Summary
Expensify's fiscal 2023 second quarter showed a company spending heavily to rebuild its platform while its current subscription business contracted. Revenue was $38.9 million, down 10% from $43.2 million in the prior-year quarter. Year to date, revenue was $79.0 million, down 5% from $83.5 million. The company tied the decline to lower billable activity across its user base, particularly pay-per-use activity that carries a higher average fee per member, and to higher contra revenue from cashback payments as members used the Expensify Card more. Gross margin fell to 56.5% from 63.2%, and gross profit dropped to $22.0 million from $27.3 million. Operating margin was negative 24.6%, compared with negative 9.2% a year earlier. Operating loss widened to $9.6 million from $4.0 million. Net loss widened to $11.3 million from $8.0 million. Diluted loss per share was $0.14, compared with $0.10.
Cash flow reversed sharply. The quarter used $0.4 million in operating activities, compared with $15.9 million provided in the prior-year quarter. For the first six months, operating cash flow was $7.2 million, down from $27.2 million. Capital expenditures were $0.5 million in the quarter, up from $0.1 million. Deferred revenue was $0.5 million, up 94.8% from the prior-year quarter. On a non-GAAP basis, the press release reported $2.2 million of Adjusted EBITDA and a $1.0 million non-GAAP net loss. Free cash flow was $1.1 million. The company also said it has twelve consecutive quarters of profitability on an Adjusted EBITDA basis.
Operational metrics were mixed. Expensify Card interchange grew 56% to $2.7 million, a bright spot as the company pushes its card and payment strategy. Paid members averaged 742,000, down 2% from 754,000 in the same period last year. Management highlighted new preferred partnership agreements with the California Society of Certified Public Accountants and the Texas Society of Certified Public Accountants. The company expanded global reimbursement to more than 154 currencies in more than 200 countries. It also hosted ExpensiCon 3 and began real-world expense reimbursements on the New Expensify platform. The CEO letter argued that competitors are moving toward subscription pricing, which could validate Expensify's model, but the letter also acknowledged stiffer than expected near-term headwinds.
Capital returns and debt reduction continued. The company repurchased 625,345 shares for $3.9 million, including $0.9 million of net share settlement on equity awards. Since the share repurchase program began in May 2022, total repurchases reached $15.9 million, including $6.9 million of net share settlement. Expensify reduced outstanding debt by $8.2 million in the quarter. The 10-Q disclosed that the company was not in compliance with all debt covenants at quarter end, specifically a covenant restricting common stock repurchases and a covenant requiring deposit, operating, and collateral accounts to be maintained with CIBC. It obtained a waiver and expects to be in compliance or to have waivers by the end of the fiscal quarter ending September 30, 2023.
Guidance was limited to stock-based compensation. The release's outlook section contained estimates for the next four fiscal quarters. For Q3 2023, total SBC is expected between $10.4 million and $12.4 million. Q4 2023 is estimated at $10.1 million to $12.1 million. Q1 2024 is estimated at $9.7 million to $11.7 million. Q2 2024 is estimated at $9.2 million to $11.2 million. The estimate is driven primarily by the pre-IPO RSU grant to all employees, which vests quarterly over eight years with about six years remaining. Risks include intense competition, the company's ability to convert its product transition into growth, the revenue decline and margin compression seen this quarter, the swing in operating cash flow, interest rate exposure on its credit facilities, foreign currency fluctuations, and the debt covenant waiver. The quarter shows a company spending to build a larger platform while its current subscription business contracts.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2023 | Q1 FY2023 | QoQ | Q2 FY2022 | YoY |
|---|---|---|---|---|---|
| Revenue | $38.9M | $40.1M | -3.0% | $43.2M | -9.9% |
| Gross profit | $22.0M | $24.3M | -9.7% | $27.3M | -19.5% |
| Gross margin | 56.5% | 60.7% | -4.2 pp | 63.2% | -6.8 pp |
| Research & development | $5.1M | $5.4M | -6.0% | $3.6M | +42.1% |
| Sales & marketing | $14.7M | $9.2M | +60.2% | $12.2M | +20.2% |
| General & administrative | $11.7M | $12.4M | -5.8% | $15.4M | -24.1% |
| Total operating expenses | $31.5M | $27.0M | +16.6% | $31.3M | +0.8% |
| Operating income (loss) | -$9.6M | -$2.7M | -253.6% | -$4.0M | -140.6% |
| Operating margin | -24.6% | -6.7% | -17.9 pp | -9.2% | -15.4 pp |
| Net income (loss) | -$11.3M | -$5.9M | -90.1% | -$8.0M | -41.4% |
| Net margin | -29.1% | -14.8% | -14.2 pp | -18.5% | -10.6 pp |
| Diluted EPS | -$0.14 | -$0.07 | -$0.07 | -$0.10 | -$0.04 |
Risks
Revenue decreased 9.9% to $38.88 million for FY2023 Q2 from $43.16 million in FY2022 Q2, driven by lower billable activity including pay-per-use activity and higher cashback contra revenue. Gross margin fell to 56.5% from 63.2% in the prior-year quarter and operating loss widened to $9.56 million.
Operating cash flow turned negative at -$0.43 million for FY2023 Q2 versus $15.94 million in FY2022 Q2, a 102.7% decline, and fell to $7.21 million year to date from $27.16 million. MD&A cites a reduction in funds held for customers, lower revenue, higher outsourcing, marketing event spend, and payment processing fees.
As of June 30, 2023, the company was not in compliance with all debt covenants, including the covenant restricting common stock repurchases and the requirement to maintain deposit and operating accounts with CIBC. A waiver was obtained, but failure to comply in the future could allow CIBC to terminate commitments and accelerate outstanding borrowings.
Gross margin decreased 6.7 pp to 56.5% in FY2023 Q2 from 63.2% in FY2022 Q2, while cost of revenue, net increased 7% to $16.93 million. This reflects lower revenue and higher outsourcing costs partially offset by vendor consideration related to the Expensify Card.
Average paid members declined to 742,000 for FY2023 Q2 from 754,000 in FY2022 Q2. A continued decline in paid members could pressure future subscription revenue.
Research and development expenses increased 42% to $5.09 million for FY2023 Q2, and sales and marketing expenses increased 20% to $14.71 million, while revenue declined 9.9%. This spending growth could continue to pressure profitability.
Interest and other expenses, net decreased 30% for FY2023 Q2, but MD&A notes an increase in interest expense under the 2021 Amended Term Loan and revolving line of credit due to increases in CIBC's reference rate. Outstanding indebtedness was $59.0 million as of June 30, 2023.
The company lost emerging growth company status effective December 31, 2022 and must now comply with all financial disclosure and governance requirements applicable to large accelerated filers, which may increase compliance costs.
SaaS KPIs
All quarters →Adjusted EBITDA
Adjusted EBITDA margin
Free cash flow
Paid members
Interchange Derived from Expensify Card
Adjusted operating cash flow
Non-GAAP Net Loss
Summary, forecast, risks and KPIs are extracted from Expensify, Inc.'s SEC filings for Q2 FY2023 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 1, 2026.