Expensify: A busted IPO to an undervalued SaaS Micro-Cap

Expensify (EXFY) develops and sells Software-as-a-Service (SaaS) solutions designed to simplify expense reporting, receipt tracking, global payments, and company card reconciliation. The platform streamlines the financial expense management workflows. Expensify's features include payment processing, invoicing, chat, document management, global reimbursements, budgeting, and email notifications. Employees can easily report payments and receipts, allowing finance departments to track, analyze, and manage budgets more effectively.

Why Expensify (EXFY)? Expensify is a broken October 2021 IPO. Financially strong and valued at 125M as a Software-as-a-Service (SaaS). It's down 96% from its first week high as an IPO. However, EXFY trades at an EV/Rev of .83 with an average of 719,000 2023 paid members and $1,116,296 revenue per employee. FCF is projected to be between 10 and 12 million in 2024. Further, a clear road map and focus on dominating the untapped, underserved VSB (very small business) market that uses email and Excel to manage expenses and documents. New Expensify created a moat around payments and documents with real-time chat in 2024. In 2023 and 2024, Steven Mclaughlin (Founder / CEO / Financial Technology Partners) purchased 11,341,889 shares above the current market price.

Year-end 2023 results:

The full-year 2023 financial results were reported on 02/2024. Revenue was 150.70 million, operating cash flow was 1.60 million, and FCF was 600,000. GAAP net loss was $41.7 million, non-GAAP net loss was $500,000, and adjusted EBITDA was 13.20 million. Adjusted EBITDA excludes stock compensation, depreciation/amortization, interest expense, and taxes.

Quarter 4 revenue was 32.2 million, average paid members was 719,000, net loss was 7.50 million, and adjusted EBITDA was 5.90 million. The fourth quarter demonstrated material improvement over Q3, driven by expense reductions. Cash used in operations was $500,000. Free cash flow was negative at $3.6 million, and net loss was $7.5 million. Non-GAAP net income was $3.1 million, and adjusted EBITDA was $5.9 million.

Adds, Churn, Expansion (FY 2022 and 2023)

The slide above was taken from Q4 2023 earnings call

Key metrics, like churn and new acquisitions, averaged the same over the prior two years. However, customer growth fluctuated materially, with a decline in paid seats compared to the previous year. The contraction of paid seats among existing customers resulted from challenging economic conditions reported by management. Despite economic conditions, customers stayed; instead, they made fewer and smaller transactions.


EXFY is Software-as-a-Service (SaaS) with a positive and growing free cash flow. The enterprise-to-revenue ratio is .82, and the staggering average revenue per employee was 1,116,296 in 2023. The number of paid customers averaged 732,000 in 2023. And, if the top line and free cash flow exceed expectations, the stock price will quickly rise from its historical and relatively low EV/Rev of .83. Quarter four's 2023 free cash flow improvement does not fully reflect the new cost reduction to be realized in 2024.

Strong financial position: debt per share was reduced from a 2022 balance of .82 to .34 in the latest quarter. The company has a cash balance of 47.50 million and a remaining credit line of 22.70 million. Portland, Oregon, headquarters' 38,500-square-foot office space is owned.

David Barrett, the company's founder, has a strong background in technology. Previously, he was the engineering lead at Red Swoosh, a peer-to-peer file-sharing company acquired in 2007 by Akamai Technologies.

Expensify sold 9.73 million shares priced at $27 at its October 2021 IPO, raising $262.7 million. In its stock market debut, the stock opened at $39.75 and rose 47%, valuing the company at $3.87 billion.

The company is rolling out New Expensify and leaning into its core functionality by creating a moat using real-time chat within expense management, document exchange, global payments, and additional functionality around expense reimbursement. The newly added chat function is free of charge. However, plans will begin charging in 2024.

For 2024, management forecast 10-12 million in FCF without expecting an improved macro environment. The current cash balance is $48 million, with a small amount left on their revolving credit line. Share buybacks make sense, with a projected 10-12 million free cash flow in 2024. They have $41M remaining on their share buyback commitment but have no plans to repurchase shares.

Recruiting and focusing on accounting partners and onboarding clients onto the new card to enjoy 50 basis points in revenue share. The new card program enhances revenue by earning more interchange per transaction, with existing customers transitioning by the end of 2024. All new Expensify Card customers are automatically part of this program, increasing reported interchange fees by 20%, now reported as revenue and not a contra expense. 

New Expensify leans into real-time chat around every core function for document management, payments, and receipts. Chat is viral and makes AI a potentially more significant advantage. Chat surrounding each function offers a deeper understanding of what drives or destroys value.

Expense management can provide insight into business value drivers. Real-time chat around receipts/payments, documents, negotiations, travel management, payroll, and budgets will provide a deeper understanding of value creation or destruction. AI can be integrated into the analysis because AI is based on words (Chat). Conversations are attached to the file, report, task, or expense discussed. 

Management reported a +35% month-over-month increase in global reimbursement customers with the new Expensify.

Cost cutting was implemented halfway through the fourth quarter. So, the full impact will be realized in future quarters.

Expensify focuses on billions of untapped and uncontested global VSBs (very small businesses). There are 1.3B underserved users in the VSB/SMB market using spreadsheets and email. EXFY is the only company actively pursuing this huge, untapped market. According to management, there is no organized competition. The USA has 33.20 million small businesses, accounting for 99.9% of all US businesses. Expensify is built from the ground up for seamless interoperability.

The chat design around all New Expensify functions enables AI. A clear roadmap for Expensify's success centered around a viral, bottom-up, word-of-mouth lead generation strategy leveraged on chat.

With Expensify's SmartScan technology, you can take pictures of your receipts. To simplify expense tracking, it automatically reads the vendor, date, and amount. It integrates with accounting and ERP systems. The updated architecture is React Native. With it, you can get a synchronous layout and effects, a concurrent renderer.

Expensify was built internally but now uses open source. With thousands of talented developers worldwide, open-source leverages Expensify's internal engineering team.

Institutional Ownership is only 14.10%, with 66.53% of shares in public float.

Insider buying:

Steven J. McLaughlin, founder and CEO of FT Partners, a fintech-focused investment banking firm, has aggressively accumulated shares and is now a 10% owner. Starting in August 2023, McLaughlin purchased 1,659,105 shares for 8,262,909 at an average price of $4.98. In October 2023, an additional 168,894 shares were purchased for 418,857 at an average price of 2.48. In November 2023, 1,014197 shares were bought for 1,845,840 at an average price of 1.82. The total shares acquired in 2023 were 2,842,198 for 10,527,606 at an average price of $3.70.

During 2024, McLaughlin began adding more shares. January 2024, shares purchased were 237,532 for $418,471 for an average price of 1.76. February 2024, shares purchased were 182,941 for $290876 for an average price of 1.59. April 2024, shares bought were 1,016,612 for 1,545,595 at an average price of 1.52. The total number of shares purchased in 2024 was 1,437,085 for 2,254,942 for an average 2024 price of 1.57. 

So the total for 2023 and 2024 was 4,279,281 shares purchased at the cost of 12,782,548 for an average price of $2.99

The slide above was taken from Q4 2023 earnings call


Customer activity is down, and management gave no guidance on revenue retention.
In Q4, the average paid membership dropped to 719,000, down from 732,000 in 2023. Expensify's new features took longer than expected, and Q1 2024 could be tough since January is traditionally a slow month, as discussed on the Q4 earnings call. 

Competition is intense with many private companies.

Capital structure: Expensify has three stock classes. Class A stock has one vote per share; privately held LT10 shares of 7.3 million (ten votes per share); and privately held LT50 shares of 7.3 million (50 votes per share). The owners of the LT10 and LT50 shares control 17% of the economic interest and 86% of the voting power in Expensify.

The CEO is betting on viral and SEO strategies for sales/marketing. These have execution risks. A weak economic outlook for existing customers could again be blamed for consistently missing expectations.

Cost cutting is responsible for the dramatic Q4 improvements over Q3, not operational or top-line improvements. On the recent Q4 earnings call, management didn't provide long-term growth guidance outside FCF for 2024.


I'm optimistic about $ EXFY's long-term value based on the product's customer reviews, talented management/board, and a founding CEO's focus on the long term. Furthermore, the deep value is based on sales and FCF to EV for a SaaS microcap. Also, the low public float and tiny institutional ownership will quickly increase the stock price if they beat expectations or show customer growth.

Long: EXFY