Ryan Schaffer: So the impact in the fourth quarter is essentially nothing. You’ll see that in Q1 and going forward in terms of the speed of that transition, it’s — similar to what David said, it’s going to be kind of at the speed of customers. Now they will be forced eventually to switch over. But I would — if I had to guess, I would think that it’s going to be initially a relatively large smart customers and then kind of a long tail, and we’re going to have to kind of nudge some people, but we do have some carats to get over. We have not yet announced. We have some function — new card functionality coming out that I’m not going to announce here, but we will announce early that is only available on the new card program. So they have a very actual real benefit to switch over as they can — they’ll be able to do exciting helpful things with the new card that they couldn’t do with the old card.
But look for maybe an announcement on that in the coming weeks. But we do think that we have really good reasons for them to switch over. Another point is also we’re starting to see more coming up on the expiration date of our initial customers. So the — all the new cards will also be under the new program. So we’re going to hit a point where our initial expense by card customers their cards are expiring, so they will automatically be migrated over when they get their new cards.
Unidentified Participant: Thank you for that color. Appreciate it.
Ryan Schaffer: No problem. Great, questions.
Operator: Great. Now we have JMP Securities.
Aaron Kimson: Hi. This is Aaron from JMP. [indiscernible] questions. First off, you call that you’re expecting a 20% uplift on card take rates becoming your own program [indiscernible] Can you talk a little bit about the challenges associated with replacing your prior program manager and whether it’s something any company can pull off or if there’s something you need to Expensify as well.
David Barrett: That’s a good question. It’s a good question. It’s not easy. We did it. We have and it took us a while as you all know, but it’s — I knew our COO is actually formally from Marketo. So we might have a little bit of an advantage there on… Well, maybe also because it requires taking over a lot of technology as well that we do in-house. And so not everyone has the same level of sort of in-house technology expertise to handle like the real-time authorizations and so forth. And so I think that we have an advantage of our companies because we’ve already built so much of the card product. We’ve already taken basically already taken that in-house. And so therefore, migrating to becoming our own program manager is a relatively low lift for us was for others.
It would be all legal lift that we went through and also on top of that, taking on like milli second latency sort of like high uptime transactional processing. And like — so I think it’s actually — it’s not impossible clearly we did it, but you can see it took us a lot of time and we worked really hard on it. So I think going to take anyone else — at least as long as us. Yes.
Ryan Schaffer: We have more of a build versus buy culture here. So I think if a company had more of a by culture that would not really struggled to do that.
Aaron Kimson: That’s helpful. And then in May 2022, the Board authorized a $50 million share repurchase plan. I think you still have about $41 million approved under that authorization. So just trying to get an understanding of how you’re thinking, I mean, valuations are less than 1 times next year’s revenue. You have the guidance for $10 million to $12 million in ’24 free cash flow, about $25 million in net cash. Do you anticipate prioritizing share repurchases in ’24? And is there a certain level of net cash you want to maintain around the business and how to think about it…?
Ryan Schaffer: It’s a great question. I think in the near term, so you might have thought we eliminated most of our debt. We still do have a little bit in our revolving facility. So I might think would be focus more on reducing that. But I think you’re absolutely right that at the share prices and generating the cash flow that we expect to, that it’s pretty good move on our part, but no firm fitments or anything to announce at this point in time.
Aaron Kimson: Understood. Thank you, guys.
Operator: All right. Now we have Piper Sandler.
Unidentified Participant: Okay. Thanks for taking the question. It looks like there continues to be pressure on the subscription revenue side of the business. I was wondering if there’s any other color you could provide there may be on how much of this drag you would attribute to business closures and downsizing and maybe any items you’re taking to mitigate it? [Multiple Speakers]
David Barrett: Yeah. Well, I think I would say just kind of reiterating what I mentioned earlier, and fundamentally, acquisitions and churn is stable. And I would say those are the most important metrics basically for us to control because I think those really signify the health of Expensify as a business in terms of our economics of acquisition and retention. But I would say, and the challenge is, yes, our 2022 was good for our customers and that they were actually expanding as businesses and adding seats hiring and things on like this. 2023 was bad for customers. And that they were reducing seats, they were lowering. They weren’t necessarily leaving Expensify. They just needed less expensify because they had fewer employees and less activity.
And so I’d say, like we can’t control the macro environment, but we can sort of shield ourselves from it as much as possible and take advantage of it when it’s good. And fundamentally, I think — the takeaway here is that the business itself is healthy, but we are basically subject to the macro effects of customer expansion contraction. I don’t know if that really answers the question.
Unidentified Participant: Yes. That makes sense. And I guess a quick follow-up in your conversation with customers, I guess, has that helped you at all with getting on to sites in terms of a potential trough. I know there’s been a couple of quarters of increasing contraction.
Ryan Schaffer: Sorry, could you say one more time?
Unidentified Participant: Yeah. I just say your conversations with customers, is that helping you at all and getting line of sight in terms of a potential trough in the contraction.
Ryan Schaffer: I see. [Indiscernible] customers basically have customers indicated that they’re going to continue downsizing?
David Barrett: Interesting. I don’t think we have insight into that.
Ryan Schaffer: We have a lot of customers. So it’s tens of thousands. So it’s tough to have like a statement that we feel super confident because there’s so many of them. It’s not — the reduction in seat on traction isn’t from our 10 largest customers. It’s from a lot of customers you’ve never heard, right? Small businesses…
David Barrett: Tens of thousands of houses…
Ryan Schaffer: Yes. It’s not — we are really popular with tech. And obviously, tech has been laying people off. But — we don’t have any definitive statement from customers on how they’re going because there’s no customer group that could speak on behalf of everybody.
David Barrett: Yeah. I wish I knew. I wish I knew it, but I don’t know.
Operator: Perfect. Okay. Let’s move in and see if [indiscernible] We can circle back. Let’s go to Lake Street Capital.
Unidentified Participant: Hey, guys. We went to that previous slide that we had before, just on the customer contraction. I mean, is there any data you can point to that maybe you’re seeing signs of improvement in that metric? And I know you obviously are going to turn users in January because it’s historically softer, but I guess is there any data that you can point to maybe that you can give help us understand if you’re seeing any sort of improvement with customer spend, I guess?
Ryan Schaffer: Nothing to announce other than obviously what we’ve presented here, we have January data. And obviously, we have our historical data. We — I think the takeaway from this slide is that our customers have been having a difficult time that’s reflected kind of in our financials. But we also don’t think that this is a permanent situation. We think the economy is going to improve. And obviously, as the economic pressures decrease, we expect to see recovery in our customer base.
Unidentified Participant: All right. Thank, guys. And then just last one for me. So with these cost cuts implemented midway through the quarter, I mean, so Q1, are you expecting to sequentially decline in OpEx? And then I guess, how do we — how should we expect OpEx throughout the remainder of 2024?
Ryan Schaffer: So we initiated full year guidance, but given that the — we saw a big recovery in OpEx in Q4, and those changes didn’t take place until halfway through the quarter. We expect to feel the full benefit of those cost cuttings in Q1. So yes, we do expect that to improve quarter-over-quarter.
Unidentified Participant: Okay. Thanks, guys.
Operator: Great. Let’s check in with FT Partners. Okay. Let’s circle back to BMO, — see if we can get you unmuted. Daniel, you there?
Daniel Jester: Yeah. Can you hear me?
Ryan Schaffer: Yes
Daniel Jester: Awesome. All right. Great. Appreciate it. Thanks for taking the question. So I joined late, so I apologize if this is a topic that was already discussed at length. But the last couple of quarters, you talked about sort of building the top of the funnel and some of the investments you’re making there to kind of accelerate the customer acquisition trajectory. Can you just spend a moment on sort of what you have been doing there? And anything that we should be on the lookout for is sort of thinking about the gate plan for ’24?
David Barrett: Sure. I think that — I mean, — so what are the advantages of having a business that kicks off a lot of cash is that you can take big swings on things. And so I think that throughout 2023, we’re trying a lot of different things. And I think what ultimately stuck the best was our investment in SEO, and that’s why I think we really — we’ve been really, really pleased with the results there. We’re also making additional investments that have longer-term returns and so forth. Fundamentally, I don’t have any sort of crystal ball as to exactly how this is going to play out in the future, more than what we’ve already suggested for our cash flow guidance. And so I’d say, fundamentally, we feel really confident in investments that we’re making, but it’s just a lot of experimentation.
Because I know it kind of like a wish you watch the answer, but in general, there’s no one thing. It’s not like we’re basically putting all of our eggs in one basket. We’re trying a whole range of things. Some work, some don’t. And I think that, in particular, the SEO has been really good.
Daniel Jester: Okay. Got you. And then — on the user churn, I understand some of that is certainly macro-driven and completely outside of your control. But maybe, again, sort of your latest thoughts about thinking what you can do to the extent that you can to limit churn if there’s any additional leverage that you’re thinking about?
Ryan Schaffer: Yes. So we have been making some investments in pre-using churn. David spoke about global reimbursement. This is really more of a more enterprise, mid-market focused feature, companies that have multiple subsidiaries in different countries. We also have some announcements that were product announcements that we have coming up that we think will be beneficial to helping churn as well. Again, something we announced for Q4, but we have been developing quite rapidly. David spoke about the success of our outsourced contributor program. That took us a little bit to kind of get digging, but now it’s a well-oiled machine, and the rate of development has dramatically increased, and we’re going to be deploying products quite quickly here in 2024, and we think that is going to be beneficial.
David Barrett: Yeah. I think the contributor program has been a real secret weapon in that we’ve been able to, I mean, effectively double or triple the engineering the vast increase the engineering team — and that just accelerates just development overall. And so I’d say, yes, I think that we are really, really happy that we’ve been making these major investments into the foundation of the platform. And now I think we’re to a point where we can begin really rapidly rolling out functionality that our customers are asking for. I mean global reimbursement was one, but I think there’s a long, long list of requests.
Ryan Schaffer: And we just released budgets to you.
David Barrett: In budgeting and insights. So we didn’t bore the slides with basically a list of every single release. But yes, I’d say there’s a whole bunch of features that basically are directly kind of pan service to the customers.
