Cloud-based expense management software provider Expensify last week filed an initial public offering (IPO) for its common stock with the U.S. Securities and Exchange Commission (SEC). The number of shares to be offered and the price range for the proposed offering are not yet determined. The stock will be offered on the Nasdaq under the ticker EXFY.
Launched in 2008 and headquartered in Portland, Ore., Expensify has an expense-reporting app that allows users to take a photo of receipts for approval and reimbursement, syncing with accounting software. The company launched a corporate card in late 2019 to build on its automated transaction-tracking technology by speeding up expense reporting and credit card reconciliation; with the card, no receipts are required.
Other features of Expensify’s technology include travel and trip planning tool Concierge, and a personal payments function that allows users to split bills, request payments and chat with other users.
Expensify’s platform is targeted squarely at small and midsize businesses, or SMBs, which the company noted in the filing “remain antiquated and inefficient” with back-office functions like human resources, accounting and expense management.
“To compete in today’s increasingly digital economy, SMBs require modern solutions that can automate and streamline manual, time-consuming back-office functions to reduce costs and allow managers to focus on higher value, strategic activities,” according to Expensify’s SEC filing.
Expensify also noted that most SMBs have expense management procedures that are “manual and laborious,” including collecting and handing in physical receipts or scanning receipts and attaching them to emails ― a time-drain for employees, accountants and managers.
Traditional expense-management solutions for SMBs often lack purposeful automation and integration with key systems and applications, among other weaknesses, Expensify stated. The company believes its app offers advantages there, as well as “a viral, ‘bottom-up’ adoption cycle” where an individual can download and use the free Expensify app to submit expenses, then convinces others to do the same.
Since its founding, Expensify has processed and automated more than 1.1 billion expense transactions on its platform, according to the filing. In the second quarter, the fintech averaged 639,000 paid users across 53,000 companies and more than 200 countries and territories.
Describing its business model as “highly scalable and efficient,” the company reported revenue of $80.5 million for 2019 and $88.1 million for 2020, with net income of $1.2 million for 2019 and a net loss of $1.7 million for 2020. For the first half of 2021, the company reported revenue of $65.0 million and net income of $14.7 million.
Among the investment risks for Expensify’s proposed stock offering are the effects of the pandemic on the company’s SMB user base. “The COVID-19 pandemic has materially adversely affected, and may continue to materially adversely affect, our business and our ability to grow,” Expensify stated in the filing.
Key to revenue growth will be the company’s ability to convert users of the Expensify app’s free basic expense management feature and trial subscriptions into paying customers for Expensify’s richer feature set, according to the filing.
The fintech noted it will use net proceeds from the IPO “for general corporate purposes, including working capital, operating expenses and capital expenditures.” A portion of the proceeds ― estimated to range between $30.8 million to $35.5 million ― will be used to pay cash bonuses to the company’s employees during the fourth quarter.
