2.8 million, primarily for software development. Cash and restricted cash increased by $1.5 million during the quarter. Management stated that existing cash resources should fund operations and the growth strategy for the next 12 months and the foreseeable future.
Material changes and management commentary
- Revenue fell by $6.6 million, primarily from lower billable activity, including reduced higher-fee pay-per-use activity, and increased cashback rewards. Cashback rewards were $2.0 million versus $1.2 million.
- Average paid members declined to 688,000 from 747,000, approximately 8%. Management reported an average of 44,200 companies using the platform.
- Gross margin declined to 57% from 61%. Legacy Card Program vendor consideration, recorded as a reduction of cost of revenue, increased to $3.2 million from $2.1 million.
- Operating expenses decreased to $20.7 million from $27.0 million. Sales and marketing fell 63%, mainly due to less employee time on sales and marketing, fewer conferences and events, and reduced outsourcing. Research and development rose 9% as employee time on product initiatives and features increased.
- Interest and other expense declined to $1.0 million from $1.4 million, primarily after repayment of the prior term loan in October 2023. Stock-based compensation expense was $7.5 million, down from $10.0 million.
- The Updated Card Program with Bancorp launched during the quarter; new cards are issued under that program. The transition from the Legacy Card Program has begun, and management expects completion by December 31, 2024. Interchange revenue under the new program was immaterial in Q1.
Outlook, risks and unusual items
The filing provides no numerical revenue or earnings guidance. Management’s liquidity outlook is subject to operating performance, costs, and other capital needs. Expensify was not in compliance at March 31 with the debt covenant restricting common-stock repurchases; CIBC granted a waiver. A May 2024 amendment revised that covenant and waived prior-period noncompliance. The company said it expected to comply with all covenants, or obtain waivers, by the end of Q2 2024. Other covenant breaches could allow the lender to terminate commitments or accelerate borrowings.
A putative securities class action filed in November 2023 alleges misleading statements in Expensify’s IPO offering documents and seeks unspecified damages. Defendants intend to contest the claims; the filing says no legal contingency was expected to have a material adverse effect as of March 31. The company also cites risks including competition, member retention and growth, platform security and interruptions, interest rates, foreign exchange, and geopolitical and economic conditions. Disclosure controls were assessed as effective at a reasonable assurance level.
Important facts for investors to verify
- Whether paid-member levels, billable activity, and revenue stabilize or continue to decline.
- Whether the card-program transition is completed by the expected date and how it affects cashback costs, interchange revenue, and margins.
- How the August 2024 mortgage repayment is funded, alongside the revolver’s 9.50% rate and September 2025 maturity.
- Compliance with debt covenants following the May amendment and any further waiver requirements.
- Developments in the IPO-related securities litigation and potential financial or operational effects.