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Very much. Excellent. Thank you very much. All right, let's get started. First, let's go over the fiscal 2023 financials, fiscal year 2023 financials. Revenue of $150.7 million. Our average paid members were 732,000, and we had 1 million. Our operating cash flow was. Our free cash flow was $600,000. The difference between operating cash flow and free cash flow is, we take out the customer funds, which can vary throughout the month, so the timing can a little bit. Our GAAP net loss was $41.7 million. Our Non-GAAP net loss, and our Adjusted EBITDA was $13.2 million. Now let's talk about Q4. We had $35.2 million.
Paid members were 719,000, and we had $3.1 million in net interchange. Cash used in operations was $500,000. Free cash flow was -$3.6 million. Net loss was $7.5 million. Non-GAAP net income was $3.1 million, and adjusted EBITDA was $5.9 million. Obviously, these numbers are an improvement over Q3. As we discussed last quarter, I mentioned that we were gonna be implementing some cost-cutting measures, and we did implement those, and we saw a pretty positive turnaround in terms of our financial metrics. Our operating cash flow improved by $4.9 million, which is a 90.2% increase quarter- over- quarter. Our free cash flow improved by $3.5 million, which is a 49.3% increase quarter- over- quarter.
Our net loss improved by $9.5 million, which is a 55.9% increase quarter-over-quarter. Our non-GAAP net income improved by $98.8 million, which is a 146.3% increase quarter-over-quarter. Our adjusted EBITDA improved by $9.4 million, which is a 268.6% increase quarter-over-quarter. So that's a pretty from third quarter, fourth quarter, so you can see the drastic impact in those cost-cutting expenditures that we did. As such, we're going to be initiating a full year free cash flow guidance to provide a more clear picture on the cash impact from these recent cost reductions. That's something that the investor community requested of us, and we're gonna be providing that.
So our fiscal year 2023 operating cash flow was $1.6 million, and our free cash flow for 2023 was a $0.6 million. In 2024, we're projecting free cash flow between $10 million and $12 million, which is obviously substantially higher than we did in 2023. We always show paid members for the first month of the quarter. So in Q1, in January, we saw paid members of 690,000. We've highlighted January. It's usually a bit soft on users. We've highlighted previous Januaries in pink, and as you can see, they're usually a little bit down, and this January is the same. I wanna give a very exciting update on the Expensify Card. As I mentioned earlier, the Expensify Card grew 63% to $11.1 million year-over-year.
We've also added a new benefit to the card. Our accounting partners who onboard their clients to the Expensify Card now receive 50 basis points in revenue share for their clients. We've seen a lot of enthusiasm for the Expensify Card in the accounting channel, and now we have a little bit larger incentive for them to really spread the good word of the Expensify Card to their customers. We also, and this is the most exciting part, we've been talking about this for a while. I get questions on it every single quarter. We have established our new card program, which earns more interchange per transaction. All existing customers are expected to be transitioned by the end of the year, 2024, and all new Expensify Card customers are being put on this new card program.
That's very exciting because it's an improvement in accounting treatment. So previously, interchange was a contra expense and cost of revenue and not revenue, which is confusing for everyone. This is now more straightforward. It's being put on the balance sheet in the manner that you would expect, and interchange going forward under the new program will be categorized as revenue instead of a contra expense and cost of revenue. And on top of that, we're also earning about 20% more interchange fees. So, if our same customers, we didn't grow at all, and we didn't have any increase in spend, that same transactions that we had in 2023, under the new program, that would be 20% higher. And with that, I will hand it over to David.
Thank you.
For a business update.
Okay. As Ryan explained, 2022 or 2023 was a pretty good year. In fact, I would say, it was a great year for the things that were under our control. Pretty much everything under our control was either stable or improved, but there was one glaring exception. So this chart, this complicated waterfall chart, let me walk you through it. So what we can see here is kind of a breakdown of the major reasons that we gained and lost paid users over the course of the past couple of years. In 2022, we added 42,000 paid seats from new customers, and in 2023, we added about 43,000 paid seats. So about the same between 2022 and 2023.
Likewise, in the two years, in 2022, we lost about 62,000 paid seats to churn, basically customers leaving the platform, going out of business, whatever that might be. And we lost about 62,000 in 2023 as well. So new customer acquisition for seats and also churn seats were basically the same year-on-year, but there was a big difference when it comes to customer expansion. You can see in 2022, our existing customers added about 85,000 paid seats, and that's been a huge tailwind in, in our business model, is that we've grown basically when our customers have grown. 2023, it's kind of a brutal year for our customers. As you can see, those same customers, lost 42,000 seats. So basically, in 2022, they added 85,000 seats.
In 2023, they lost 42,000 seats. The net of that is, over the past couple of years, we added about 4,000 active seats, but you can see it was kind of a rollercoaster ride to get there. So our business, the actual fundamentals of the business itself, new customer acquisition, customer churn, and so forth, are actually quite stable. It's just the expansion and contraction of our existing customers themselves, who that, you know, hired a bunch of people, laid off a bunch of people, whatever it might be, that's what accounts for the huge swing, basically, in the paid seats themselves. So the year itself was actually, we think, pretty good. It's just, it was a difficult year for our customers, and that reflected through to basically our results.
And so if we think about how the year itself was spent, it was really kind of a year of planting, and 2024 is a year of harvesting, if you will. Well, and one of the things we really planned to invest in is basically expanding our SEO and keywords themselves. If you can think of it in terms of the top 100 SEO top 100 search results for each keyword, we've really expanded kind of the broad breadth of the number of keywords that we're going after, because if you wanna get in the top 10, you gotta start in the top 100. And so you can see that we've had really, really sizable gains in the number of keywords that actually we rank for at all.
Now, if you dig into the keywords that were in actually the first page, that's where we do even better. We have, like, a really strong growth in actually the keywords in the first page, and so our SEO investment, which we've been strong in the past, so it's a big sort of machine to improve, but it's been moving, improving pretty quick and really happy with that. And so the results there is we've seen actually our SEO traffic itself really just increase as well. Again, we've always been strong from an SEO perspective, and so it's a sort of a big freighter to turn, but it's been really improved, and so that's been great. And so in 2023, we think we've really improved our SEO game, and that's, I think, positioned us really well for continued growth in 2024.
Now, we've talked about some of the functionality that we launched, launched last year as well. One of my favorites has got to be global reimbursement. So as you recall, we have customers all over the world, especially some of our large, multinational companies with entities in multiple jurisdictions. So one of the most common features we've had from our large enterprise customers is global reimbursement capability. And so this is something that we launched last year, and we're really happy with the traction overall. You can see it's been growing exponentially ever since launch. Even the past couple of months, we've seen a 35% increase in the number of, enterprise customers taking up global reimbursement. So this has been a great sort of a feature that our customers have asked for for a long time, and we're really happy to have delivered.
I'm also excited to talk about Expensify Chat. I know, I've been talking about this forever. So we're really, really happy with the traction we've had in the past couple of years here. And we can see that basically Chat has been around for a while, and it's been growing very quickly, especially in this past couple months here, where we've seen that actually, 7,000 distinct companies have started using Chat internally.
That's just within the past year, an increase of over 250% increased the number of customers that are choosing to use Expensify Chat inside their company, and that's actually a huge testament. Because, recall, this is... Right now, it's actually a different app. It's a different website. You have to go to New Expensify to get it, and this is showing existing customers are going to a new app, new website, to use this new functionality. Now, recall, right now, Chat is a free feature, and we're tracking the seats to make sure that we can charge for it in the future. But right now, it's actually just a free add-on to existing customers. But we're really happy that customers are finding value in it, so much so that they're going to a different app to experience it.
And so we think that, all this leads into, you know, a great future for New Expensify. With that in mind, you might recall that New Expensify has been, it's a completely open-source community that is contributing towards it, and that open-source community has grown staggeringly over the past year. Within the past year, we've gotten over 100% more contributors to the open-source repo itself, and so that's great. And so we're actually having, really strong growth in the community itself, and which is building, it's basically been this huge, force multiplier to our engineering team, be able to pull onto not just random contributors around the world, but true expert contributors from different agencies and so forth.
We've gone on from being basically, you know, a small user of this React Native technology to probably the largest React Native contributor outside of Facebook Meta. And so it's actually been a really important year for us because this is, you know, a super powerful technology for the future, and we've established ourselves as the leading name in it. So with that in mind, I'd like to talk a little bit about New Expensify itself. New Expensify, it's a new technology to solve some old problems. Now, our strategy hasn't really changed. It's really about just doubling down and improving on the strategy that we've always had. And to kind of reiterate that strategy, step one is we're gonna capture a huge untapped market.
And so we think 99% of the global opportunity is really in the VSB, SMB, and no one's going after that right now. We think that we can build a platform that can tap this untapped market and basically grow uncontested. We think the only way that can happen, though, is with a bottom-up viral strategy, where the customers themselves promote Expensify just by the mere virtue of using it, and then we can monetize that primarily through high-margin subscriptions. So to break down, to dig into this a little bit more, just kinda talk about them. Step one, when we talk about the VSB, it really is a huge industry. We're talking over 1 billion potential employees around the world in companies under 250 employees. It is a huge market.
It is so much bigger than the current market, and it's almost entirely untapped. Just digging into the U.S. alone, like 99.9% of all U.S. businesses are small businesses. Again, this is not just a global phenomenon, it's a local phenomenon in the United States. It's a huge, huge opportunity, and it's not like no one's known about it. Just no one has actually taken a business model that can actually credibly go out and get it. And so that business model works through viral lead generation, and it's not a new business model. Others have done it as well. So I'd say, first is chat functionality is inherently viral. You can't talk to yourself. To use the product itself, you have to go talk to someone else. WhatsApp got to 1 billion users with 73 employees.
We think that chat's an incredibly viral use case, and that's basically what the internet was primarily built on. Likewise, payments, same thing. You can't pay yourself. You gotta pay someone else. Payments are incredibly valuable, incredibly viral. Venmo got to, you know, hundreds of millions of users because of this viral dynamic overall. And third, we'd say document management is inherently a viral function itself. You know, Dropbox sort of introduced the entire consumer organization of IT. Their reciprocal reward program is a masterclass in how to go viral. And so all these document management and all these, the three major use cases are chat, payments, that really is expense management. Expense management already exists in the intersection of those three. So it's not that Expensify is pushing into each one of these.
Expensify has always done all of these because the very act of submitting expense reports to someone, and you're talking with your admin about the expenses, that is a chat application. Likewise, it's obviously a payments application because you're getting paid for your expense reports, but it's also a document-sharing application. I mean, the most obvious documents are receipts, which we have millions and millions of, but also there's a bunch of other supporting documentation that goes into it as well. And so chat, payments, and documents, that's really what expense management is, and we think that actually we exist in sort of the overlap of this, these three incredibly viral use cases.
And so when we think about building on top of that for a New Expensify, it's really just doubling down on what these core strengths are and pushing a little bit into each of these different areas. Now, we're not gonna dislodge... any of these players anytime soon, but we think we can take a bite out of their market. More importantly, we can take the bite that's right next to ours. Wherever we see the intersection of sort of chats, payments, and documents, we think there's a real opportunity to grow from there, and no better place in the world for that is the accounting community, because that's what they do all day, every day.
In a particular accounting firm, sure, many of them are processing expense reports, but the bulk of the accounting firm is actually doing tax and compliance, and that's just basically a ton of talking, a ton of Excel spreadsheets, a kind of, you know, just interaction around between organizations, not just within their own. And so we actually think the accounting community is a prime opportunity for this key intersection, and we think New Expensify can be targeted directly to them. So if we talk about basically what New Expensify is, now, we've been talking about it for a long time, and at its core, it's fundamentally a chat system. As you can see, it feels very much like, you know, WhatsApp, Slack, whatever it might be.
You got your chats on the left, you got your chat, your who you're gonna talk to, your major conversation. You can do threads, you can react, and basically it works a lot like any of the chat systems, but it's got a few tricks under the hood. One is that it's a universal chat system. You can just basically mention not just people in your workspace, you can mention any email address or phone number, and we'll pull them directly into that chat room. And so think of like Slack, except without all that garbage about dealing with different workspaces and things like this. More it's like Discord, but without all the weird, you know, gamer stuff around it.
Or it's basically a more business-oriented, super flexible, global pay or a global chat solution, designed where you can—anyone that has an email address or a phone number, you can talk with them. And likewise, they don't even have to use the app. If you choose to chat, talk to someone with the Expensify app via email or text, email them or text them, and if they respond via email or text, we'll show that tool. So it's a tool that you can choose to adopt as an individual, and you can use with 100% of people who have email addresses and phone numbers, and then we'll communicate with them however is convenient for them. So it's a very powerful chat foundation, but it's also, of course, a payments tool. Now, it's still basically the same chat experience.
You can still talk to people and things like this, but a major part of talking to people is actually to share documents with them, share receipts with them, share payments requests, and so forth. And then when you do that, they can click in to basically pay the payments. They can pull up a traditional sort of expense management, sort of money page, we call it, where you can search by looking at reports and expense and things like this. So it has all the same, sort of same power that we've built up over the past 15 years doing expense management on a global basis, but presented in a chat-centric context where you, every single data object can be talked about. So it's not just about paying people, and it's not just about talking to people after the expense is done.
It's also trying to capture some of the conversation that led up to that expense overall. And so it's a yes, it's a chat tool. Yes, it's a payment tool, but it's also a document management tool, because again, this isn't new. Expense management has always been about document management, and so now we're just basically bringing that more to the forefront, especially when you start thinking about accounting firms, which are doing a lot of document-heavy, task-based functionality. If you're closing the books on a monthly basis, it means every month you're spinning up a whole bunch of conversations about each basically category in your ledger, different sort of tasks they need to close out and so forth. Now, historically, you would use email, Excel, maybe some sort of an issue tracking system, whatever it is.
In our case, you can do all of that on the platform. You can take everything from the payment to the reconciliation and all of the discussions in between on the same platform. You just basically upload the files themselves, and then we will store them permanently and securely inside of our cloud architecture. And so, again, it's a universal system, but that means it also becomes a universal document sharing system. If you need to chat with or share a document with anyone in the world via email or text, now we've become a tool to do that. So these are not new use cases. As you can see, chat, payment, document management, these are not distinct experiences. It's not like you have to, you know, go open to the chat experience or whatever. Every one of these is all three.
When you're sharing documents or chatting and doing payments, you're infusing all three of these use cases throughout the entire product and at all times. And so the reason we keep talking about chat is because we think that chat allows us to add a moat out of every feature. Again, expense management isn't new, as this has been around since the dawn of time. But we think that actually building a collaborative, real-time experience around it is new, and we can bring new life into these use cases, and in the process of doing so, expand into this huge market that's been largely untapped. Now, we talked about this idea of real-time expense processing.
What makes it real time is that people are in the product already, so they're in a position to act in real time. As much as we might like, basically, a user to prioritize expense reports, if it's not on their phone, if it's not actually in front of their face, they're just gonna ignore it for as long as possible. Great thing about getting people into a real-time chat experience, however, is that when they receive a payment request, they immediately turn around and just approve it because it's just right there. We make it so easy to do, so we can cut days out of the reimbursement process merely because we cut days out of waiting for the user to actually do something.
We can take an action that takes, you know, 72 hours to make it to, you know, 7 seconds . It's a completely different experience because chat changes the behavior of the user to be into the product at all times, and then that's in a position to act in a very different ... than any other tool. So you can't just. It's not a matter of just making the money move fast. You have to make the user move fast, and that's a whole different experience. Second, when we do bill pay and invoicing, again, functionality that we ... Our experience is about trying to capture more of the conversation around the bill and the invoice itself because every time you invoice a client or, you know, pay a bill from a client, there's a conversation around there.
That preceding that, engagement was basically some conversation around an MSA, an SOW. There's some terms as a contract, whatever it might be. Currently, that conversation happens in, I don't know, email, Slack, or via phone or something like this. Now, we can capture all of those contract conversations in a chat tool itself, and we can be the long-term storage repository of the final terms of the deal. So when you're reviewing the invoice, the invoice terms are actually right there in product. So you can see when it started, supposed to start and end, how much it's going to cost. And so when you're actually approving a bill, you can assess whether or not that bill is actually in line with the stated purpose of the agreement itself.
It's a completely different experience paying the bill when you're able to talk to everyone involved in real time, and that's just another feature of adding, sort of infusing chat throughout the existing old experiences. Next, when we talk about travel management, now we've been talking about travel for a long time, you know, travel booking and so forth, but we think that there's a great opportunity for, I think the term is bleisure. I don't know why it's called that. Well, I do know why it's called that. It's, you know, business plus bleisure, and, you know, it's just a fantastic term. You gotta love the internet. Anyway, I think that a great thing about bleisure is that when you're traveling for work, you're going cool places, and you're...
So the idea of bookending and staying a couple extra days and so forth, it's incredibly common, but it's not necessarily supported by the traditional tools. Additionally, when you travel places, you're traveling with other people, and you don't work all the time. You have off hours. When you go to a conference, you know, people are on call or on duty when they... Then they go, you know, wild out at night. And so as a result, we try to recognize the real-world social dynamic of people who are doing business travel, and there's a lot of. Normally, you would basically spin up a WhatsApp group or something like this to sort of, after hours, you go someplace else. Instead, we just build that social group for you automatically.
When you travel, when multiple people travel to the same city, we're just gonna throw them to a chat room together, so they can actually start coordinating their dinners and their after, sort of after-work activities right here in product. And so again, travel management is nothing new, but a social sort of bleisure-based travel management is new, and I think that's something that's highly defensible because it requires integrated, seamless, chat functionality that pretty much no one else has. And then finally, we've talked about universal chat, and that basically everything we talked about here is designed to sort of cross IT boundaries seamlessly. Like, you don't need an account. You don't need a password or any of this. It's basically just built in automatically, so anyone with an email address or phone number, you can collaborate with, they can join. It doesn't require an app.
You just open up in a mobile app or just respond to the email, whatever it might be. So we're going, we're working very hard to eliminate the barrier to adoption, such that no matter who you integrate with and who you collaborate with, they can engage with you directly through the product in whatever terms are, are most sort of palatable to them. And so all of this foundation, we think, creates a highly sort of defensible number of values for that high-margin subscription. 'Cause fundamentally, in the end, pretty much any technology can be reproduced, but it's very hard to reproduce chat functionality because that is actually held to the highest standard of any sort of usability or reliability and performance sort of standards. And so this is a completely different level of technology development.
That's why we've been spending so long on it, and it's why we're years ahead of what we think the competition could do. So the kind of array of this overall, the three major sort of components of our what we think is our long-term growth is, first, we start with this VSB, SMB market, 'cause it's huge and untapped, and no one else is going after it. There is really no organized competition there. It's, you know, our competition is email and Excel, and it's not fighting back. And so we think that it's a huge opportunity that's largely uncontested. Second, we think the only way to go out and get it, in fact, the only way anyone else has ever gotten it, was through viral and word of mouth. And we're the only ones even trying that.
If you look at any of our competition, all of them have the exact same business model, pretty much the exact same product being sold the exact same way, and it's all basically struggling. So we think that the way that you can capture this, it has to be with a different angle. The way others have captured this huge, untapped opportunity has been through a viral word-of-mouth manner. Now, we're going to do that for expense management because we think that we're the, sort of the, the nexus of the three most important and most viral use cases on the internet, and so we think that we can play that again. And then finally, we think that subscriptions are the way that you can make profit in a sea of sort of like, red competitors.
Because, you know, not a new idea to want to do everything, but actually doing everything is quite hard, and we've been working at building this foundation for a very, very long time. We think in the end, the most defensible way to operate in this market is with the best unit economics. It's basically to have the lowest cost acquisition into the largest market with the highest margins. Not exactly the most genius stuff, but saying it is actually quite hard... Or saying it's easy, but doing it is quite hard. And so we've been focused entirely on unit economics and sort of profitable long-term growth for a very long time. And so we think that we have a very strong advantage over the competition, which is just, just now starting to think about this.
Finally, I'd be remiss not to say something about AI, because that just seems to be the thing that everyone's picked up on. It's not a coincidence that Expensify has been pushing a chat focus for a very long time, because we've known that this is gonna come. I mean, everyone's known it's gonna come, but knowing it's gonna come is different than actually doing something about it. We've built our entire platform around chat because chat is the language of AI. The sort of generative AI chatbots. It's going to completely change how user interfaces are designed.
Like, historically, you know, there's a bunch of buttons, there's a bunch of searching and things like this, and that's still gonna be there in a way, but you can interact with the AIs more natively, actually through chat, through talking, and things like this. And so our platform is about trying to build a single foundation where all kinds of information and people can collaborate on the same level of the AIs themselves. And so if you have a super intelligent AI hanging out with you, you don't wanna basically just press a bunch of buttons to talk to them. That's not actually how they talk. They talk in a language that we talk as well. And so chat is the language of AI, and Expensify is building a foundation such that the AIs can collaborate on an equal footing with the humans themselves.
So we've been talking about all this stuff for such a long time, and I know that, you know, it's been a lot of work to get to this point, but we're extremely happy to actually start showing it rather than just talking about it. And so here on the screen, we've got a QR code. One more trick of Expensify Chat is that it's got public rooms. If you scan that code, you're gonna be, you know, on web and on mobile, whatever it might be, you'll be dropped directly into a room where you, again, don't need to sign up, don't even need to type an email address. You can just observe and read a bunch more information. There, you're gonna get direct...
access to me, the rest of the product team, the executive team, to talk in real time about the product itself. Now, again, this isn't about financials. This conversation is about the roadmap itself, so let's basically stick to the topic. But if you have any questions about basically how the product works, why we're doing certain things, how it's differentiated from the competition, and so forth, that's where we'd love to talk with you. And so just scan that code. You'll drop directly into a room. You're gonna see the whole chat experience. You can start requesting real money from your friends. You can start splitting bills. You can start experiencing everything we're talking about right now. It works on all platforms, works with email, phone number, works with everything. We think it'd be great if you created an account, but, you know, we'll talk to you there.
I can't wait to talk to you soon. It's gonna be a great time. With that, I guess, let's open it up to questions. Nicki?
Great. Let's get started with Citi. George, do we have you on the line?
Hi. Yeah, this is George on for Steve Enders. Thanks for taking the questions. Maybe just to start with on the paid user number, it was kinda flat quarter-over-quarter. Really appreciate the color on, you know, net adds versus churn versus contraction. You know, does that quarter-over-quarter stabilization give you guys any sense that, you know, maybe we're nearing a bottom, kind of excluding seasonal factors, or is there just still too poor visibility? Just kind of appreciate update on, you know, how you guys are feeling about that metric.
Yeah, it's tough to say if we're at the bottom right now. Obviously, as David showed, we have a lot of positive indicators for the future. January, I think I mentioned, January is usually a pretty soft month in terms of users, so that's not completely unexpected.
... but we're, you know, working real hard to improve all, you know, inbound traffic, inbound leads, and we have some, you know, exciting green shoots data that we, that we shared with you. But, I think it's probably jury's still out on whether it flares at the bottom or not. Obviously, we hope so, but,
Fingers crossed.
We'll know soon.
Great. Okay, and then one quick follow-up. I appreciate the FCF guidance, and, you know, obviously a big improvement in cash flow generation this quarter. Is there more cost-cutting on the horizon that's required in order to hit that FCF target? Or do you guys-
Good question
... believe you have things in place?
It's a good question. We implemented the changes midway through the quarter, so at this point in time, there is no additional cuts needed. We've made all the cuts. Not all of them took effect in time to be experienced in Q4, so we do believe that we'll see, you know, a greater impact of the cuts in Q1 and future quarters. You know, as of today, everything's implemented. We don't need to do anything else.
Great. Thanks for taking the questions.
Thank you.
All right, next we have J.P. Morgan.
Hello, everyone. Thank you for letting me ask a question, and hi, David, great to meet you. So I was wondering if you could comment on the long-awaited migration to the New Expensify. Is the statement in the press release about the global launch in 2024 does that imply that you expect the migration to be fully completed this year?
Great question. So, it's a rolling launch. I mean, as you can see, it's already out. Customers are using it. It's being used for different use cases. We are migrating people over in batches and so forth. We intend to keep the old website around for as long as people need it, and so we don't know how long exactly that's going to be. Because it's basically we're pulling everyone over with, you know, honey, not vinegar. Is that the right phrase? And so we wanna make sure that we're taking the time to do it right. We're not in a hurry to basically push people over. We're basically making sure that they come over time.
I can't predict that, and I would like to say yes, but I, I just, I don't know for certain, because fundamentally, that's gonna be up to customers.
Okay. Perfect. And, Ryan, a quick question about the interchange. I remember-
Yeah
... last quarter, you were suggesting that this transition may take up to a year because new customers will be on the new card, but old customers will switch whenever their contract comes up. So when do you expect to see the most impact from this transition throughout the year? And-
Sure
... what was the initial impact on revenue, perhaps in the fourth quarter? 'Cause I can see that you've probably restated historic numbers as well, so the $11 million versus historic numbers. And what was the impact that you booked in the fourth quarter?
So the impact in the fourth quarter is essentially nothing. You'll see that in Q1 going, and going forward. In terms of the speed of that transition, similar to what David said, it's gonna be kind of at the speed of customers. Now, they will be forced, you know, eventually to have switched over. But-
Mm-hmm
... I would, if I had to guess, I would think that it's gonna be a, initially, a relatively large swath of customers, and then kind of a long tail, and we're gonna have to, you know, kind of nudge some people. But we do have some carrots to get them over.
Sure.
We have not yet announced, we have some new card functionality coming out that I'm not gonna announce here, but we will announce shortly, that is only available on the new card program. So they have a very actual real benefit to switch over, as they can- they'll be able to do exciting, helpful things with the new card that they couldn't do with the old card. But look for maybe an announcement on that in the coming weeks. But we do think that we have really good reasons for them to switch over. Another point is also we're starting to see, we're coming up on the expiration date of our initial customers, so all the new cards will also be under the new program.
So, we're gonna hit a point where our initial Expensify Card customers, their cards are expiring, so they will automatically be migrated over when they get their new cards.
Thank you for that, color. I appreciate it.
No problem. Great questions.
Great. Now we have JMP Securities.
Hi, this is Aaron from JMP. Thanks for the questions.
Hey, Aaron.
Hello. First off, you called out that you're expecting a 20% uplift on card take rate by becoming your own program manager. Can you talk a little bit about the challenges associated with replacing your prior program manager, and whether it's something any company can pull off, or if there's something unique to Expensify that's letting you do this?
That's a good question. That is a good question. It's not easy. We did it. We have it, and it took us a while, you know, as you all know. But our new CRO was actually formerly from Marqeta, so we may have a little bit of an advantage there on-
Well, maybe also because it requires taking over a lot of technology as well that we do in-house, and so not everyone has the same level of sort of in-house technology expertise to handle, like, the real-time authorizations and so forth. And so I think that we have an advantage over companies because we've already built so much of the card product. We've already basically taken that in-house, and so therefore migrating to becoming our own program managers a relatively low lift for us. Whereas for others, it would be all legal lift that we went through, and also on top of that, taking on, like, you know, millisecond latency, sort of like high uptime, transactional processing.
Like, so I think it's actually, you know, it's, it's not impossible, clearly we did it, but you can see it took us a lot of time, and we worked really hard on it. So I think it's gonna take everyone else at least as long as us.
Yeah, we have more of a build versus buy culture here. I think if a company had more of a buy culture-
Oh, yeah
... they probably would not-
Struggle, yeah
Probably struggle to do that.
Got it. That's helpful. And then in May 2022, the board authorized a $50 million share repurchase plan. I think you still have about $41 million approved under that authorization. So just trying to get an understanding of how you're thinking. I mean, valuations at less than 1x next year's revenue. You have the guide for $10 million-$12 million in 2024 free cash flow, about $25 million in net cash. Do you anticipate prioritizing share repurchases in 2024? And is there a certain level of net cash you want to maintain to run the business that we should think about?
Yeah.
Great question.
Yeah, it's a great question. I think in the near term, so you might saw we eliminated most of our debt. We still do have a little bit in our, revolving, facility. So my instinct would be focused more on reducing that. But I think you're absolutely right that at these share prices and generating the cash flow that we expect to, that, it's pretty good, move on our part, but no firm commitments or, or anything to announce at this point in time. Yeah.
Understood. Thank you, guys.
All right, now we have Piper Sandler.
Great, thanks for taking the questions. It looks like there continues to be pressure on the subscription revenue side of the business. I was wondering if there's any other color you could provide there, maybe on how much of the drag you would attribute to business closures and downsizing, and maybe any actions you're taking to mitigate it?
I see.
We did a lot of sure.
Yeah.
Well, I think I would say, you know, just kind of reiterating what I mentioned earlier, I mean, fundamentally, acquisitions and churn is stable. And I would say those are the most important metrics basically for us to control. Because I think those really signify the health of Expensify as a business in terms of our economics of acquisition and retention. But I would say... And the challenge is, yes, our 2022 was good for our customers, and that they were actually expanding as businesses and adding seats, you know, hiring and things like this. 2023 was bad for customers, and that they were reducing seats, they were lowering. They weren't necessarily leaving Expensify, they just needed less Expensify because they had fewer employees and less activity.
And so I'd say, like, we can't control the macro environment, but we can sort of shield ourselves from it as much as possible and take advantage of it when it's good. And fundamentally, I think, the takeaway here is that the business itself is healthy, but we are basically subject to the macro effects of customer expansion and contraction. I don't know if that really answers the question.
It does, yeah.
Yeah, no, that makes sense. I guess a quick follow-up. In your conversation with customers, I guess, has that helped you at all with getting line of sight into in terms of a potential trough? I know it's just been a couple quarters of increasing contraction.
Sorry, could you say that one more time?
Yeah, just, your conversation with customers, is that helping you at all in getting line of sight in terms of a potential trough in the contraction?
Oh, I see. Have customers... Basically, have customers indicated that they're gonna continue downsizing?
Oh, oh, oh, interesting. I don't think we have insight into that.
We have a lot of customers, so it's, you know, tens of thousands, so it's tough to have, like, a statement that we feel super confident in-
Yeah
... 'cause there's just so many of them. It's not the reduction in seat contraction isn't from, you know, our 10 largest customers. It's from, you know, a lot of customers you've never heard, right? Small businesses and-
Tens of thousands of businesses.
You know?
Yeah.
Yeah. It's not... We are really popular with tech, and obviously tech's been-
Yeah
... laying people off. But, we don't have any, you know, definitive statement on, from customers on how they're going, 'cause there's no customer group that can speak on behalf of everybody.
Yeah. I wish I knew. I wish I knew, but I don't know.
Perfect. Okay, let's move in and see if BMO's here. Do we have Daniel or Kyle? We can circle back. Let's go to Lake Street Capital.
Hey, guys. If we went to that previous slide that we were at before, just on the customer contraction. I mean, is there any data you can point to that maybe you're seeing any signs of improvement in that metric? I know you obviously you're gonna churn users in January because it's historically softer, but I guess, is there any data that you can point to maybe that you can give, help us understand if you're seeing any sort of improvement with customer spend, I guess?
Nothing to announce other than, you know, obviously, what we've presented here.
Yeah.
We, we, you know, we have January data, and, you know, obviously, we have our historical data. I think the takeaway from this slide is that, you know, our customers have been having a difficult time, as reflected kind of in our, our financials. But we also don't think that this is a permanent situation. We think the economy is going to improve, and obviously, as the economic pressures decrease, we, we expect to see, you know, recovery in our customer base.
All right, thanks, guys. And then just last one from me. So with these cost cuts implemented midway through the quarter, I mean, so Q1, are you expecting to sequentially decline in OpEx? And then I guess, how should we expect OpEx throughout the remainder of 2024?
So, we initiated full year guidance, but given that the... We saw a big recovery in OpEx in Q4, and those changes didn't take place until halfway through the quarter. We expect to feel the full benefit of those cost cuttings in Q1. So, yes, we do expect that to improve quarter-over-quarter.
Okay. Thanks, guys.
Great. Let's check in with FT Partners. Okay, let's circle back to BMO, see if we can get you unmuted. Daniel, are you there?
Yeah. Can you hear me?
Yes.
Awesome. All right, great. Appreciate it. Thanks for taking the question. So I joined late, so I apologize if this is a topic that was already discussed at length. But in the last couple quarters, you talked about sort of building the top of the funnel, and some of the investments you're making there to kinda accelerate the customer acquisition trajectory. Can you just spend a moment on sort of what you have been doing there, and anything that we should be on the lookout for as you're thinking about the game plan for 2024?
Sure. I think that. I mean, so one of the advantages of having a business that kicks off a lot of cash is that you can take big swings on things. And so I think that throughout 2023, we were trying a lot of different things. And I think what ultimately stuck the best was our investment in SEO, and that's why I think we're really, you know, we've been really, really pleased with the results there. We're also making, you know, additional investments that have longer term returns, and so forth. Fundamentally, I don't have any sort of, you know, crystal ball as to exactly how this is gonna play out in the future, more than what we've already suggested for our cash flow guidance. And so I'd say, fundamentally, we feel very confident in the investments that we're making.
But, you know, it's just a lot of experimentation. Which is I know kind of like a wishy-washy answer, but, in general, there's just no one thing. It's not like we're basically putting all of our eggs in one basket. We're trying a whole range of things. Some work, some don't, and I think that, in particular, the SEO has been really good.
Okay, gotcha. And then, on the user churn, I understand some of that is certainly macro-driven and completely outside of your control. But maybe, again, sort of your latest thoughts about thinking what you can do, to the extent that you can, to limit churn, and if there's any additional levers you're thinking about.
Oh, yes. So, we have been making some investments in reducing churn. David spoke about global reimbursement. This is really more of a more enterprise, mid-market focused feature. Companies that have, you know, multiple subsidiaries in different countries. We also have some announcements that were product announcements that we have coming up, that we think will be beneficial to helping churn as well. Again, nothing to announce for Q4, but we have been developing quite rapidly. We... David spoke about the success of our outsource contributor program.
That took us a little bit to kind of get clicking, but now it's a well-oiled machine, and the rate of development has dramatically increased, and we're gonna be deploying products quite quickly here in 2024, and we think that is going to be beneficial.
Yeah. I think the contributor program has been a real secret weapon in that we've been able to, I mean, effectively double, triple the engineering-
Yeah.
Yeah, vastly increase the engineering team. And that just accelerates just development overall. And so I'd say, yeah, I think that we're really, really happy that we've been making these major investments into the foundation of the platform. And now, I think we're to a point where we can begin really rapidly rolling out functionality that our customers are asking for. I mean, global reimbursement was one, but I think there's a long, long list of requests.
We just released budgets, too.
Oh, and budgeting and insights. And so did we just... You know, we didn't bore the slides with basically a list of every single release, but yes, I'd say there's a whole bunch of features that basically are directly kind of fan service to the customers.
Okay, gotcha. And then maybe just one last one for me. Appreciate the free cash flow guidance. It's great to, great to see that. I guess, philosophically, how should we approach your thinking about the guidance? Like, does it assume kind of like a stable macro? Does it... Like, what are the, you know, the fundamental pillars that underpin the guidance, so we can think about your progression against that this year? Thank you.
So, it does not rely on a macro environment improving. It's a... There's some conservatism baked into that, but given kind of the up revenue's been soft in recent quarters, I think that conservatism is warranted. But it doesn't, that is, it's not a wishful guidance. Like, we really hope this happens. We feel good, we do feel good about this number, and we don't need some change in the world for that to happen. We feel pretty good about it hitting those targets.
Yeah. It doesn't require a bunch of things to go right for that to work. That's basically, it's like, if everything stays as we plan, then it should be fine.
Great. All right, thank you very much.
Thank you.
All right, to the end of the Q&A.
All right. Thank you all for joining, and as David mentioned, we have opened up a public room in our new product. We're not gonna be talking about financials there, for obvious reasons, but if you want to join and talk to us about the product roadmap, we would love to talk to you. We think this is really exciting. It's also a great opportunity for retail investors to get access to our executive team, our product management team, on a level that is, you know, not traditionally-
Yeah
... seen in public companies. So we think it's kind of novel and exciting, and we're looking forward to talking to you all there. So thank you all for your time, and we'll see you next quarter.
Thanks, everyone.