Ryan Schaffer:
Welcome to the Q1 2025 Expensify Earnings. I'm Expensify's CFO, Ryan Scaffer. And with me, I have Founder and CEO of Expensify, David Barrett. Now we'll pass it off to Niki for the legal lease.

Operator:
Please note that all the information presented on today's call is unaudited. And 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 forward-looking statements. Forward-looking statements in the earnings release that we issued today, along with the comments on this call, are made 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.

Ryan Schaffer:
Thanks, Niki. Now let's talk about the Q1 2025 financials. Our revenue was $36.1 million, which is up 8% year-on-year. Our average paid members were $657,000, which is Total interchange was 5.1%, which is up 43% year-on-year. Our operating cash flow was $4.8 million. Our free cash flow was $9.1 million. The difference between those 2 numbers again is customer funds. Our GAAP net loss was $3.2 million. Our non-GAAP net income was $4.8 million, and our adjusted EBITDA was $8.4 million. Now I'll talk about free cash flow. Obviously, we had a really good quarter free cash flow-wise. -- like I just said, our Q1 free cash flow was $9.1 million, which is a 75% increase year-on-year and an increase of 45% quarter-on-quarter. With our Q4 results, we initiated free cash flow guidance of annual free cash flow guidance of $16 million to $20 million. We are increasing that to $17 million to $21 million. That's a bit of a conservative increase. This is due to the kind of tumultuous nature of the economy right now as we watch the impact of the tariffs on the economy. And so again, we think this is a conservative number. We have confidence we can hit this number, and we will update this as we see kind of how the current economic policy plays out. As always, just our flash April paid members. April paid members were 655,000, which is just slightly down from Q1. It's less than 0.5% down. So essentially flat. And April is usually a little soft, and this April is no different. You can see previous Aprils denoted by the pink lines on the graph. Now let's talk about Q1 business highlights. Like I mentioned before, the Expensify Card grew to $5.1 million, which is a 43% increase year-on-year. Expensify travel continues to grow very quickly. We saw 166% quarter-over-quarter increase in quarterly travel in Q1. And notably, we are seeing customers adopt travel at twice the rate that they adopted the Expensify card. So we compare those 2 because it's a cross-sell from our traditional expense product, but we're seeing travel adoption be met by customers with a lot of enthusiasm, and we're very excited about it. Also, we announced full Spanish support. So if you speak Spanish, the product will look great to you. We have Spanish in our product UI and our product messaging. And also, we're not doing sales demos and customer support in Spanish. And we are also adding more international support and more languages coming very soon. You might have also seen we announced a simplified pricing for our collect plan. Our legacy collect pricing, which is the same scheme as the control pricing is still under, the collect legacy pricing was $5 to $20 per active member per month, and we gave a 50% discount for annual commitment or subscription and a 50% discount for Expensify card adoption. Notably, no cost if you have employees who are inactive. Now this is great for a more sophisticated customer that can forecast what their usage is going to be in the product. If you have, let's say, 100 employees, about 33% of them will be active on the platform any given month, but not the same 33%. So a different mix of employees each month. So in that case, the customer would buy a 33 seat subscription and any employee can kind of sit in those seats. However, that did take me a while to explain, and it is more sophisticated, and we saw that kind of falling flat on the lower end of the market. The collect customers generally self-service and they're not talking to a salesperson. So we need to communicate what our pricing is in under 5 seconds very simply. So this pricing is not a price reduction per se. It's more of a streamlining of our pricing, and that's based on extensive research into watching user sessions, talking to customers and sales feedback. So under the new scheme, it's $5 for any member per month. So you just enter how many employees you want to use the product at any time, and it's multiplied times $5, and that's your monthly price. So there's no annual spend in our card required, but they are built whether or not the user is actually active. So you're paying per account versus per active seat. The result is collect is $5 per month per member, simplified pricing for simple customers and control, which is $9 to $36 per month per active employee, which is advanced pricing for advanced customers. We think this is going to help us convert at the lower end of the market, and we're really excited for it. Now I'm going to pass it over to David.

David Barrett:
Great. So last quarter, we talked a ton about AI and all the cool things that we're doing with it. And so this quarter is basically just saying we did a bunch of that. So last -- we talked about this idea of conversational corrections, meaning that when you scan a receipt to create an expense, we use AI to figure out what the most likely category is it based upon the type of merchant, what that merchant's name is, what the category names are and so forth as well as everything you've done, everything else. Coworkers has done with the merchant in the past. We will either automatically categorize it or we will suggest the most likely categories. And then based upon that suggestion, you can either say like meals or whatever or you can just respond to natural language what you want done and then our AI will basically do the right thing with that. What -- a human would do in a situation, now we'll do. We talked about that aspirational last quarter, and now that's done. And so that's in products and you can use it today. It's very cool, it's just a great bring AI Similarly, a feature that we've talked about for a while is this idea of more advanced policy violations where you can prohibit tobacco, gambling, alcohol expenses and things like this. So now we do kind of deep receipt analysis to figure out what actually is being purchased, not merely where did you go and so you can deny those. Likewise, one thing we talked about is the power of AI for fraud reduction. Anyone who's basically doing anything online and selling their products, booking travel, things like this, there's always some degree of like fraud you're trying to control, especially when it comes to just trying to understand on a per travel basis, what they're actually doing to make sure they're actually not booking the sketchy things to make sure that no one's account got taken over or whatever it might be. wide variety of ways things can go wrong. However, we can control for that, and we can basically detect and cancel this fraud travel in real time. So all of this is basically stuff that we've talked about and stuff that we're bringing to market and a lot of this to market right now. Looking forward, I would say the stuff we're most excited for is this idea that we talked about in the past, we kind of call virtual CFO functionality. Imagine if you had a CFO and a sat down with you to kind of optimize your workflow, they would say things like, why are you cutting a bunch of physical checks? Let's actually streamline that with direct deposit or even asking questions, saying like who are my top spenders, who spends the most out of policy, you should just be able to ask concierge that and just get the answer directly. Likewise, on a monthly basis, a CFO would tell you what's changed week-on-week, month-on-month, things like this. And now that's going to be built out of the box. And so you basically have this ability to just get analysis pushed to you automatically without thinking about it. So AI is getting great. AI is heating up, but also the prep for F1 is really heating up. We're getting super excited about just the amount of visibility and traction that we're seeing in the leaders F1. Just to give one new thing that just happened. And so Dojat, my personal favorite, just launched this music video, and it's wild. Like the first 20 seconds of this music video are just slowly zooming in on the Expensify. You got to watch the video. It's fantastic. It's not exactly safe for work, but it's still great. At the Met Gala, Dan just walked out. first drove up in an Expensify branded F1 car, which was talking about that, which also is kind of amazing. And then walked into the net wearing an Expensify basically racing out it. And then it was dramatically torn off and he has a sweet suit underneath it. But basically, the part that I care about is he walked into the Met Gala wearing the Expensify branding while driving up in the expensify car. And so this is just the kind of thing happening right now, and it's wide. And it really has an effect. We saw actually for the hours after this particular thing happened, sign-ups quadrupled basically from this one small action that just happened automatically that we didn't even plan for. And so there's all kinds of stuff like this happening every day around this, and the movie hasn't been launched. And so we're pretty excited about this F1 promo. It's lining up to be one of the best product placements ever. And so it's pretty cool. We're excited. And also, overall, I think we're excited that users are really starting to notice just how cool this design is. Here's just an actual user who just posted a review unprompted to G2 Crowd, talking about how great Expensify Chat is because we talked about sort of the challenge of expense management is you can automate like 80% of it, but that remaining 20%, the human interaction, that's where all your pain is. And so chat-centric design is what streamlines that sort of last 20% by bringing it in product, so you can just talk to your account, your employees, whoever it might be in the context of the thing you have a question on. So you're not texting them to say like, hey, remember that thing you did 2 months ago and like, what are you talking about? Rather you're saying, on this particular expense, what's it for? And then you can fix it right in the context of that, especially when a concierge is there. And so if you say what the fix is, the concierge can be supplied right away. The design is really coming together. It's super exciting. I think the summer, in my mind, is really lining up to be very complete vision of what we set out to do years ago, and it's actually even better than we imagined. And so it's a pretty exciting time overall. That's probably got for now, and you can hear your questions.

Operator:
Thank you, David. One quick note due to the amount of earnings calls happening today, we had a few scheduling conflicts with our analysts. So if we don't hear from you on the Q&A, we look forward to speaking with you on the one-on-one call back. First, let's start off with Citi. I believe George, you're here.

George:
Great. Maybe we can just start with the topic of the day, macro and tariff impacts. You guys talked about kind of conservatively baking that into your guide to some extent. Have you seen any impacts to date? And maybe when you just think about your business, macro headwinds have been an issue in the recent past. You guys have made some changes to the business. How do you just think about your resiliency in the face of this environment?

Ryan Schaffer:
So great question. I simply like your question about resiliency. So I think -- obviously, no one wants a bad economy. That's not good for anyone. But if we're going into kind of rough economic waters, I think that we are well positioned. Obviously, we had $9 million in free cash flow this year. So I think that the way we've kind of restructured the business over the last year or 2, we're in a really good place to weather a tough economic environment. So that is -- I mean we're hoping for the best, preparing for the worst.

George:
Okay. That makes perfect sense. I wanted to also ask about the paid user number and really just kind of the disconnect that started to show up between what you've seen on revenue versus paid users. I mean, revenue up 8% year-over-year, paid users down year-over-year. When you guys think about your business, I think investors like we have been kind of trained on paid users as one of the most important metrics for the business. But now you guys are becoming multiproduct. I mean, is that still how you guys are thinking about the business internally and kind of optimizing for paid users? Because it seems like there's levers here that are driving success that kind of extend beyond that metric. Maybe you could just talk about what you've seen in that metric and then how you think about the business as one of many levers.

Ryan Schaffer:
Yes. Another great question. So obviously, paid members is really important. That hasn't changed. That's a huge focus for us. But we have diversified kind of our revenue streams over the last couple of years. So it's not -- I think around the time we IPO-ed, it was revenue and paid members were kind of in lockstep, and we've diversified kind of beyond that, right? We make money in other ways other than subscription. So I think that we are -- paid members is still very important, but we have other tools in our toolbox to increase revenue, which is good.

George:
Okay. Great. And then maybe if I could just sneak one more in on the Formula One. I think exciting times here. I think we're a T- 1.5 months or so away. You guys talked about maybe some early impacts. Do you feel like it had an impact in Q1? Or do you think of this more as like a Q2 benefit? And then presumably, the bulk of the benefit is going to be felt kind of in Q3 and beyond? Or how are you guys thinking about kind of sequencing of how this hits the model?

Ryan Schaffer:
I mean I don't think we've seen much benefit in Q1. I think it's definitely going to pick up. Obviously, we're just kind of -- we're seeing the almost like pre-promotion type of impact. But I mean, to answer your question, we think it's going to -- the impact is going to increase over time. And probably more in Q3 than Q2. So I mean it takes time and you see the movie, okay, then you go to the website, you get into kind of our conversion funnel. So the -- in terms of web traffic and stuff, obviously, we expect a lot around Q2. But in terms of that representing new business, we wouldn't see that until a little bit after. I agree with that.

Operator:
Next, we have Citizens JMP, Aaron I believe you are on the line.

Aaron Kimson:
So can you talk about what verticals following up on George a little bit? What verticals your customer base is most exposed to today? I think you've become less reliant on tech customers since the IPO and analysis you've done on what percentage of your customer base is in industries that may face tariff headwinds?

Ryan Schaffer:
Great question. So that's -- it's been a little challenging to track that because the are the tariffs going to happen, what industries are they affecting? Does it get pulled back. So I think that's been kind of tough to get an exact answer. But I mean kind of the behavior we're seeing is customers kind of in a wait-and-see type of holding pattern type thing. Obviously, in a healthy economy, our customers are growing, right? SMB customers grow faster than enterprise customers generally because they're smaller. And I think our customers are kind of waiting, right? They're not hiring a whole bunch of people. They're not doing big expenditures. They're trying to see how this shakes out and how it impacts them and all that. So in Q1, I think it's kind of too early to really see that impact, and it's something we're definitely monitoring, but it's tough to kind of pin down a number.

David Barrett:
Yes. It's like everyone is just kind of holding their breath to see what's coming on the pipeline. So I mean, I think we're eager to find that as everyone else...

Aaron Kimson:
Got it. And then the second one, I'm looking at the slides right now, correct me if I'm wrong, but I think you usually shared the paid member numbers for the first month of the next quarter. Are the April numbers in here?

Ryan Schaffer:
Yes. So it was flat, slightly down to flat, less than 1%, less than 0.5%.

Aaron Kimson:
Got it. And then the last one would just be, can you remind us from an accounting perspective with the F1 movie coming out in Q2, how we should think about how that's going to hit the cash flow statement and the income statement?

Ryan Schaffer:
Yes. Great question. So the Movie accounting is interesting, just as a review. So we have been making payments for the movie for a while. So the free cash flow impact of that has largely already been felt. However, we have not recognized the expense yet. So the day the movie comes out, we will recognize the expense of all the payments we made over multiple years. So a large expense being recognized, but not necessarily a large cash flow impact. Now we do have one more payment. So there are some free cash flow -- and when we're doing advertising next quarter is going to be expensive quarter. So it will impact free cash flow, but the S&M expense will be substantially higher because we're recognizing all the past payments that have already been recognized in free cash flow.

Operator:
Well, let's be competing schedules everybody we have live. So we will speak to the rest of you all.

Ryan Schaffer:
Great. Short and sweet. All right. Thank you all, and we'll see you next quarter. And go see the movie.

David Barrett:
Yes the movie.

Operator:
Goodbye.