All right, everyone. We're very excited to have you here for the next quarterly earnings call for Expensify. We've got a lot of exciting stuff to share, and so let's just hop right into it. Okay, let's get started with you're gonna read some very exciting legalese to get going.
That's right. Before we begin, please note that all the information presented on today's call is unaudited. During the course of this call, management may make forward-looking statements within the meaning of the federal securities laws. These statements are based on management's current expectations and beliefs and involve risks and uncertainties that could cause actual results to differ materially from those described in these forward-looking statements. Forward-looking statements in the earnings release that we issued today, along with the comments on this call, are made available only as of today and will not be updated as actual events unfold. Please refer to today's press release and our filings with the SEC for a detailed discussion of the risks that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today.
Please also note that on today's call, management will refer to certain non-GAAP financial measures. While we believe these non-GAAP financial measures provide useful information for investors, the presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. Please refer to today's press release or the investor presentation for a reconciliation of these non-GAAP financial measures to their most comparable GAAP measures. With that, I'll turn it back to you, David.
Thank you for that fascinating introduction. We are coming to you live from the San Francisco lounge, we have the whole dream team here to discuss any questions you might have. We're going to go through all of this, and then each analyst is gonna have one question and one follow-up. Let's get started. As a reminder, Expensify's major plan for long-term success hinges on basically three major pillars. Like, one is that we have a huge untapped market opportunity. The second is that we have a unique bottom-up adoption model. Third, that we're going after this huge, huge billion user opportunity. To kind of review each of those in turn. As a start, the market is huge and largely untapped.
If you just sum up basically all of the customers of all the competition, we're talking about, you know, 1% of the actual companies in the world. The way that we view it is the opportunity is largely untapped. The differentiation for Expensify is that we are going after the whole market using a radical business model. Now, one thing we're gonna talk about a little bit more is that we're doing a lot right now to sort of expand growth in a few different ways. Now, you know from the roadshow and a bunch of other videos and so forth, that we have a bottom-up adoption model and things like this. New things that we're adding to that, basically, we've dramatically expanded our advertising.
If you're new to the top sort of 20 cities in America, you've probably seen our ads everywhere. We've also launched a new free plan, which basically is allowing anyone to adopt the Expensify Card and do reimbursements for free. The freest free plan on the market, if you will. This is the kind of two most visible things, if you will, to go after this beachhead or the SMBs. What you might not know is that we're doing a tremendous amount of work inside to go after the sort of the greenfield opportunity. One is that we've expanded our account management organization, and this is basically pairing our top partners and customers with a dedicated point of contact.
Every customer can, of course, always reach out to our Concierge service and get fast, effective 24/7 support. If you want that personal touch, and you wanna establish a long-term relationship, now we're expanding our ability to provide that on a per customer basis. Second is that we've, for the first time, added outbound calling. We've never really done this in the history of the business. This is an entirely new capability for us. Because one advantage that we have is we have individual users in over 1 million businesses around the world. As a result, we have basically our inside guy that's championing Expensify internally. We can use this as a tremendous sort of owned asset, if you will, to call into businesses from around the world and grow the business.
Third, we've really reinvesting in our channel program. As you know, we've been in extensive partnership with the ExpensifyApproved! channel and basically the CPAs around the world. Towards this, we've actually launched an entirely new card focused exclusively on CPAs. These are a card for CPAs and their clients. There's a lot going on inside the business, some of which is visible from the outside, some which isn't. Now, as a reminder, our major differentiation, yes, our product is great and card's awesome and all of that, but the major difference between Expensify and everyone else is our business model is completely different than everyone.
We have what we call a bottom-up adoption model, where individual employees will adopt a product internally without asking permission, without asking for advice, and actually just using Expensify to promote Expensify inside the product, turning their expense report into a highly targeted marketing message directly to the decision maker. This is a radical departure from everything else in the industry, and it's uniquely Expensify. Likewise, as we mentioned, this opportunity is huge, and it's much bigger than business. We're going after the full market, not just at the enterprise scale, but also having a consumer-grade design that can actually solve all of the financial burdens of individuals doing, you know, bachelor parties, going to Burning Man, whatever it might be.
There's a complicated series of financial transactions that happen inside, outside, between businesses and this, in a sort of quasi-business side hustle zone, and we're aiming for all of it. We have a global reach, not just support for currencies, but support for receipt types across the entire world. We have not just our own native card, but also native travel. You can talk to Concierge and book travel, book hotels, flights, whatever it might be. All of this comes for free. We are the only company in the market that can make all of these claims. Maybe to finalize, we think that there's a true billion user opportunity here. We think that if Instagram can link a billion people through photos, we can link a billion people through money. This doesn't happen with a normal product.
This doesn't happen with a series of point solutions that are targeted towards the back office. We think the only way to approach this is by building a platform that consolidates all of these payment opportunities and these payment flows into a single seamless experience. That's what we're focusing all of our energy on. Expensify is all in on this billion user opportunity. To invest in Expensify is to be a believer that that opportunity is real. With that, let's talk about where we're going right now.
All right, all the good stuff. Let's talk about how Q4 performed. As you can see on screen, it was our best quarter in terms of paid member growth since the start of the pandemic, something we're very excited about. All right, last quarter we said that we were predicting revenue to come in between $38.2 million and $39.2 million. What we actually came in at was $40.4 million, so that is above expectations. In terms of paid members, we were expecting somewhere between 673,000 and 691,000. We came in at 711,000. We actually gave this guidance kind of late in the quarter, so we didn't sandbag these numbers.
We actually just had an incredible end of the quarter, which pushed up the numbers beyond what we were expecting. That's great for us. As you know, we have a very reliable subscription or annual subscription business, and then a kind of a variable pay per use. Those are customers that sign up without an annual subscription or just existing customers exceeding their annual subscription, so the overage. We had a huge influx of that overage that we were anticipating, which is why we have these above expectation numbers. Some other numbers to point out for Q4. We had 57% year-on-year revenue growth. We increased our paid members in Q4 by 44,000, a very exciting number for us. Our annualized revenue or ARR for Q4 is $161.6 million.
On a GAAP basis, we had a $21.9 million loss. On a non-GAAP basis, so if you take out stock-based comp and the IPO bonuses, which I'm gonna touch on in a second, we had a $4.4 million non-GAAP net income and a $7.3 million adjusted EBITDA. I'll talk a little bit about the IPO bonus again. We talked about it last quarter. You might recall that I said that we had to actually accrue this over multiple quarters. Part of it is in Q3, part of it is in Q4. We'll explain the impact on Q4. The good news is we don't need to worry about this. We're not IPO-ing again, so we won't be talking about the IPO bonus going forward.
This is the last quarter where we've got to deal with that. All right, here's how we calculate the non-GAAP net income, 'cause we got a lot of questions about that last time. We had a GAAP net loss of $21.9 million. You add back in $12.1 million in stock-based comp, fourteen point two in the IPO-related bonus, that gets you to the $4.4 million non-GAAP net income. Jumping over to adjusted EBITDA, a negative $6.9 million in adjusted EBITDA. Add in that bonus again, you get $7.3 million in adjusted EBITDA. All right, let's talk about that was Q4. Let's just look at some of the highlights for fiscal year 2021. We did $142.8 million in revenue.
That's a 62% year-on-year revenue growth over 20. Our interchange grew 185% versus the prior period. We continue to increase the efficiency of our employees. We are now doing $1.1 million in annualized revenue per employee, which is, you know, higher than what we had in the roadshow or the previous quarters. Talk about numbers keep getting more exciting. In fiscal year 2021, we had a net loss of $13.6 million. But when you look at our adjusted EBITDA, which excludes stock-based comp and the IPO bonus, we actually had $58 million in adjusted EBITDA, which is a 41% EBITDA margin, something that we are very proud of. On a Rule of 40 basis, that's 103%. Something definitely worth celebrating.
All right, now let's talk about guidance for Q1. You'll see that we have our previous guidance range, and we are expecting it. We are giving you an increase in ranges here. In Q1, we are expecting revenue to come in between $39.6 million and $38.6 million. For paid members, we are expecting between 684,000 and 702,000. All right, now I wanna talk about long-term guidance. To date, you know that we've only been giving quarterly guidance. We'd like to actually issue long-term guidance now. We're finding that revenue is growing sustainably at 2%-3% month-on-month. Now, we are seeing that pay-per-use that I mentioned.
We're seeing some volatility there, kind of driven by macro events of the pandemic, you know, trends in business travel due to the war. That is making our pay-per-use numbers more volatile than they have been in the past. What we would like to do is we're gonna start issuing a long-term guidance, and that's gonna be 25%-35% long-term growth guidance. That's the growth level that we believe we can sustain over a multi-year period. We are going to cease the quarterly guidance because that has become more of an exercise in management trying to predict global macro events, and that has become increasingly tough with how the world is looking nowadays.
We would like to spend this time that we have with you all talking about our long-term growth and how we're going to drive that long-term growth versus, you know, debating whether there's gonna be a new strain or there's gonna be more kind of international events. That is actually all the material I had. Now we're going to jump over to Anu, who's going to kick off our Q&A.
First we have Sterling from JP Morgan.
You would think by now we would get the unmute button corrected.
Got it.
Can you just maybe you touched upon it in the last part of your comments, but talk a little bit about the seasonality in the paid user, given the expectation that this quarter is gonna finish with fewer average paid members than what you did in the fourth quarter?
Yeah. You'll see it is actually an increase from the guidance we gave in Q4. We did have an influx of over subscriptions pile in at the end of literally the last two weeks of the year, which drove our those numbers up higher. From our perspective, we are seeing you know, our guidance is increasing, but we did see that influx at the end of Q4, and that was unexpected. We were not expecting that in Q1, so I would go off of the guidance that we're providing here.
Maybe also just chime in on that. I would say, normally we don't see the last two weeks of December, which is a holiday period, as being like major growth opportunity. Q4 was kind of special in the sense that it was the first clean quarter we've had for a very long time. I think the Q4 is a reflection of how the business model performs when the world is normal and everything's opened up, you know, and there are no major land wars in Europe and, you know, people are looking towards the end of the pandemic. I think that Q4 gives a good glimpse of kind of what kind of future we expect and how things behave when the world is normal.
As we've seen, the abnormality of the macro trends throws a lot of volatility into that pay-per-use, and then that sort of compromises some of this complexity for forecasting.
All right. The second part is, you know, at the time of the IPO, we had talked about, you know, pandemic and the way we built our models around business travel, really recuperating more towards pre-pandemic levels, probably in the back half of 2022. Is there any change in your viewpoint in terms of, I know you wanted to get away from the quarterly gyrations.
Yeah.
Of forecasting macro, but based on what you've seen so far, we still have to build our models. Do you think there's still anything different with, you know, Omicron, war, et cetera, that would prevent, you know, that pickup from getting there by the second half?
We think Q4 is actually a great example of how the business, like David said, functions normally. In Q1, you know, we saw that surge in Omicron. January was actually, you know, the peak of the pandemic, and now it's coming back down. I do think that, again, the pandemic isn't forever. There's been these kind of, hard to predict flare-ups, that we saw in Q1. Q4, I think is a great example of, everything was trending downwards, everything's opened up, and then we kind of saw a regression maybe a little bit in Q1, but obviously we don't think that it's going to be, permanent going forward.
Yeah. I think we're getting back on track.
Understood. Thank you.
Thank you.
Okie dokie. Next we have Tanika from Bank of America. I believe we haven't spoken to you before, so-
Yeah, welcome.
Welcome.
Thanks for having me. Koji is actually in Hawaii right now, so I'm on for him. We've been seeing some hiring outside of S.F. We were in Seattle for an analyst there. Seeing good success there with investing outside of the metropolitan, like around the U.S. I just wanted to understand how are you guys thinking about investing for growth? Has the investment profile changed since the IPO? Yeah, just trying to get at the spending environment. Will you be taking corporate expenses up and how to think about it going forward?
Great question. I think that maybe it's kind of touching on what we discussed before. In general, the answer to basically any question you have, more or less is that, whatever we've been doing is working and we're gonna keep doing. We make small changes over time, and so we don't make big shifts in general. I would say, in general, we don't feel that our overall business model or strategy needs any kind of changes. We think that it's already designed for a full market approach, and it works incredibly well outside of metropolitan areas. It works internationally. It works basically everywhere people are. The basis of my answer is no, not much has really changed in how we are fundamentally planning growing in the long run.
That said, we do obviously tweak the formula a bit. As I sort of touch again what I mentioned earlier, we have increased advertising, especially in metro areas, but also there's like podcasts, there's digital, there's a wide variety of things that go into this. You can see us basically anywhere people are, or anywhere people are looking, that's where we are as well. We're expanding our account management. Now, again, this is not new. We have always provided hands-on account management for customers. We're just making that more widely available. We're adding outbound is new, basically calling people in a more sort of proactive fashion. That's a new approach, and that does reach outside of those metro areas a bit more. We've done basically some direct mail as well.
For example, contacting CPAs around the nation, which are basically in every state. More channel partners and growing through the accounting firms, which is again, not necessarily. It's biased towards metro areas just because population centers are, but again, it's everywhere. The free plan is really about just making it more approachable on-ramp for customers of all sizes. None of these, I would say, is a dramatic change. None of them is specifically targeted outside of select and new markets. Our model has already been targeting a global marketplace.
Any thoughts on that?
Yeah.
That's it.
Any follow-ups, Tanika?
Yeah, just a quick follow-up, if there's any update on the visibility on the Marqeta contract, will it get changed so revenue over the GAAP? Any timeline on that? Visibility on that would be helpful. Thanks.
Yeah, a good question. We've made actually a tremendous amount of operational progress on that, and we're still on track to get it all done, so we can kinda clean up our financial statements this year. The ETA is still 2022. We are still not so close to it that I can give you a better timeline, but maybe next earnings release, we can tell you a little bit in more detail.
That's helpful. Thank you so much.
Of course.
Thank you.
Next up, we have Tyler from Citi.
How's it going, Tyler?
Hey. Hey, doing well. Thanks. I guess I just wanted to better understand the comments on what you saw at the end of Q4, and then in terms of the influx of paid members. Then I guess, specifically, what is driving the drop-off into Q1. Was this, you know, budget flush? Was this just kind of in response to promotional activities? Then are those members going away in Q1, or is this just kinda the-
Oh, that's a great question.
Typical seasonality that you see Q4 to Q1, just 'cause it's a softer travel time?
Yeah. That's a great question. This is not a churn-off of customers or anything like that. It is a decrease or any kind of the volatility of the pay-per-use members. Again, we saw an unprecedented level of customers exceeding their subscriptions in the back half of December, which is traditionally kind of a quiet time for us. We don't predict that level of pay-per-use surge in Q1, especially in light of what we've seen with Omicron in Q1. That's. We've adjusted our guidance appropriately.
Yeah.
Also by definition, because it's pay-per-use and it's overage, and customers use it when they feel the need, it's much harder to predict. When we say we don't anticipate it, there's nothing that tells us that we're gonna keep seeing that sort of pay-per-use surge. We might, we might not. Like, it literally is a total unknown.
Yes. The core revenue growth is very reliably, very sustainably growing at a solid 2%-3% rate. It's the customers exceeding their subscriptions, which is difficult to predict, especially in light of kind of what's going on in the world now.
Right. The customers exceeding the subscription, that's kinda more revenue volatility versus average paid member volatility, right?
The pay-per-use numbers are in the total paid members, so it moves them both.
I see. Okay. Then, just as we think about maybe some of the new product initiatives. Obviously you know, this free plan was announced recently. I guess first, is that having any cannibalization on the paid users? Then secondly, any just early updates on the invoicing and bill pay that you launched?
Yeah. I'd say, first off, no, it's designed not to cannibalize. Basically, the free plan, the paywall was calibrated to basically ensure that the people who are currently paying keep paying. No, it's this is adding a new group of customers, especially, cardholders that are generating interchange, but they're actually just not paying, any subscriptions. No, it's not cannibalizing. It's purely additive. As to the second part of that in sort of, attraction with, invoice and bill processing, I don't know that we've split any of that out quite yet, but we're very, very pleased with the growth of both of those. I think that very much it's a platform play, and we're perfecting the art of cross-selling these different use cases into our existing customer base.
I think once it becomes more material, like from a, you know, over 10%, I think is what we typically say, then we'll probably break it out. At this point, it's still under that threshold.
One, maybe tidbit we can give you is we've seen in Q4 we've had over 3,000 customers, new customers sign up for the free plan, which is really exciting traction.
Yeah
for how little it's been out. Obviously we're gonna continue talking about the free plan and the progress of that next quarter as well. It's very encouraging and something that we're all excited about here.
Yeah.
Thank you.
Cool. Next up, we have Brent from Piper.
Hello. Good afternoon. A couple questions if I could. I guess, you know, David, for you, we'll start things off here. I was actually on my first return to travel trip actually this week at.
Oh, good. Welcome back.
At Shoptalk in Vegas.
Uh-huh.
There were a lot of people there. Quite a few people, more than I anticipated. I guess, as we just think about your business, as we think about paid members, maybe just walk through expectations around this return to travel. If we do see it coming back earlier in the year, would you all see that trend?
Great question. It's just that.
Toward SMB, is it a little bit different of an expectation versus maybe some of these bigger conferences where there are larger, you know, enterprise-oriented companies that showed up at the Shoptalk this week?
Yeah, those are all great questions. I think that you're absolutely right in the sense that there are these indicators and early leading indicators that things are coming back to normal. Like just last night, we went out to a team dinner with about 15, 20 people there. I was sitting there, and I talked to the person sitting next to me. I'm like, "This is the most people I've had a dinner with in two years." I'm looking around, the bar is packed, everything is. I'm like, "This feels so weirdly normal." That's just like a tiny tidbit of, like, that was a business dinner. That got put down on our Expensify Card. That generates revenue, and it's an active thing.
Even if we think about Q4, like, I remember I booked a Disney cruise for me and my seven-year-old daughter before we knew anything about Omicron. I remember Q4 was like a brief window of hope and joy. Basically, as we got closer and closer to December, everyone's just like, "Oh my gosh, should we even go on this trip?" As we're pulling into port, other ships are basically shutting down and being turned away. It's like Q4 was a weird time, but it's a reminder of like we can get back to normalcy. I think that we're seeing that again now. Like these positive indicators are like you know buds in spring. Like it's coming back.
Now, when you ask about, like, conferences specifically, I know that we have a robust conference season this year, much more than previous years. I think, just speaking for ourselves and our own sort of, like, marketing, we're much more active in the conference circuit than we have been in the past. I think we're seeing conferences in the past were basically, like, partially virtual and things like this, and now it's actually fully in person. Vaccine and mask mandates are going away, and that increases sort of just more participation. These are all sort of anecdotal. Again, like I'm not Fauci, I can't tell you what the pandemic's gonna do.
I do think that if from our perspective we see far more signs for hope and optimism in the upcoming quarters than there is pessimism.
Helpful color. I guess then for Ryan, obviously, historically, this has been a very profitable business. Just wanted to pick your brain here. As you think about the coming year ahead, walk me through your view around where could free cash flow kinda be? What are intentions there? Where could, you know, EBITDA be going forward? Just trying to think through the path back to, you know, generating a meaningful amount of free cash flow and EBITDA going forward. Just trying to think through that equation here as on a full year basis. Thanks.
Yeah. When the pandemic started, we had pulled back on a lot of our spend, and as we see kind of the economy waking back up, we have ramped up our spend accordingly. We feel that, you know, for 2022 we're probably gonna be spending more than we spent in 2021. I do think that we're gonna be very profitable in 2022. Maybe, if I had to directionally give you an indication, I'd say probably less than what we were in 2021 just because our spend will be ramped up for the entire year instead of kind of incrementally as the year goes on.
Helpful. Thank you. Color.
Next up, we have Pat from GMP.
All right. Great. Thank you. Congratulations, you guys. I guess I'm gonna follow up where Brent just left off. You gave us sort of long-term revenue guidance. How should we think about the bottom line and the gross margins over the long term?
That's a good question.
I think we did that during the roadshow. I don't think anything's really changed.
Yeah.
The operational long-term targets.
The long-term targets that we've discussed in the past, I think we're about in the same range. Now, it might vary a little bit, but fundamentally, not much has changed in the business. We have increased our sales and marketing spend, so I think we'll see those margins go down. In general, the overall economics of the business are still very strong, very profitable.
Okay. You wanna just for the benefit of people who don't know and who are on this call, you wanna just tell us what they are?
Which margins?
Well, start with your long-term, the bottom line, EBITDA.
I don't know. That's not top of my head.
I believe it's 30%, I believe, is what we've indicated in the past.
All right. Great.
We don't-
And then, uh-
Obviously we're above that right now, but we think in the long term it's gonna probably trend more towards 30%.
Okay. David, for you know, smaller businesses have a lot of options. What do you view as the biggest competitive threat, and what's the plan to counter it?
Good question. I mean, I don't think anything's really changed. I mean, I think that if you look at the competitive environments, we have more clones of the same kinds of competitors, whether there's like one or 10 of the same business, it's basically just the same thing. The sum of all of them is still just like the same sort of concept. I'd say by and large, we don't think that the competitive environment has like meaningfully changed. We have more names perhaps. There's way more market confusion and so that can drive you know the benefit of advertising is to cut through some of that noise, if you will. Fundamentally, we don't think the business model's changed. We don't think the opportunity's changed.
We don't think the strategy needs to change. Fundamentally, it's about getting to the customer first. We think that a viral word-of-mouth model is still unquestionably the best and most scalable and cost-effective way to get to the broader market. If there's more players in sort of the shallow end of the pool, that doesn't really affect anything in the event.
All right. Great. Thank you, guys.
Next up, we have Mark from Loop Capital.
Hi, can you hear me okay?
Yeah.
Okay, great. Well, thank you for taking my call. Going back to the margins, you know, with respect to the 25%-35% long-term margin guide, or not margins, excuse me, revenue guidance that was given, how should we think about long term? Is it two years, five years? Why not just provide annual guidance for that matter?
Good question. When we say long term, we actually mean a multi-year period. The company, before the pandemic, we had, like, basically 10 years of very very predictable up and to the right growth. The last two years have been very weird. In general, we feel very confident in our ability to deliver these ranges over multiple years. You say two, five, I think that sounds great.
Yeah.
Okay, great. Thanks. Moving on here. In the current environment, pricing increases or price increases are on, you know, pretty much everyone's mind these days. What are your thoughts on the potential for a price increase in the coming year?
I'd say we have no immediate plans for a price increase. We have surveyed customers, and we know that compared to the basket functionality that we replaced, if you were to purchase each point solution, like, Spendesk is actually an incredibly attractive price point for what it would take to replace it all. Currently, we think that we're at a great price. We think it provides an extreme amount of value, and we want to continue just penetrating more and more businesses throughout the world. I think that is a lever we can pull, but it's not one we intend to pull in the short term.
Yeah.
Okay, great. Thank you. That's helpful.
Great. Well, it's been a real pleasure. Thank you so much, and Godspeed.
Thank you, everyone.
Bye, everyone.