# Expensify, Inc. (EXFY) FY 2024 MD&A

Verbatim Item 7 Management's Discussion and Analysis from Expensify, Inc.'s 10-K for fiscal year 2024.

SEC filing source: https://www.sec.gov/Archives/edgar/data/1476840/000147684025000018/exfy-20241231.htm
Accession: 0001476840-25-000018
Filing date: 2025-02-27
Report date: 2024-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary.
Confidence: high

Company profile: /company/EXFY/
All MD&A years: /company/EXFY/mda/
Previous year: /company/EXFY/mda/fy2023/ (FY 2023)
Next year: /company/EXFY/mda/fy2025/ (FY 2025)

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read together with our audited consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements based upon current plans, expectations and beliefs involving risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Risk Factors” and in other parts of this Annual Report on Form 10-K.

The following discussion and analysis of our financial condition and results of operations generally discusses 2024 and 2023 items and year-to-year comparisons between 2024 and 2023. A discussion of 2022 items and year-to-year comparisons between 2023 and 2022 can be found in "Management’s Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 26, 2024.

OVERVIEW

Expensify is a cloud-based expense management software platform that helps the smallest to the largest businesses simplify the way they manage money. Every day, people from all walks of life in organizations around the world use Expensify to scan and reimburse receipts from flights, hotels, coffee shops, office supplies and ride shares. Since our founding in 2008, we have added over 15 million members to our community and processed and automated over 1.7 billion expense transactions on our platform as of December 31, 2024, freeing people to spend less time managing expenses and more time doing the things they love. For the year ended December 31, 2024, an average of 687,000 paid members across an average of 47,600 companies and over 200 countries and territories used Expensify to make money easy.

OUR BUSINESS MODEL

Our employee-centric product strategy, viral and bottom-up business model, word-of-mouth adoption and unique company culture come together to drive value for our members and a competitive advantage for us. We believe that if we remain hyper-focused on our end-user members, and build great products, our members will continue to drive adoption.

We primarily generate revenue from annual subscriptions to our cloud-based platform, driven by the number of paid members active on a monthly basis. Individuals or companies pay for subscriptions on behalf of themselves, their employees and contractors, who we collectively refer to as members. We define a customer as any member who pays for themselves and zero or more other members, grouped into one or more "expense policies." This might be an individual, an entire company, or a department of a larger company. The definition of customer inherently excludes sole proprietors on Track or Submit plans.

We monetize transactions from the Expensify Card by receiving a percentage of the interchange for all spend on the card. As we expand our platform, we continue to increase the number of integrations and to more actively promote the Expensify Card with complementary use cases beyond expense management to both new and existing customers to drive increased adoption.

We monetize bookings via Expensify Travel by charging a booking fee on each booking. We intend to continue to develop complimentary features to Expensify Travel to increase the number of existing companies using Expensify Travel and to attract new customers.

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Key Factors Affecting Our Performance

Our performance depends on many factors, including the following:

INVESTING IN PRODUCT-LED GROWTH

We continue to focus on growing the number of paid members on our platform. Relative to other software companies, we invest more in product development and less in sales. This investment in product allows us to develop easy-to-use but powerful features that encourage adoption of our platform. Our ability to grow our paid members depends on our viral, bottom-up adoption cycle that starts with an individual employee. After downloading our free app to submit expenses and realizing the benefits of Expensify, our enthusiastic members champion our platform internally, spread it via word-of-mouth or invites to other employees and often convince decision makers to adopt Expensify company-wide. In order to continue to grow, we believe we must continue prioritizing investments in our platform to delight our members and drive viral expansion.

CONVERTING FREE MEMBERS

Our success depends on converting users who try the free aspects of the Expensify platform into paid members. While our viral model means that employees or contractors often introduce Expensify into small and medium-sized businesses (“SMBs"), companies subscribe and pay for the majority of our paid members.

INVESTING TO MAINTAIN MARKET CONSENSUS

Our viral and word-of-mouth adoption model is effective in part because we have established ourselves as a recognized leader in expense management for SMBs. We deploy large scale brand advertising to promote our platform strength and create market consensus that Expensify is a category leader for expense management software. Additionally, in 2023 we hosted our third ExpensiCon, an invite-only, all-expenses paid industry conference, with the goal of increasing our market consensus among our Approved! Accounting partners and increasing adoption of our platform. We believe investing in market consensus enables us to focus on creating great viral features for our members rather than relying on low-margin, unscalable activities of traditional sales and marketing to drive customer acquisition. In 2024 we invested in a promotional marketing opportunity to have Expensify heavily featured in Apple's biggest budget film, F1, which is scheduled to be released in theaters on June 27, 2025. Our goal is that this will increase our brand awareness and support our bottom-up, word of mouth marketing.

RETAINING EXISTING CUSTOMERS

Expense management touches many functions across a company. To provide a seamless experience for our customers, we integrate with accounting, ERP and travel software used by SMBs and their employees every day. We also have frictionless integrations with many of the technology providers that generate the most receipts for our members, such as Uber and Lyft. Expensify delivers an expense management platform that we believe customers like, and that embeds us within organizations. Because of these two factors, we have historically enjoyed high customer retention rates that often outperform enterprise retention rates. We believe an additional factor that drives our retention rates is that SMBs generally re-evaluate their technology solutions less frequently, and as such, there is rarely a conscious choice around whether to choose to continue using Expensify for another year.

Gross logo retention and net seat retention are important indicators of customer satisfaction and usage of our platform. We calculate our gross logo retention rate as of the end of a period by using (a) the number of distinct companies who have ever had five or more paid members paying for a subscription during the period ending one year prior as the denominator and (b) the number of those same companies that are still paying for at least one subscription during the more recent period as the numerator. In 2024 and 2023, our annual gross logo retention was 81% and 74%, respectively. We calculate our net seat retention rate as of the end of a period by using (a) the number of paid member seats from companies who have

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ever had five or more paid members paying for a subscription during the period ending one year prior as the denominator and (b) the number of paid member seats at those same companies during the more recent period as the numerator. In 2024 and 2023, our net seat retention was 86% and 99%, respectively. Our growth will depend on our ability to retain existing customers.

INTRODUCING FEATURES TO EXPAND OUR RELATIONSHIP WITH EXISTING CUSTOMERS

We fully launched the Expensify Card in 2020 and we intend to actively promote the Expensify Card to both new and existing customers to drive increased adoption. In 2024, we launched our travel platform, Expensify Travel, as a natural extension of our expense management product. Many companies look for combined travel and expenses solutions in order to streamline the booking to reimbursement flow. Outside of the Expensify Card and Expensify Travel, we have invested, and will continue to invest, in developing features complementary and adjacent to expense management. At most companies, not every employee generates expenses that would be submitted via an expense report on a monthly basis. As we add additional features that are used by all employers, we have the potential to monetize the segment of our customers’ employees that are not submitting expense reports.

MACROECONOMIC TRENDS

Our business and the operations of our customers, the majority of which are SMBs, depend on the overall state of the economy, and we and they could be negatively impacted by slower economic growth and a potential for a recession. Although certain indicators have suggested that inflation has made downward progress, the economy continues to be impacted by elevated inflation rates and faces further inflation risk. Tariff and trade issues also continue to cause overall uncertainty with respect to the economy. See the section titled "Risk Factors" in this Annual Report on Form 10-K for further discussion of the possible impact of such macroeconomic trends on our business. Additionally, other potential challenging macroeconomic conditions, and the resulting impact on business continuity and travel, could negatively impact our business.

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Components of Results of Operations

Revenue

We generate revenue from subscription fees based on the usage of our cloud-based expense management software platform under arrangements paid monthly in arrears that are either (i) month-to-month and can be terminated by either party without penalty at any time or (ii) annual arrangements based on a minimum number of monthly members. Annual subscription customers who wish to terminate their contracts before the end of the term are required to pay the remaining obligation in full plus any fees or penalties set forth in the agreement. We charge our customers subscription fees for access to our platform based on the number of monthly active members and level of service. The contractual price is based on either negotiated fees or rates published on our website. We generate most of our revenue from customers who have a credit card or debit card on file with us that is automatically charged each month. Virtually all of our customers have a standard terms of service contract, with the few exceptions for customers on bespoke service contracts.

Our contracts with our customers include two performance obligations: access to the hosted software service, inclusive of all features available within the platform, and the related customer support. We account for the platform access and the support as a combined performance obligation because they have the same pattern of transfer over the same period and are therefore delivered concurrently. We satisfy our performance obligation over time each month as we provide platform access and support services to customers and as such recognize revenue over time. We recognize revenue net of applicable taxes imposed on the related transaction.

During the year ended December 31, 2024, the Expensify Card consisted of two card programs operating concurrently: the "Legacy Card Program," which was the original program when the Expensify Card launched in 2020, and the "Updated Card Program," which launched in February 2024. All new Expensify Cards issued subsequent to the launch of the Updated Card Program operate under that program. As of December 31, 2024, our transition of cardholders from the Legacy Card Program to the Updated Card Program was substantially complete.

Under the Updated Card Program, we generate revenue from the authorization and settlement of Expensify Card transactions and are contractually entitled to all interchange generated on Expensify Card transactions based on our agreement with the issuing bank. Under the Updated Card Program, we are the principal in the transaction and recognize interchange as revenue on a gross basis within Revenue on the accompanying Consolidated Statements of Operations. Interchange revenue was $9.2 million for the year ended December 31, 2024.

We offer a cashback rewards program to all customers on the Updated Card Program based on volume of Expensify Card transactions. Cashback rewards are earned on a monthly basis and are applied against outstanding customer receivables or are paid out the following month. We consider our cashback rewards as consideration payable to a customer, and it is recorded as contra revenue within Revenue on the Consolidated Statements of Operations. Cashback rewards applied against outstanding customer receivables are reflected as a reduction to Accounts receivable, net on the Consolidated Balance Sheets. Cashback rewards liability is recorded within Accrued expenses and other liabilities on the Consolidated Balance Sheets. The cashback rewards fluctuate over time as customers meet eligibility requirements and timing of payments made to customers.

Cost of Revenue, Net

Cost of revenue, net primarily consists of expenses related to hosting our service, including the costs of data center capacity, credit card processing fees, third-party software license fees, outsourcing engineering costs to maintain our platform, outsourcing costs to support customer service and outsourcing costs to support our patented scanning technology SmartScan, net of consideration from a vendor for monetizing Expensify Card activities. Additional costs include amortization of finance right-of-use assets, amortization expense on capitalized software development costs and personnel-related

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expenses, including stock-based compensation and employee costs attributable to supporting our customers and maintenance of our platform.

Consideration from a vendor is related to the Expensify Card under the Legacy Card Program, where we use a third-party vendor to issue Expensify Cards and process the related transactions. The vendor is contractually entitled to the interchange through its relationships with the card network and card issuing bank. The vendor keeps a portion of the interchange for their services, and our agreement with the vendor results in us receiving the remainder of the interchange (our remainder portion, "Expensify interchange amount"). The vendor also charges us fees ("vendor fees") for the services it provides to us. Due to the nature of the vendor agreement, we do not record the Expensify interchange amount as revenue under the Legacy Card Program. Instead, the net of the Expensify interchange amount and vendor fees are paid to us, which we record as "Consideration from a vendor, net," a contra expense in Cost of revenue, net on the Consolidated Statements of Operations. The following summarizes these various amounts for each of the periods presented:

[[GREPCENT_TABLE]]
[["","Year ended December 31,"],["","2024","","2023"],["","(in thousands)"],["Expensify interchange amount","$","8,014","","","$","11,144"],["Vendor fees","(821)","","","(1,009)"],["Consideration from a vendor, net","$","7,193","","","$","10,135"]]
[[/GREPCENT_TABLE]]

OPERATING EXPENSES

Research and Development

Research and development expenses consist primarily of personnel-related expenses, including stock-based compensation, and external contributor costs incurred related to the planning and preliminary project stage of new products or enhancing existing products or services. We capitalize certain software development costs that are attributable to developing or adding significant functionality to our internal-use software during the application development stage of the projects. All research and development expenses, excluding capitalized software development costs, are expensed as incurred.

We believe delivering new functionality is critical to attract new customers and expand our relationships with existing customers. We expect to continue to make investments in and expand our product and service offerings to enhance our customers’ experience and satisfaction and to attract new customers. We expect research and development expenses will increase as we expand our research and development team to develop new products and product enhancements.

General and Administrative

General and administrative expenses primarily consist of personnel-related expenses, including stock-based compensation, for any employee time allocated to administrative functions, including finance and accounting, legal and compliance, and human resources. In addition to personnel-related expenses, general and administrative expenses consist of business insurance, rent, utilities, depreciation on property and equipment, amortization of operating lease right-of-use assets, information technology and external professional services, including finance and accounting, audit, tax, legal and compliance, and human resources. We expect that general and administrative expenses will remain consistent as it relates to costs associated with being a publicly traded company, including legal, audit, business insurance and consulting fees.

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Sales and Marketing

Sales and marketing expenses primarily consist of personnel-related expenses, including stock-based compensation, advertising expenses, depreciation on property and equipment, outsourcing costs for sales and product demos, branding and public relations expenses, referral fees for strategic partners and other benefits that we provide to our referral and affiliate partners. We expect sales and marketing expenses will increase as we expand our brand marketing.

Interest and Other Expenses, Net

Interest and other expenses, net, consist primarily of interest paid under our credit facilities with Canadian Imperial Bank of Commerce ("CIBC"). It also includes the results of operations of our Fifth & Harvey, LLC subsidiary, which holds title to and manages operations of the operating lease for lots in Portland, Oregon that are currently used to host multiple portable food vendors open to the general public, realized gains and losses on foreign currency transactions and foreign currency remeasurement. We expect interest and other expenses, net will decrease as all outstanding debt has been paid off as of December 31, 2024.

Provision for Income Taxes

Income taxes primarily consist of income taxes in the United States, United Kingdom, Australia, Netherlands and Canada, as well as states in the United States in which we do business.

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Results of Operations

The results of operations presented below should be reviewed in conjunction with the consolidated financial statements and notes included elsewhere in this Annual Report on Form 10-K.

The following table sets forth our results of operations for the periods presented:

[[GREPCENT_TABLE]]
[["","Year ended December 31,"],["","2024","","2023"],["","(in thousands, except per share data)"],["Revenue","$","139,236","","","$","150,687"],["Cost of revenue, net(1)","64,239","","","66,888"],["Gross margin","74,997","","","83,799"],["Operating expenses:"],["Research and development(1)","24,638","","","23,368"],["General and administrative(1)","38,382","","","49,228"],["Sales and marketing(1)","12,797","","","44,352"],["Total operating expenses","75,817","","","116,948"],["Loss from operations","(820)","","","(33,149)"],["Interest and other expenses, net","(1,572)","","","(5,327)"],["Loss before income taxes","(2,392)","","","(38,476)"],["Provision for income taxes","(7,663)","","","(2,980)"],["Net loss","$","(10,055)","","","$","(41,456)"],["Net loss per share:"],["Basic and diluted","$","(0.12)","","","$","(0.50)"],["Weighted average shares of common stock used to compute net loss per share:"],["Basic and diluted","87,380,708","","","82,493,226"],["Net loss margin","(7)","%","","(28)","%"]]
[[/GREPCENT_TABLE]]

(1)Includes stock-based compensation expense as follows:

[[GREPCENT_TABLE]]
[["","Year ended December 31,"],["","2024","","2023"],["","(in thousands)"],["Cost of revenue, net","$","12,506","","","$","13,868"],["Research and development","11,900","","","10,870"],["General and administrative","6,815","","","9,842"],["Sales and marketing","2,316","","","6,632"],["Total stock-based compensation expense","$","33,537","","","$","41,212"]]
[[/GREPCENT_TABLE]]

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COMPARISON OF THE YEARS ENDED DECEMBER 31, 2024 AND 2023

Revenue

[[GREPCENT_TABLE]]
[["","Year ended December 31,","","Change"],["","2024","","2023","","Amount","","%"],["","(in thousands, except percentages)"],["Revenue","$","139,236","","","$","150,687","","","$","(11,451)","","","(8)","%"]]
[[/GREPCENT_TABLE]]

Revenue decreased $11.5 million, or 8%, for the year ended December, 31, 2024 compared to the same period in 2023, primarily due to (i) a decrease in billable activity across our user base, including a decrease in pay-per-use billable activity which has a higher average fee per member than our annual members, and (ii) an increase in contra revenue related to cashback payments driven by the increased adoption and spend captured from members using the Expensify Card. These decreases were partially offset by an increase in interchange revenue driven primarily by a shift in cardholder spend from the Legacy Card Program to the Updated Card Program.

Cost of Revenue, Net and Gross Margin

[[GREPCENT_TABLE]]
[["","Year ended December 31,","","Change"],["","2024","","2023","","Amount","","%"],["","(in thousands, except percentages)"],["Cost of revenue, net","$","64,239","","","$","66,888","","","$","(2,649)","","","(4)","%"],["Gross margin","$","74,997","","","$","83,799","","","$","(8,802)","","","(11)","%"],["Gross margin %","54","%","","56","%"]]
[[/GREPCENT_TABLE]]

Cost of revenue, net decreased by $2.6 million, or 4%, for the year ended December 31, 2024 compared to the same period in 2023. Cost of revenue, net decreased primarily due to (i) a decrease in outsourcing activities related to maintaining our platform, and (ii) a decrease in total employee and employee related expenses subject to allocation. These were partially offset by a decrease in Consideration from a vendor, net driven primarily by a shift in cardholder spend from the Legacy Card Program to the Updated Card Program.

Gross margin decreased to 54% in 2024 compared to 56% in the same period in 2023 due to the factors described in the preceding paragraphs for Revenue and Cost of revenue, net.

Research and Development

[[GREPCENT_TABLE]]
[["","Year ended December 31,","","Change"],["","2024","","2023","","Amount","","%"],["","(in thousands, except percentages)"],["Research and development","$","24,638","","","$","23,368","","","$","1,270","","","5","%"]]
[[/GREPCENT_TABLE]]

Research and development expenses increased by $1.3 million, or 5%, for the year ended December 31, 2024 compared to the same period in 2023, primarily due to an increase in employee time spent on project initiatives and new product features, partially offset by a decrease in total employee and employee related expenses subject to allocation.

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General and Administrative

[[GREPCENT_TABLE]]
[["","Year ended December 31,","","Change"],["","2024","","2023","","Amount","","%"],["","(in thousands, except percentages)"],["General and administrative","$","38,382","","","$","49,228","","","$","(10,846)","","","(22)","%"]]
[[/GREPCENT_TABLE]]

General and administrative expenses decreased $10.8 million, or 22%, for the year ended December 31, 2024 compared to the same period in 2023, primarily due to (i) a decrease in total employee related expenses subject to allocation, (ii) a decrease in settlement losses, and (iii) a decrease in business insurance expense.

Sales and Marketing

[[GREPCENT_TABLE]]
[["","Year ended December 31,","","Change"],["","2024","","2023","","Amount","","%"],["","(in thousands, except percentages)"],["Sales and marketing","$","12,797","","","$","44,352","","","$","(31,555)","","","(71)","%"]]
[[/GREPCENT_TABLE]]

Sales and marketing expenses decreased $31.6 million, or 71%, for the year ended December 31, 2024 compared to the same period in 2023, primarily due to (i) a decrease in outsourcing activities related to sales and product demos, (ii) a decrease in total employee and employee related expenses subject to allocation and a decrease in time spent on sales and marketing activities, (iii) a decrease in advertising spend, and (iv) a decrease in marketing event spend.

Interest and Other Expenses, Net

[[GREPCENT_TABLE]]
[["","Year ended December 31,","","Change"],["","2024","","2023","","Amount","","%"],["","(in thousands, except percentages)"],["Interest and other expenses, net","$","(1,572)","","","$","(5,327)","","","$","3,755","","","(70)","%"]]
[[/GREPCENT_TABLE]]

Interest and other expenses, net decreased by $3.8 million, or 70%, for the year ended December 31, 2024 compared to the same period in 2023 primarily due to a decrease in interest expense incurred due to the repayments of the term loan component of the 2021 Amended Loan and Security Agreement (as defined below), the revolving line of credit and the amortizing term mortgage.

Provision for Income Taxes

[[GREPCENT_TABLE]]
[["","Year ended December 31,","","Change"],["","2024","","2023","","Amount","","%"],["","(in thousands, except percentages)"],["Provision for income taxes","$","(7,663)","","","$","(2,980)","","","$","(4,683)","","","157","%"]]
[[/GREPCENT_TABLE]]

We recorded a provision for income taxes of $7.7 million for the year ended December 31, 2024 compared to a $3.0 million provision for income taxes for the year ended December 31, 2023. We follow the asset and liability method of accounting for income taxes, whereby we recognize deferred income taxes for the tax consequences of temporary differences between the financial statement carrying amounts and the tax

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basis of the assets and liabilities. Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized. During the years ended December 31, 2024 and 2023, we recorded an incremental valuation allowance of $0.9 million and $3.7 million, respectively. The provision for income taxes reflects taxable income earned and taxed in U.S. federal and state, and non-U.S. jurisdictions.

Our effective income tax rate was (320.4)% and (7.7)%, for the years ended December 31, 2024 and 2023, respectively. The effective income tax rate differs from the statutory rate in 2024 primarily due to nondeductible stock-based compensation, the compensation limitations imposed by Internal Revenue Code ("IRC") Section 162(m), and the change in the valuation allowance. The effective income tax rate differs from the statutory rate in 2023 primarily due to nondeductible stock-based compensation, the change in the valuation allowance, and the compensation limitations imposed by IRC Section 162(m).

Liquidity and Capital Resources

Since our inception, we have financed our operations primarily through our cash flow from operations, sales of our equity securities and borrowings under our credit facilities. As of December 31, 2024, we had $48.8 million in cash and cash equivalents with no outstanding indebtedness and $24.0 million of capacity available for borrowings under the revolving line of credit.

Our future capital requirements will depend on many factors, including revenue growth and costs incurred to support growth in our business and our need to respond to business opportunities, challenges or unforeseen circumstances. We believe that our existing cash resources will be sufficient to finance our continued operations and growth strategy for the next 12 months and the foreseeable future.

CASH FLOWS

The following table summarizes our cash flows for the periods indicated:

[[GREPCENT_TABLE]]
[["","Year ended December 31,"],["","2024","","2023"],["","(in thousands)"],["Net cash provided by operating activities","$","23,877","","","$","1,559"],["Net cash used in investing activities","(7,628)","","","(7,294)"],["Net cash used in financing activities","(22,073)","","","(45,317)"],["Net decrease in cash and cash equivalents and restricted cash","$","(5,824)","","","$","(51,052)"]]
[[/GREPCENT_TABLE]]

CASH FLOWS FROM OPERATING ACTIVITIES

Net cash provided by operating activities was $23.9 million for the year ended December 31, 2024 as compared to $1.6 million for the same period in 2023. The increase is primarily due to a decrease in marketing and advertising spend and a decrease in outsourcing activities related to sales and product demos, partially offset by a decrease in revenue.

CASH FLOWS FROM INVESTING ACTIVITIES

During the year ended December 31, 2024, net cash used in investing activities was $7.6 million, primarily consisting of software development costs.

Net cash used in investing activities increased for the year ended December 31, 2024 compared to the same period in 2023, primarily due to an increase in employee and external contributor software development costs offset by a decrease in the purchase of property and equipment.

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CASH FLOWS FROM FINANCING ACTIVITIES

During the year ended December 31, 2024, net cash used in financing activities was $22.1 million, primarily consisting of the repayment of the revolving line of credit and the amortizing term mortgage, and the repurchase and retirement of common stock, which was partially offset by proceeds from common stock purchased under our 2021 Stock Purchase and Matching Plan ("Matching Plan").

During the year ended December 31, 2023, net cash used in financing activities was $45.3 million, primarily consisting of principal payments on the term loan, the repurchase and retirement of common stock, and payment for employees taxes withheld from stock-based awards, which was partially offset by proceeds from common stock purchased under the Matching Plan.

Share Repurchase Program

On May 10, 2022, the Executive Committee approved a share repurchase program with authorization to purchase up to $50.0 million of shares of Class A common stock ("2022 Share Repurchase Program"). We may repurchase shares from time to time through open market purchases, in privately negotiated transactions or by other means, including the use of trading plans intended to qualify under Rule 10b5-1 of the Exchange Act, in accordance with applicable securities laws and other restrictions. The actual timing, manner, price and total amount of future repurchases will depend on a variety of factors, including business, economic and market conditions, corporate and regulatory requirements, prevailing stock prices, restrictions under the terms of loan agreements and other considerations. The 2022 Share Repurchase Program does not obligate us to acquire any particular amount of Class A common stock, and the program may be suspended or terminated by us at any time at our discretion without prior notice. As of December 31, 2024, there was approximately $39.5 million remaining under the share repurchase authorization.

The 2022 Share Repurchase Program was scheduled to expire on March 31, 2025. On February 25, 2025, the Executive Committee approved a new share repurchase program with authorization to purchase up to $50.0 million of shares of Class A common stock ("2025 Share Repurchase Program") that replaces the 2022 Share Repurchase Program. Pursuant to the 2025 Share Repurchase Program, we may repurchase shares from time to time through open market purchases, in privately negotiated transactions or by other means, including the use of trading plans intended to qualify under Rule 10b5-1 of the Exchange Act, in accordance with applicable securities laws and other restrictions. The actual timing, manner, price and total amount of future repurchases will depend on a variety of factors, including business, economic and market conditions, corporate and regulatory requirements, prevailing stock prices, restrictions under the terms of loan agreements and other considerations. The 2025 Share Repurchase Program does not obligate us to acquire any particular amount of Class A common stock, and the program may be suspended or terminated by us at any time at our discretion without prior notice.

See Note 8 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for further information.

CREDIT FACILITIES

Amortizing Term Mortgage

In August 2019, we entered into an $8.3 million amortizing term mortgage agreement with CIBC for our commercial building located in Portland, Oregon. The agreement required principal and interest payments due each month over a five-year period. Interest accrued at a fixed rate of 5.00% per year until August 2024, at which point the remaining outstanding principal balance on the amortizing term mortgage was due in full. The borrowings were secured by the building. On August 29, 2024, we repaid in full the then-outstanding balance of $7.6 million and an immaterial amount of accrued interest and terminated the associated mortgage agreement with CIBC and secured promissory note. See Note 7 to our condensed consolidated financial statements included elsewhere in this Annual Report on Form 10-K for further information.

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2021 Loan and Security Agreement

In September 2021, we amended and restated our loan and security agreement with CIBC (the "2021 Amended Loan and Security Agreement") which consisted of a $45.0 million initial term loan, the option to enter into an additional $30.0 million delayed term loan that expired in March 2023, and a monthly revolving line of credit of $25.0 million. Under the 2021 Amended Loan and Security Agreement, the initial term loan of $45.0 million was payable over a 60-month period with principal and accrued interest payments due each quarter, commencing on September 30, 2021. The term loan amortized in equal quarterly installments of $0.1 million through September 30, 2024, $0.2 million beginning October 1, 2024 and $0.6 million beginning October 1, 2025, with any remaining principal balance due and payable on maturity in September 2026. The amounts borrowed accrued interest at the bank’s reference rate plus 2.25% beginning on September 30, 2021 and continued on a quarterly basis through maturity of the term loan. The borrowings were secured by substantially all our assets. The then-outstanding balance of $36.0 million and $0.1 million of accrued interest on the term loan were repaid in full on October 12, 2023.

2024 Loan and Security Agreement

In February 2024, we entered into a Second Amended and Restated Loan and Security Agreement (as amended by the amendments described below, and as may be further amended from time to time, the "2024 Amended Loan and Security Agreement") with CIBC. The 2024 Amended Loan and Security Agreement amended and restated the 2021 Amended Loan and Security Agreement in its entirety, to extend the maturity date of the revolving line of credit from September 2024 to September 2025, remove certain provisions related to the term loan that was repaid in full in October 2023, and make certain changes to the positive and negative covenants intended to better align with our operations. The 2024 Amended Loan and Security Agreement provides for a $25.0 million revolving credit facility. Borrowings under the revolving line of credit accrue interest at CIBC’s reference rate plus 1.00% and are secured by substantially all our assets.

We incurred an immaterial amount of costs in connection with entering into the 2024 Amended Loan and Security Agreement. These debt issuance costs are reflected as a deferred asset within Other current assets on the Consolidated Balance Sheets and are being amortized to interest expense on a straight-line basis over the term of the agreement.

On April 24, 2024, we entered into an irrevocable standby letter of credit (the "Letter of Credit") issued under the 2024 Amended Loan and Security Agreement to reduce cash collateral requirements in connection with the Updated Card Program. The Letter of Credit was issued in the amount of $1.0 million for the benefit of The Bancorp Bank, N.A. and expires on March 20, 2025. No amounts have been drawn on the Letter of Credit as of December 31, 2024.

In May 2024, we entered into a First Amendment to the 2024 Amended Loan and Security Agreement, which amended the covenant restricting the amount of repurchases of common stock to allow for certain additional repurchase activity and provided a waiver for our non-compliance during prior periods with the previous version of such covenant.

The then-outstanding balance of $15.0 million and an immaterial amount of accrued interest on the revolving line of credit were repaid in full on July 10, 2024.

Upon full repayment of the amortizing term mortgage on August 29, 2024, we entered into a Second Amendment to the 2024 Amended Loan and Security Agreement, which permits our wholly-owned subsidiary, 401 SW 5th Ave LLC, to remain an excluded subsidiary provided that the subsidiary does not engage in any operations or activities except to maintain legal existence and ownership of the real property or any related activities thereto, does not hold assets other than real estate assets, and does not incur any indebtedness except for intercompany liabilities permitted under the agreement or grant any liens.

In February 2025, we entered into a Third Amendment to the 2024 Amended Loan and Security Agreement, which amended the covenant restricting the amount of repurchases of common stock, which

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includes net share settlements of stock-based awards, to allow for certain additional net share settlement activity and provided a waiver for our non-compliance of this covenant as of December 31, 2024 with the previous version of such covenant.

See Note 7 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for further information.

Certain Covenants

We are subject to customary covenants under the 2024 Amended Loan and Security Agreement, which, unless waived by CIBC, restrict our and our subsidiaries' ability to, among other things, incur additional indebtedness, create or incur liens, permit a change of control, merge or consolidate with other companies, sell or transfer assets, pay dividends or make distributions, make acquisitions, investments or loans, or payments and prepayments of subordinated indebtedness, subject to certain exceptions. We must also maintain certain financial covenants: a total liquidity ratio, as defined in the 2024 Amended Loan and Security Agreement, tested each quarter, of not less than 1.10 to 1.00 from the quarter ending March 31, 2024, not less than 1.20 to 1.00 from the quarter ending June 30, 2024 and each quarter thereafter, and a total EBITDA net leverage ratio, as defined in the 2024 Amended Loan and Security Agreement, tested each quarter, of not less than 2.50 to 1.00 from the quarter ended March 31, 2025 and each quarter thereafter.

Upon full repayment of the amortizing term mortgage on August 29, 2024, we entered into a second amendment to the 2024 Amended Loan and Security Agreement, which permits our wholly-owned subsidiary, 401 SW 5th Ave LLC, to remain an excluded subsidiary provided that the subsidiary does not engage in any operations or activities except to maintain legal existence and ownership of the real property or any related activities thereto, does not hold assets other than real estate assets, and does not incur any indebtedness except for intercompany liabilities permitted under the agreement or grant any liens.

If we fail to perform our obligations under these and other covenants, CIBC's credit commitments could be terminated and any outstanding borrowings, together with accrued interest, under the credit or loan agreements could be declared immediately due and payable.

As of December 31, 2024, we were not in compliance with all debt covenants under the 2024 Amended Loan and Security Agreement, specifically the covenant restricting the amount of repurchases of common stock, which includes net share settlements of stock-based awards. As described above, in February 2025, we entered into the Third Amendment to the 2024 Amended Loan and Security Agreement, which included a waiver for our non-compliance of this covenant as of December 31, 2024. We do not believe non-compliance with this covenant had any material impact on our operations.

Key Business Metrics and Non-GAAP Financial Measures

We supplement the reporting of our financial information determined under U.S. generally accepted accounting principles ("GAAP") with certain business metrics and non-GAAP financial measures which we regularly review to evaluate our business, measure our performance, identify trends affecting our business, formulate business plans and make strategic decisions. Accordingly, we believe that these key business metrics and non-GAAP financial measures provide useful information to investors and others in understanding and evaluating our results of operations in the same manner as our management team. These key business metrics and non-GAAP financial measures are presented for supplemental informational purposes only, should not be considered a substitute for our financial information presented in accordance with GAAP and may be different from similarly titled metrics or measures presented by other companies.

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KEY BUSINESS METRICS

Paid Members

We believe that our ability to increase the number of paid members on our platform will drive our success as a business. Our customers pay for subscriptions on behalf of employees and contractors who use the platform, whom we refer to as paid members. We define paid members as the average number of users (employees, contractors, volunteers, team members, etc.) who are billed on Collect or Control plans during any particular quarter. For SMBs or sole proprietors with only one employee, the business owner may also be the only paid member.

The following table sets forth the average number of paid members for the quarters ended March 31, 2023 through December 31, 2024 (in thousands):

[[GREPCENT_TABLE]]
[["Quarter ended","","Paid members"],["March 31, 2023","","747"],["June 30, 2023","","742"],["September 30, 2023","","719"],["December 31, 2023","","719"],["March 31, 2024","","688"],["June 30, 2024","","684"],["September 30, 2024","","684"],["December 31, 2024","","687"]]
[[/GREPCENT_TABLE]]

NON-GAAP FINANCIAL MEASURES

Limitations of Non-GAAP Financial Measures

Non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation or as substitutes for financial information presented under GAAP. There are a number of limitations related to the use of non-GAAP financial measures versus comparable financial measures determined under GAAP. For example, other companies in our industry may calculate these non-GAAP financial measures differently or may use other measures to evaluate their performance. All of these limitations could reduce the usefulness of these non-GAAP financial measures as analytical tools. Investors are encouraged to review the related GAAP financial measures and the reconciliations of these non-GAAP financial measures to their most directly comparable GAAP financial measures and to not rely on any single financial measure to evaluate our business.

Adjusted EBITDA and Adjusted EBITDA Margin

We define adjusted EBITDA as net loss from operations excluding provision for income taxes, interest and other expenses, net, depreciation and amortization and stock-based compensation. We define adjusted EBITDA margin as adjusted EBITDA divided by total revenue for the same period. We are focused on profitable growth and we consider adjusted EBITDA to be an important measure because it helps

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illustrate underlying trends in our business that could otherwise be masked by the effect of the income or expenses that are not indicative of the core operating performance of our business.

[[GREPCENT_TABLE]]
[["","Year ended December 31,"],["","2024","","2023"],["","(in thousands, except percentages)"],["Adjusted EBITDA","$","39,372","","","$","13,174"],["Adjusted EBITDA margin","28","%","","9","%"]]
[[/GREPCENT_TABLE]]

Non-GAAP Net Income and Non-GAAP Net Income Margin

We define non-GAAP net income as net loss from operations in accordance with GAAP excluding stock-based compensation. We define non-GAAP net income margin as non-GAAP net income divided by total revenue for the same period. We are focused on profitable growth and we consider non-GAAP net income to be an important measure because it helps illustrate underlying trends in our business that could

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otherwise be masked by the effect of stock-based compensation, which is not considered indicative of the core operating performance of our business.

[[GREPCENT_TABLE]]
[["","Year ended December 31,"],["","2024","","2023"],["","(in thousands, except percentages)"],["Non-GAAP net income (loss)","$","23,482","","","$","(244)"],["Non-GAAP net income (loss) margin","17","%","","\u2014","%"]]
[[/GREPCENT_TABLE]]

Free Cash Flow

We define free cash flow as net cash provided by operating activities excluding changes in settlement assets and settlement liabilities, which represent funds held for customers and customer funds in transit, respectively, reduced by the purchases of property and equipment and software development costs.

[[GREPCENT_TABLE]]
[["","Year ended December 31,"],["","2024","","2023"],["","(in thousands, except percentages)"],["Free cash flow","$","23,863","","","$","555"],["Free cash flow margin","17","%","","\u2014","%"]]
[[/GREPCENT_TABLE]]

Reconciliations of Non-GAAP Financial Measures

The following tables reconcile the most directly comparable GAAP financial measure to each of these non-GAAP financial measures.

Adjusted EBITDA and Adjusted EBITDA Margin

[[GREPCENT_TABLE]]
[["","Year ended December 31,"],["","2024","","2023"],["","(in thousands, except percentages)"],["Net loss","$","(10,055)","","","$","(41,456)"],["Net loss margin","(7)","%","","(28)","%"],["Add:"],["Provision for income taxes","7,663","","","2,980"],["Interest and other expenses, net","1,572","","","5,327"],["Depreciation and amortization","6,655","","","5,111"],["Stock-based compensation expense","33,537","","","41,212"],["Adjusted EBITDA","$","39,372","","","$","13,174"],["Adjusted EBITDA margin","28","%","","9","%"]]
[[/GREPCENT_TABLE]]

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Non-GAAP net income and non-GAAP net income margin

[[GREPCENT_TABLE]]
[["","Year ended December 31,"],["","2024","","2023"],["","(in thousands, except percentages)"],["Net loss","$","(10,055)","","","$","(41,456)"],["Net loss margin","(7)","%","","(28)","%"],["Add:"],["Stock-based compensation expense","33,537","","","41,212"],["Non-GAAP net income (loss)","$","23,482","","","$","(244)"],["Non-GAAP net income (loss) margin","17","%","","\u2014","%"]]
[[/GREPCENT_TABLE]]

Adjusted Operating Cash Flow and Free Cash Flow

[[GREPCENT_TABLE]]
[["","Year ended December 31,"],["","2024","","2023"],["","(in thousands, except percentages)"],["Net cash provided by operating activities","$","23,877","","","$","1,559"],["Operating cash flow margin","17","%","","1","%"],["(Increase) decrease in changes in assets and liabilities:"],["Settlement assets, net","2,469","","","6,398"],["Settlement liabilities","5,145","","","(108)"],["Adjusted operating cash flow","31,491","","","7,849"],["Less:"],["Purchase of property and equipment","\u2014","","","(1,384)"],["Software development costs","(7,628)","","","(5,910)"],["Free cash flow","$","23,863","","","$","555"],["Free cash flow margin","17","%","","\u2014","%"]]
[[/GREPCENT_TABLE]]

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Contractual Obligations and Commitments

The following table summarizes our contractual obligations and commitments as of December 31, 2024:

[[GREPCENT_TABLE]]
[["","Payments due by period"],["","(in thousands)"],["","Less than 1 year","","1-3 years","","More than 3 years","","Total"],["Finance lease commitments","$","153","","","$","102","","","$","\u2014","","","$","255"],["Operating lease commitments","1,079","","","3,114","","","4,499","","","8,692"],["Total","$","1,232","","","$","3,216","","","$","4,499","","","$","8,947"]]
[[/GREPCENT_TABLE]]

Indemnification Agreements

In the ordinary course of business, we enter into agreements of varying scope and terms whereby we agree to indemnify customers, issuing banks, card networks, vendors and other parties with respect to certain matters, including, but not limited to, losses arising out of the breach of such agreements, services to be provided by us or from intellectual property infringement claims made by third parties. In addition, we have entered into indemnification agreements with our directors and certain officers and employees that will require us, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors, officers or employees. No demands have been made upon us to provide indemnification under such agreements and there are no claims that we are aware of that could have a material effect on our Consolidated Balance Sheets, Consolidated Statements of Operations, Consolidated Statements of Changes in Stockholders' Equity, or Consolidated Statements of Cash Flows.

Off-Balance Sheet Arrangements

During the periods presented, we did not have, and we do not currently have, any off-balance sheet financing arrangements or any relationships with unconsolidated entities or financial partnerships, including entities sometimes referred to as structured finance or special purpose entities, that were established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

Critical Accounting Policies and Estimates

Our consolidated financial statements included elsewhere herein have been prepared in accordance with GAAP. The preparation of our financial statements requires us to make estimates and judgments that affect our reported amounts of assets, liabilities, revenues and expenses. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. For our accounting policies, see Note 2 to our consolidated financial statements contained elsewhere herein for a description of our significant accounting policies.

EMPLOYEE AND EMPLOYEE-RELATED EXPENSES

Allocating our employee and employee-related expenses, which consist of contractor costs, employee salary and wages, stock-based compensation and travel and other employee-related costs, to their appropriate financial statement line items on the Consolidated Statements of Operations, requires us to make estimates and judgments as a result of our generalist model and organizational structure. We base our estimates for allocating employee and employee related expenses on our internal productivity and team management tools. Management reviews the estimates each reporting period to evaluate the

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amounts allocated to Cost of revenue, net, Research and development, General and administrative, and Sales and marketing on the Consolidated Statements of Operations.

REVENUE RECOGNITION

We generate revenue from subscription fees paid by our customers to access and use our hosted software services, as well as standard customer support.

Revenue is recognized when control of the promised goods or services is transferred to customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.

Our contracts are either month-to-month arrangements billed monthly in arrears based on a specified number of members or annual arrangements billed monthly in arrears based on a minimum number of monthly members. Month-to-month contracts can be terminated by either party at any time without penalty. Annual subscription customers who wish to terminate their contracts before the end of the term are required to pay the remaining obligation in full plus any fees or penalties set forth in the agreement.

We charge customers subscription fees for access to our platform based on the number of monthly members and level of service. The contractual price per member is based on either negotiated fees or rates published on our website. Our contracts with customers include two performance obligations: access to the hosted software service ("SaaS"), inclusive of all features available within the platform and related customer support. The SaaS and the support are accounted for as a combined performance obligation because they have the same pattern of transfer over the same period and, therefore, are delivered concurrently. We satisfy our performance obligation over time each month as it provides the SaaS and support services to customers and as such generally recognizes revenue monthly based on the number of monthly members and contractual rate per member.

Certain annual contracts provide the customer the option to increase the minimum number of members and extend the contract term on a prospective basis or to purchase members beyond the minimum contracted number of members at a higher rate for a particular month. These options are accounted for when the customer exercises the option as they do not represent a material right and are accounted for as a contract modification.

Revenue is recognized net of applicable taxes imposed on the related transaction. We charge customers on a monthly basis, in arrears, with typical payment terms being 30 days. Since our performance obligation is satisfied monthly, at any reporting period, we have no unsatisfied, or partially unsatisfied, performance obligations.

Under the Updated Card Program, we generate revenue from the authorization and settlement of Expensify Card transactions. We partner with an issuing bank to issue Expensify Cards to customers as a feature of the Company’s SaaS. Our agreement with the issuing bank allows for card transactions to be authorized and settled on the Visa network. We are contractually entitled to all interchange generated on Expensify Card transactions based on our agreement with the issuing bank. Based on our agreements with the payment processor and issuing bank, we are the principal in the transaction. As such, we recognize interchange as revenue on a gross basis within Revenue on the accompanying Consolidated Statements of Operations.

Recent Accounting Pronouncements

See Note 2 to our consolidated financial statements in this Annual Report on Form 10-K for recently issued and adopted accounting pronouncements.

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