Expensify, Inc. (NASDAQ:EXFY) Q3 2023 Earnings Call Transcript

Ryan Schaffer : Yes. Great question. So in terms of how the adoption is going to go, it is tough to predict that, because we don’t — we’re not going to force people. We’re going to basically give them a deadline, because you need to shift by this date and, It’s kind of a 2 phase approach. We need them to accept the new card terms, and then their old cards will turn off after a certain point. So If I had a guess, and this is, I guess, we will probably see a lot of people can wait until, like, the last day that we force them, just because of human inertia. So I would think that at least 50% are in the second half. Is that your…

Anu Muralidharan: I think so. So there’s basically a decent amount of the portfolio their cards will expire naturally next year. So when it expires, we’ll just send them the new card. So we don’t have to ask them to change their cards. And then to Ryan’s point, everybody else has to voluntarily activate the new card. And if they have this card on file at various vendors, they need to change them. So that’s always a painful exercise for the customer. So after the first round of trying to get them to move over depending upon the reception. There are various things we could do, like, motivate them with a reward to switch over. Like, we might explore things like that. Because ultimately, we are incentivized to get everybody on one program so we can stop reporting 2 interchange lines, because things are about to get worse before they get better for this accounting treatment.

But, yes, we’ll continue to have a separate interchange line — cash back line, so it makes you guys’ modeling job easier, to the extent that any of this is easy. But want — and we try our best to get everybody migrated as soon as possible, but by the end of next year at the latest.

Operator: Next we have Dan Jester from BMO.

Daniel Jester : Maybe to stick with the card. It was great to see — so that sequential improvement, in the growth rate for the card. As you think about what’s being successful there, is that more customers signing up for the card? Or is that you getting a greater wallet share of transaction, and the customers who had previously adopted the card?

Anu Muralidharan: That’s a great question. No. The, amount of spend per domain on average is actually very stable. So almost all of those gains are new card adopting companies. For a minute, I thought where you were going to go was ask if those companies are all new Expensify adopters as well? And the answer to that is, no, it’s a mix of existing Expensify customers adopting the card as well as new customers adopting the card out of the gate. So that’s kind of how it breaks down.

Daniel Jester : And then a new — in the past, you’ve talked about the strategy here about having your customers earn enough in cash back to offset their subscription fees. Are we seeing customers there yet and sort of, like, how close are we to that becoming a reality, especially as we go into next year with some of your, you know, competitors maybe in a bit of a different pricing environment?

Anu Muralidharan: Great question. And, actually, come to think of it something we just, like, should have mentioned in the deck somewhere, but we didn’t. But we — of the things that we did we, [I think presented in] October, so it’s Q4. Did we lose them? Oh, I thought there was like a — okay. Never mind. So we basically put out this product enhancement on our existing product, which takes the cashback you earned and kind of credits it towards your subscription bill. So that your subscription bill that you end up paying is minus your cashback. So you charge the lower amount, because you’re already going to receive that cashback anyway. So instead of due doing 2 transactions being netted. But as part of that, we did something more, which is we showed every customer on Expensify based on the amount of money that the — their employees are expensing through their policies.

We took that amount, and we basically said if all of this was on the Expensify card, this is the amount of cashback you would have made, and that shows up now on the home page. And if you click on that, it basically tells you how we got that number. But also if you had gotten that cashback, what every user, seat on Expensify would have cost you in net terms. So a lot of customers it’s zero, for a lot of customers it’s $3, for some customers $6, so on and so forth. But it allows every customer to look at the unique value that they can get in terms of cheaper Expensify best plans — cheaper Expensify by just adopting the company card. And the intention behind it was to get more people to actually take the card, get that lower price. Because when you see them at a price point that they consider a steal, your chances of retaining them are so much higher and just every customer you retain is — because every new customer you’re gaining costs you, I think, the conventional wisdom is twice as much as an existing customer.

So that’s kind of the motive behind doing all that. So we are hoping we’ll see more benefits from doing it. We just launched it last week.

Ryan Schaffer : It’s a big upgrade to the education demonstration of the value Expensify has and, fighting any [FUD] that might be out there about our relative cost to others. I think if you actually do an analysis, Expensify is way less expensive compared to some of our competitors.

Daniel Jester : Got you. And then just one last one if I can squeeze in. So for 2024, we should assume that there’s going to be customers using new Expensify when it gets launched, but you’re still going to be having customers use the old Expensify. Is that a correct assumption?

Anu Muralidharan: That’s right. No night switches. We won’t be forcing anybody into anything. What we want to do is really get as many new customers as possible adopting it from the bottom up, because that just tells us what the experience is truly like without the baggage of change. Alongside that, we’ll have [Technical Difficulty]. So for anybody that wants to try the new product, they can click on the link and switch their experience over. But they can switch back if that’s what they want. Like, it just allows them to try it. When they switch back, we have an initiative to ask them what they didn’t like about it so we can improve it. So it’s been ongoing effort of getting feedback from both new customers, but also existing customers who are proactive enough to switch.

And once we get to a point where we can save with certainty that the new product performs really well and has a better experience, retains better, converts better, then we contemplate how we want to sunset the existing product. We’re aways from that decision point.

Operator: Next up we have Loop Capital.

Unidentified Analyst : So, Ryan, I was wondering if you could just go into a little bit more detail around why the company, is sunsetting the SDR program, the out the outbound sales?

Ryan Schaffer : Great question. So as you know, we’ve historically grown bottom up, product led growth and when things slowed down with, like, COVID and kind of the tumultuous atmosphere in the last couple of years, we dialed up more of our sales efforts. We had a kind of a 2 pronged approach there. We have outbound, and then we also have a group of onboarding specialists. These are people that we didn’t historically have. And we’ve been — we’ve allowed those programs to mature a bit so we can properly analyze. It’s tough to make a decision in the first 3 months of something that we’ve given enough time. And then, we just analyze the economics of what is — how — what is the output of an SDR, how much do they cost? Versus AdWords. How many how many leads does a dollar and marker? Not just AdWords. A lot of stuff. But what is a dollar of marketing…