Q2 2024 Earnings Summary
- Expensify's migration to the new card program is expected to significantly enhance revenue by increasing interchange fees by 20% on every transaction and treating interchange as revenue instead of contra expense, simplifying financials and improving margins ,. The company plans to migrate 100% of spend to the new program by the end of the year.
- The launch of "New Expensify" and a built-in travel management system is expected to add new revenue streams starting in Q3, expanding the company's product offerings and market reach ,. The company is optimistic about generating revenue from New Expensify and its travel bookings in Q3 ,.
- The partnership with Apple for the upcoming 2025 F1 film has already generated over 600 million impressions and earned media coverage estimated at over $100 million, enhancing brand visibility and potentially driving customer growth , ,.
- Financial constraints limiting share buybacks: Due to covenants with their lender, the company's ability to repurchase shares is limited and currently "quite low" because of high spending in last Q3. This indicates potential financial constraints impacting shareholder returns.
- Delays in product development: The company has no exact estimate of when its payroll product will be ready for market, despite having technology and licensing in place. Significant front-end work remains to make it "truly competitive," indicating delays and potential missed opportunities.
- Risk to customer relationships during card migration: To complete migration to the new card program, the company may need to "forcefully shut off" old cards, which could "disrupt some business operations" and risk getting customers "all angry" or causing them to leave. This poses a risk to customer satisfaction and retention.
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Revenue Guidance Outlook
Q: When will you provide longer-term revenue guidance?
A: We need to see more stabilization in the business before we feel comfortable providing longer-term revenue guidance. As the business becomes more predictable, we'll start offering more guidance. -
New Expensify Revenue Contribution
Q: How much revenue will New Expensify generate in Q3?
A: It's too early to give a specific revenue number, but it will be less than $1 million, though way more than zero. -
Share Repurchase Constraints
Q: Can you buy back shares under current covenants?
A: Currently, our lender covenant limits share repurchases due to a 12-month lookback on free cash flow, but after next Q3, the covenant will be loosened, and we'll have the capability to buy back more shares. -
New Expensify Card Migration
Q: How will you achieve 100% card migration by year-end?
A: We're making great progress and may eventually shut off old cards to encourage migration. We aim to transition everyone smoothly without disrupting business operations. -
R&D Expense Optimization
Q: Will R&D expenses decrease since you're out of R&D mode?
A: We didn't mean to suggest changes to R&D expenses. We're optimizing the sales process, which involves a different kind of R&D. When a product launches, ongoing work shifts from R&D to cost of revenue. -
Travel Product Demand
Q: Is initial demand for travel product greenfield or replacements?
A: We're seeing both. Greenfield sales are easier, but we're also gaining enthusiasm from companies with existing travel tools. Our T&E platform is attracting new leads who value integrated solutions. -
Payroll Product Update
Q: Any updates on the payroll product?
A: We still use it internally and have the technology and licensing in place. However, we need more front-end work to make it market competitive. We're focused on the core business and don't have an exact launch estimate. -
Customer Growth Drivers
Q: What drove the uptick in customer numbers in July?
A: It's the result of many small changes—the sum of a thousand steps. We've also gained buzz from the Apple movie and increased engagement. -
Transaction Volumes Post-Migration
Q: Any change in transaction volumes after card migration?
A: It's too early to tell since most migrated in the last 60 days. Generally, when we get company spend, we get most of their spend. -
Conference Participation Impact
Q: Will returning to conferences impact OpEx?
A: We don't see it dramatically changing anything. We're re-engaging in travel conferences after an 8-year hiatus but don't expect a significant effect on operating expenses.