Expensify, Inc. Q1 FY2026 Earnings Call

Hello, and thank you for joining us for Expensify's Q1 2026 Earnings Call. I'm going to start off with the legal disclosure and then hand off to Ryan Schaffer, our CFO; and David Barrett, our Founder and CEO. 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 these 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 expected 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. And with that, I'll hand it over to Ryan.

Thank you, Niki, and thanks, everyone, for joining today's call. Let's start with the Q1 financials. Revenue for the quarter was $34 million, down 6% year-over-year. Average paid members were 632,000, down 4% year-over-year. Total interchange revenue was $5.5 million, up 10% year-over-year. While we continue to see pressure on the top line, we are really focused on the fundamentals of the business and focusing our efforts on returning to growth. Operating cash flow was $0.1 million and free cash flow was $2.5 million. The difference in those numbers is largely driven by the timing of customer payments. Our GAAP net loss was $2.3 million. Our non-GAAP net income was $3.6 million and adjusted EBITDA was $6.2 million. So while revenue has declined, profitability is still strong, and that's a key theme for the business right now. As mentioned, we generated $2.5 million in free cash flow this quarter. It's worth noting that we also had a one-time legal payment of $2.6 million related to the class action lawsuit we've since settled. Absent that payment, we would have seen roughly $5 million of free cash flow this quarter. With that said, we remain conservative in our outlook and are reiterating our full year 2026 free cash flow guidance of $6 million to $9 million. As always, we'd like to provide a look into the performance of next quarter's paid active member number. For April 2026, we had 641,000 paid active members, which is an improvement from our Q1 average and what we think is an encouraging sign for the quarter. In conclusion, we are focusing on maintaining strong fundamentals in the business, investing in long-term growth opportunities, migrating customers to new Expensify and iterating quickly on their feedback. And with that, I'll hand it over to David for a product update.

Thanks, Ryan. The simplest way to frame Q1 is this. We're building a more durable, more profitable business today while setting ourselves up for a much stronger growth story tomorrow. The numbers show the transition, but the product tells you where we're going and how far we've actually come. In Q1, we made meaningful progress in both distribution and product adoption. A major focus was accelerating our Bring Your Own Card strategy. Historically, companies often had to change cards to get the full value of expense automation. With BYOC, they can keep the corporate cards they already have, connect them to Expensify and automatically import transactions as expenses. That removes a major adoption barrier and lets us meet customers where they already are. We also expanded our partnership footprint. We renewed our referral program with ANZ and Kiwibank and partnered with the Institute of Commercial Payments, giving us stronger visibility across the banking and commercial payments ecosystem. At the same time, we broadened the commercial ecosystem around Expensify with new ERP relationships with Campfire and Rillet, plus a travel integration with American Airlines. The goal is simple: make Expensify fit naturally into the systems businesses already use. On the product side, Q1 was a strong shipping quarter with more than 30 improvements across the app. In January, we focused on practical finance workflows, better top spending visibility, receipt rotation, automatic approval routing, bulk card assignment, bank account sharing, clear card status labels and Uber for Business discounts. In February, we launched a new Home tab, upgraded insights, made Concierge available in more places and added merchant and itemized receipt rules. These are important because they move Expensify from simply capturing expenses to actively helping users manage spend, automate coding and resolve issues faster. In March, we continued that momentum with account-related client workspaces, GPS miles tracking, expanded insights charts, stronger virtual card controls, mobile receipt cropping, faster report creation, bulk expense selection, inline editing, CSV member imports and smarter Home tab alerts. Taken together, these updates make new Expensify faster, more automated and more useful for both individual employees and finance teams. Stepping back, Q1 is about strengthening the foundation while setting up the next phase of growth. The Expensify Card continued to perform well with interchange revenue growing to $5.5 million, up 10% year-over-year. We also continue to generate cash, producing positive operating cash flow and $2.5 million of free cash flow in the quarter. At the same time, we're seeing encouraging growth signals. April paid active users increased to 641,000, above the Q1 average of 632,000. Combined with product velocity you just saw, the expansion of BYOC and major AI capabilities coming in June, we believe the business is positioned for a potential inflection point. So our focus remains consistent: keep improving new Expensify, reduce adoption friction, expand distribution and turn the product momentum we're seeing into durable growth. With that, thank you to everyone for joining. Let's hop into Q&A.

Perfect. Mark, I believe you're on the line, if you want to open us up for the Q&A.

Can you hear me okay?

Yes.

Dave, just a question on a comment in your prepared remarks. You mentioned that you believe that the business was poised for an inflection point. I was wondering if you could just dig into that a little bit more.

Sure. This isn't a new claim; the strategy behind new Expensify has been to shift away from a more traditional expense management solution toward a modern, collaborative, AI-focused solution. We knew this would be a significant investment and would take time, and we're at the tail end of that effort. We've been migrating users over, and we're very pleased with the reaction from customers moving to new Expensify, seeing new capabilities, the AI and the collaboration features. We're also seeing excitement from new customers—what we call new native customers—who have never used Expensify Classic. They adopt the product quickly, understand it and value it, which validates many of our design decisions and gives us confidence. There are also green-shoot indicators like April, which was positive from a paid member growth perspective. Much of this aligns with the story we've been telling: making a difficult but sizable strategic shift to pursue a much larger market opportunity. We still believe there is an order-of-magnitude greater opportunity beyond the traditional market. New Expensify is designed to pursue that, and we are increasingly confident in our ability to capture it. It won't happen overnight, but we are a long-term business, and we have conviction in this strategy.

Great. And then as a follow-up, maybe if you could just update us on the percentage of your Classic customers that have migrated to the new platform.

It's about 60%, I would say. The migration is going well. The advantage of migration is that we control the timeline, and we are shifting customers over while closely monitoring their feedback. The most important feedback we've received relates to performance. The functionality is strong and reliable, but it's not fast enough yet for larger customers. We never want to migrate a customer if we are not confident they will have a great experience. As a result, much of our engineering focus has shifted away from large capital projects toward rapidly integrating specific features customers request and responding to feedback. Right now, a major engineering thrust is hardening and improving the performance of our existing and new functionality.

And then along with that, to date, your migration strategy for the new Expensify platform has relied mainly on carrots rather than sticks, and with about 60% migration so far, do you plan to shift that approach to move the rest over?

I don't think so. The incentives approach has been working well. We can continue to maintain Classic, so we are not forced to push customers off the platform. We migrate customers because we believe we can give them a better experience. There's no reason to force anyone; we prefer to pull them over with attractive functionality rather than push them. We have plenty of time and a steady stream of compelling functionality to encourage migration. In some cases, larger customers are eager to migrate, but performance is the limiting factor. So we are actually seeing enthusiasm to move to new Expensify, and our challenge is to ensure performance meets expectations. That's where much of our attention is focused.

Just a confirmation that we were double booked. So we will speak to our other analysts offline with everyone we have live on the call right now.

Great. Well, thank you, everyone, for dialing in. It's definitely an exciting time for us. We're very excited about where this is going, and I appreciate your time.

Thank you.