Expensify, Inc. Q2 FY2024 earnings

Expensify's fiscal 2024 second quarter showed a business still shrinking at the top line while costs fell faster. Revenue was $33.3 million for the quarter, down 14.4% from $38.9 million in the prior-year quarter. Gross profit fell 13.8% to $18.9 million, but gross margin edged up to 56.9% from 56.5%. The operating line flipped to a profit. Operating income was $0.2 million for the quarter, compared with an operating loss of $9.6 million in the prior-year quarter. Operating margin moved to 0.7% from negative 24.6%. Net loss narrowed to $2.8 million from $11.3 million, and diluted EPS improved to a loss of $0.03 from a loss of $0.14.

Cash generation was the standout. Operating cash flow was $9.3 million for the quarter, up from negative $0.4 million in the prior-year quarter. For the six months ended June 30, 2024, operating cash flow was $12.8 million, up 77.4% from $7.2 million. Capital expenditures were $0.0 million in the quarter, down from $0.5 million a year earlier. The company reported free cash flow of $5.7 million, a non-GAAP measure that excludes changes in settlement assets and settlement liabilities and subtracts purchases of property and equipment and software development costs. Adjusted EBITDA was $10.2 million and non-GAAP net income was $5.6 million, against adjusted EBITDA of $2.2 million and a non-GAAP net loss of $1.0 million in the prior-year quarter.

Paid members averaged 684,000 in the quarter, down 8% from 742,000 a year earlier. Management tied the revenue decline to lower billable activity across the user base, including pay-per-use activity that carries a higher average fee per member, plus higher cashback contra revenue as more members used the Expensify Card. Interchange derived from the Expensify Card grew to $4.0 million, up 48% year over year. The new card program is live, with 34% of spend migrated by the end of the quarter and a stated target of 100% adoption by the end of the year. New Expensify is live and expected to add revenue in the third quarter, and Expensify Travel launched with an expected new revenue stream from travel bookings in the third quarter. The company also flagged a lead product placement in Apple's F1 film, set for release in June 2025.

Guidance covers the full fiscal year. Expensify estimates free cash flow of $15.0 million to $16.0 million for the fiscal year ending December 31, 2024. It also gave stock-based compensation estimates for the next four fiscal quarters, with a total of $7.3 million to $9.3 million expected in the third quarter of 2024. Risks stay visible. Revenue and paid members are both declining, and the shift toward card spend lifts cashback contra revenue that reduces reported revenue. The company carried $22.6 million in outstanding indebtedness and $15.0 million drawn on its revolving line of credit as of June 30, 2024, against $53.2 million in cash and cash equivalents. In May 2024 it amended its loan agreement to allow additional repurchases and obtained a waiver for prior non-compliance with the earlier repurchase covenant. Deferred revenue, current portion, was $1.3 million, up 154.4% from $0.5 million a year earlier. The forward-looking discussion also names inflation, interest rates, the competitive landscape, and the ability to attract and retain members as factors that could move results.