Expensify, Inc. (EXFY) Earnings

Management highlights

- **Financial Performance and Profitability Improvement** * Q2 2026 total revenue was $33.9 million, with 640,000 average paid members * GAAP net loss improved to $3.9 million from $8.8 million year-over-year; non-GAAP net income reached $3.4 million, compared to a non-GAAP net loss in the prior year * Adjusted EBITDA improved to $6.6 million from a negative adjusted EBITDA year-over-year * Operating cash flow was $8.4 million, and free cash flow was $6.4 million - **Product Development and AI Innovation** * Launched Level 3 workflow automation (Agent Rules), which automates approval routing via natural language LLM judgment instead of rigid if-then logic * Launched Level 4 custom AI agents, which are live (out of beta) and can proactively/reactively collaborate with employees, vendors, and clients via chat, email, and SMS * Launched Expensify MCP, which enables third-party AI tools (ChatGPT, Claude, Cursor) to directly access user expense data via natural language * Shipped more than 30 total new features and enhancements across the quarter: April brought the "Bring Your Own Card" feature enabling personal card imports and shared card feeds across workspaces; May added admin controls (card freeze/unfreeze, CSV company card imports) and AI-powered prohibited expense detection; June launched real-time Expensify card rules and automatic VAT capture via SmartScan to support international expansion * Awarded Expense Management Platform of the Year at the TravelTech Breakthrough Awards - **Platform Migration Status** * Migration of Classic customers to New Expensify has entered the long tail phase; virtually all remaining Classic customers have been prompted to migrate, and most who migrate choose to stay on the new platform * More users are now on New Expensify than on Classic, marking a major milestone - **Capital Allocation** * Completed a modified Dutch auction tender offer, repurchasing 6.1 million Class A common shares at $1.20 per share, which was undersubscribed * Purchased an additional 712,000 shares in the open market at an average price of $1.63 per share * Total share repurchases in Q2 reached 6.8 million shares, reducing shares outstanding by ~7%, demonstrating management confidence in the company's value and commitment to returning capital to shareholders

Guidance

- Free cash flow guidance for full year 2026 was revised upward by $5.5 million at the midpoint, from the original guided range of $6 to $9 million - The typical summer seasonal dip in paid members was observed in July 2026 (634,000 paid members, down from the Q2 average of 640,000), and management expects membership to rebound through the remainder of Q3 2026 - Management expects the growing New Expensify user and revenue base will eventually intersect the declining Classic base, returning the full company to net growth, though the exact timing of this inflection point is not confirmed - New Expensify targets a vastly larger untapped addressable market than Expensify historically served, and management expects long-term growth from expanding into this market

Segment performance

Expensify operates two core product segments: Expensify Classic and New Expensify. 1. **Expensify Classic**: This is the legacy original expense management platform. It is a slowly declining segment: no new customers are added to this segment, and its user base is gradually decreasing as customers migrate to New Expensify. It generates substantial steady cash flow that funds new product development and growth initiatives for New Expensify. It still accounts for 44% of total users as of the end of Q2 2026. 2. **New Expensify**: This is the next-generation platform. It reached a major milestone in Q2 2026, with 56% of total users now on New Expensify, surpassing Expensify Classic. Excluding migrated Classic customers, New Expensify grew net new ARR over 250% year-over-year to more than $10 million, which represents less than 10% of total company ARR. Sequentially, net new ARR for New Expensify grew from ~$7 million at the end of Q1 2026 to ~$12 million at the end of Q2 2026. Virtually 100% of all incremental new revenue comes from New Expensify, as the company no longer sells new Classic subscriptions. Additionally, Expensify's card program is a standalone revenue segment: combined credit interchange revenue across both segments reached $5.9 million in Q2 2026, up 12% year-over-year. Payment volumes saw a modest quarter-over-quarter increase, with consistent sequential growth.

Risks & headwinds

- The company currently has two parallel business trajectories: a slowly declining legacy Classic business and a rapidly growing new New Expensify business. This creates uncertainty around which dynamic will dominate first: whether New Expensify growth will outpace Classic churn before the legacy business erodes further, or whether full migration of Classic customers can be completed fast enough to reverse legacy churn - The mixed growth profile of the combined business has created investor confusion around the company's actual performance and trajectory - AI development spend is currently scaling, and management is actively working to optimize and reduce this spend, creating near-term cost uncertainty - New usage-based AI monetization and new vertical opportunities (like Bill Pay and Consolidated Travel Billing) are still in early stages, with no guarantee they will deliver meaningful incremental revenue

Analyst Q&A

• Q: The full-year 2026 free cash flow guide was raised $5.5 million at the midpoint from the original $6-$9 million range. How are sales, marketing, and AI investment tracking relative to original plans? /

  A: Sales and marketing investment deployment has started, with additional spending planned for later in 2026. AI spending is currently scaling, but management is actively reviewing and optimizing AI spend to control costs, leading to the improved full-year free cash flow outlook. This improved visibility allowed management to raise the guidance midpoint.

• Q: New Expensify net new ARR (excluding migrated Classic customers) hit $10 million, up 250% YoY. Can you comment on sequential growth, and what does the split between the two businesses mean for the company's trajectory? /

  A: Sequentially, net new ARR grew from ~$7 million at the end of Q1 to ~$12 million at the end of Q2, showing rapid growth. The company now has a slowly shrinking legacy Classic business (that produces strong cash flow) and a small but fast-growing New Expensify business. Eventually, the growing New Expensify line will cross the declining Classic line, and the full company will return to growth, but the exact timing of this intersection is unclear. Over 56% of total users are now on New Expensify, and all incremental revenue comes from New Expensify, as the company no longer sells new Classic subscriptions.

• Q: Is there a different monetization model for New Expensify versus Classic? Are there new monetization opportunities for the new platform? /

  A: The core business model is fundamentally the same for both products, as they solve the same expense management problem with shared infrastructure. New Expensify does open up new monetization opportunities: Consolidated Travel Billing has just launched to add incremental transactional revenue from the travel vertical. Usage-based monetization for new AI features is being actively considered, and Bill Pay is on the product roadmap to add additional revenue streams. New Expensify also targets a much larger untapped addressable market than Classic, expanding long-term revenue potential.

• Q: The "Bring Your Own Card" (BYOC) marketing message has been highlighted. How is the Expensify card program performing, and what are payment volume trends? /

  A: BYOC has been very effective for Expensify, as competitors require customers to switch to their proprietary card to use the platform, while Expensify allows customers to keep their existing cards. Even with marketing focused on BYOC, the Expensify card continues to grow well. Payment volumes saw a modest quarter-over-quarter increase in Q2, with consistent sequential volume growth quarter after quarter.