Ryan Schaffer : Yes. Great question. Also good to hear from you. I think there’s a couple of things. First, we’re starting to see some, I think, green shoots data that is giving us some optimism going forward. One thing we have at our ExpensiCon 3 conference this year and since then, we’ve seen a big uptick in the production from the accounting space. I think that’s a positive factor. Also, obviously, the card continues to grow. The accounting treatment, while it’s not a difference in cash. It’s cloudy side of the accounting. The revenue treatment, so pretty soon here, we’re going to be getting the actual revenue benefit from the card, which is something we’ve discussed a long time. So that’s just — that can’t help. But be positive with, the card is adding to revenue instead of pulling down through cashback.
And then also, our new platform is very close to going live for our customers, and that is something we’ve been working on for years. And so we are very optimistic in all the R&D investment we’ve made, in that over the last several years and the impact that’s going to help in business. Do you have anything else to add to that?
Anu Muralidharan: No. That sums it up. We’re just excited to start really testing and improving the virality and word-of-mouth that comes with putting customers on Expensify 2.0.
Steve Enders : Okay. Great. And then on the expense reduction, for — going into next year. I guess, what are the areas that maybe we should see those cuts taking place? Like, what is the spend that might be being pulled back? And I guess, as we think about that, should we see any impact going into getting — going into 4Q for the OpEx cuts?
Ryan Schaffer : Great question. So for Q4, some of these cuts have been mid quarter. So I would expect, a slight reduction, but it’s kind of — you don’t really start to see, I think, until Q1. But in terms of where it’s going, it’s going into, S&M — reduction S&M, a reduction — G&A. And also, reduction in R&D. But I want to touch on that a little bit. There’s not a reflection on a decrease in actual development. As you know, we have a robust, open source community, and we compensate those people. And, we have basically done surge pricing on the community in order to gather a whole bunch of interest. And at this point, we have thousands of people working in on — in the community, and we are pulling back on those prices. And so it’s not a decrease in output, but it’s an increase in efficiency there.
Operator: Can you repeat that? Did we have any more questions from Citi? Next up, we have JPMorgan.
Unidentified Analyst : First of all, I wanted to, ask about the dynamic with regards to your customers and, specifically, with regards to PPU, and the subscription based payments. Have you been able to reduce the ratio of PPU to a more normalized historic level? And that would be would you be willing to share what it is today?
Ryan Schaffer : So, great question. Thank you for it. It has decreased. I think, if you recall, just for people maybe that haven’t been tuning into all the earnings, are — we have two different types of billing, paid users, we have subscription users. They’re billed every month, and that is at a discounted rate. And then we have activity based users that are billed at a higher rate. If anyone exceeds — if a company exceeds their subscriptions, they get billed at the higher activity based rate. We saw a huge influx of growth and, therefore, subscription overages and our pay per use, which is what we call our activity based billing. Our pay per use users spiked to about 35% of all users, which is, quite high. Historically, it’s been around 20%.
So almost doubled. And in the last couple of quarters, we have seen those numbers come down. And so to answer your question, currently, they are at, I believe, 28% of that. Now that’s a combination of our efforts to migrate people over to subscription users. But also we have seen as we’ve touched on in the presentation, just a decrease in, activity across users. So it’s kind of a combo of both.
Unidentified Analyst : And, another follow-up, with regards to the investments that you’ve been making. We’ve obviously seen, a pretty heavy investments on the OpEx side, but, also significant expansion of your COGS, which led to a decline of — reduction of gross margin versus historic levels. Is there a level that you feel would be a more normalized long term target for gross margins, once you launch the new Expensify platform?
Ryan Schaffer : That’s a great question. So I don’t have an exact number to give you right now. But in terms of COGS, we are expecting that decrease in ’24. And we’ll — we’re in a dynamic environment right now. So we are — I think that’s probably the extent I’m going to say that. We expect it to go down, but I don’t have a hard number for you right now. We are being very agile right now with how things are going.
Operator: Next, we have Piper Sandler on the line.
Unidentified Analyst : It’s [Hannah] on for Brent tonight. Just a few questions for me. First one for you Anu. Just what is left to bring that new Expensify 2.0 to market?
Anu Muralidharan: Did you — sorry, just didn’t catch the exact question. What is the timeline, is that your question?
Unidentified Analyst : What is left to be done on your end before it goes to market?
Anu Muralidharan: Yes. Basically, the way we approach launching anything, which is very much applicable to 2.0 as well, is to take an iterative approach because we don’t want rebuild everything, and then launch everything in one go, because that would just delay getting it out to the user. Right? So what we’ve been doing through the course of 2023 is taking little features that are ready and launching them at conferences to beta audiences. And that’s been going pretty well. But it’s kind of piecemeal to just make sure that iteratively what we’re developing is working as intended. What we’re going to do quite possibly this month, if not as soon as next week, is launch the complete viral bottom up adoption flow to the market. And what I mean by that is an end user signs up to Expensify 2.0, is immediately presented with the options to either start chatting with somebody or send or request money from them, which are really like the major end user use cases.
And if they start a conversation with someone and send a money request, and that someone is actually a manager at a company, then they will — I mean, no matter who you are, they get dropped into the product and they can pay your money request. But then if they choose to pay using a business bank account, we are able to identify them as a company decision maker. And therefore, we create a workspace for them in the background and move that money request into that workspace and put both the submitter and the payer or approver as it is called in our existing product lingo into that workspace. So they’re ready to start collaborating in that work space environment. And doing all that automatically gives them an onboarding specialist. And, of course, there’s always concierge.
And both conversations with both of those parties is also in that user’s left hand nav. Keeping everything sort of really in one place and in a very accessible and a very intuitive way. And this is really our first real world experience to looking at how the product takes to seeing how customers use it and start conversations with them about how to improve it based on their very real world experience. So that’s what we’re very excited about. And then the fast followers — and I’m not comfortable giving you timelines just yet. But the fast followers from there will be how do we upgrade from the entry level plan to a more advanced plan as the company matures or maybe is actually big and we upgraded them based on the assumption that they’re starter and then they quickly get to upgrade to a more advanced plan based on their use case.
