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Small-Cap Confidential
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February 24, 2023

Expensify (EXFY) Reports Q4 Results

Expensify (EXFY) reported after the bell yesterday and revenue was a touch light (2% miss) while EPS beat expectations on the back of strong margins. Revenue rose 7.8% to $43.5 million (missed by $850K) while adjusted EPS of $0.07 beat by a penny. Management reaffirmed long-term revenue guidance of 25% to 35%.

While revenue metrics, including revenue per paid member (flat at $55.8), were on the low side of expectations due to the pay-per-use customer base (35% of customers) and seasonally slow Q4, adjusted EBITDA margin (a measure of profit) of 25.7% was well ahead of expectations for 23.2%.

The company added 18,000 new subscribers in the quarter and ended Q4 with 779,000 average subscribers.

As discussed in my report, Expensify is working on several fronts to build a more durable and consistent growth company. This includes building out a direct sales force and bringing on account managers to convert pay-per-use customers to subscribers, as well as to retain customers. Subscriber revenue is a more predictable revenue stream than pay-per-use.

It is also launching the Card program with a new processor and building out its accounting channel (again with dedicated account managers) to grow new products, including a CPA card and Chat.

Big picture, and not unexpectedly, Expensify continues to face a mediocre environment for its customer base, which tilts toward small businesses. But it is on a self-help program that should position the company for significant and steadier growth in the coming years.

The quarter shows there is still a lot of work to be done. If there wasn’t, EXFY would be a $20 (or higher) stock, not one trading below $10. With an undemanding valuation and a brighter future, we’ll stick with a buy rating. That said, we could see some weakness in shares today, depending on how the broad market acts (PCED inflation comes out today).

Expensify has $38 million remaining on its share buyback program which should lend support to shares. BUY

Tyler Laundon is chief analyst of the limited-subscription advisory, Cabot Small-Cap Confidential and grand slam advisory Cabot Early Opportunities. He has spent his entire career managing, consulting and analyzing start-up and small-cap companies. His hands-on experience has taught Tyler that the development of a superior business model is the biggest factor in determining a company’s long-term success. Accordingly, his research focuses on assessing the viability of management’s growth strategies, trends in addressable markets and achievement of major developmental milestones.