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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________________
FORM 10-Q
___________________________________
(Mark One)
xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2023
OR
oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission File Number 001-41043
___________________________________
Expensify, Inc.
___________________________________
(Exact name of registrant as specified in its charter)
Delaware27-0239450
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
401 SW 5th Ave
Portland, Oregon
97204
(Address of Principal Executive Offices)(Zip Code)
(971) 365-3939
Registrant’s telephone number, including area code
___________________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Class A Common Stock, par value $0.0001 per shareEXFYThe Nasdaq Stock Market LLC
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filerxAccelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o No x
The registrant had outstanding 68,420,787 shares of Class A common stock, par value of $0.0001 per share, 7,333,619 shares of LT10 common stock, par value $0.0001 per share, and 7,093,750 shares of LT50 common stock, par value $0.0001 per share, as of August 4, 2023.


Table of Contents
Table of Contents
Page
Item 1.
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
i

Table of Contents
Special Note Regarding Forward Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements about us and our industry that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding our strategy, future financial condition, future operations, projected costs, prospects, plans, objectives of management and expected market growth, are forward-looking statements. In some cases, you can identify forward-looking statements because they contain words such as “may,” “will,” “shall,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential,” “goal,” “objective,” “seeks,” or “continue” or the negative of these words or other similar terms or expressions that concern our expectations, strategies, plans, or intentions. There are a number of risks, uncertainties and other important factors, many of which are beyond our control, that could cause our actual results to differ materially from the forward-looking statements contained in this Quarterly Report on Form 10-Q. Such risks, uncertainties and other important factors include, among others:
the impact of inflation on us and our members;
our borrowing costs have and may continue to increase as a result of increases in interest rates;
our expectations regarding our financial performance and future operating performance;
our ability to attract and retain members, expand usage of our platform, sell subscriptions to our platform and convert individuals and organizations into paying customers;
the timing and success of new features, integrations, capabilities and enhancements by us, or by competitors to their products, or any other changes in the competitive landscape of our market;
the amount and timing of operating expenses and capital expenditures that we may incur to maintain and expand our business and operations to remain competitive;
the sufficiency of our cash, cash equivalents and investments to meet our liquidity needs;
our ability to make required payments under and to comply with the various requirements of our current and future indebtedness;
our cash flows, the prevailing stock prices, general economic and market conditions and other considerations that could affect the specific timing, price and size of repurchases under our stock repurchase program or our ability to fund any stock repurchases;
the war in Ukraine and escalating geopolitical tensions as a result of Russia's invasion of Ukraine;
our ability to effectively manage our exposure to fluctuations in foreign currency exchange rates;
the increased expenses associated with being a public company;
the size of our addressable markets, market share and market trends;
anticipated trends, developments and challenges in our industry, business and the highly competitive markets in which we operate;
our expectations regarding our income tax liabilities and the adequacy of our reserves;
our ability to effectively manage our growth and expand our infrastructure and maintain our corporate culture;
our ability to identify, recruit and retain skilled personnel, including key members of senior management;
the safety, affordability and convenience of our platform and our offerings;
ii

Table of Contents
our ability to successfully defend litigation brought against us;
our ability to successfully identify, manage and integrate any existing and potential acquisitions of businesses, talent, technologies or intellectual property;
general economic conditions in either domestic or international markets, including geopolitical uncertainty and instability;
our protections against security breaches, technical difficulties, or interruptions to our platform;
our ability to maintain, protect and enhance our intellectual property; and
the other risks and uncertainties identified under Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022.
You should not rely upon forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations, estimates, forecasts and projections about future events and trends that we believe may affect our business, results of operations, financial condition and prospects. Although we believe that we have a reasonable basis for each forward-looking statement contained in this Quarterly Report on Form 10-Q, we cannot guarantee that the future results, levels of activity, performance, or events and circumstances reflected in the forward-looking statements will be achieved or occur at all. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors described in the section titled “Risk Factors” and elsewhere in our Annual Report on Form 10-K for the year ended December 31, 2022, and any subsequent filings, as well as those identified in this Quarterly Report on Form 10-Q. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report on Form 10-Q. The results, events and circumstances reflected in the forward-looking statements may not be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.
The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, or investments we may make.
In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain, and you are cautioned not to unduly rely upon these statements. Unless otherwise indicated or unless the context requires otherwise, all references in this document to “Expensify,” the “Company,” “we,” “us,” “our” or similar references are to Expensify, Inc. and its consolidated subsidiaries. Capitalized terms used and not defined above are defined elsewhere within this Quarterly Report on Form 10-Q.
iii


Part I - Financial Information
Item 1. Condensed Consolidated Financial Statements
1


Expensify, Inc.
Condensed Consolidated Balance Sheets
(unaudited, in thousands, except share data)
As of June 30,As of December 31,
20232022
Assets
Cash and cash equivalents$97,795 $103,787 
Accounts receivable, net14,922 16,448 
Settlement assets, net39,276 35,838 
Prepaid expenses5,050 8,825 
Other current assets24,606 22,217 
Total current assets181,649 187,115 
Capitalized software, net8,617 6,881 
Property and equipment, net14,545 14,492 
Lease right-of-use assets6,417 745 
Deferred tax assets, net409 344 
Other assets749 664 
Total assets$212,386 $210,241 
Liabilities and stockholders' equity
Accounts payable$1,691 $1,059 
Accrued expenses and other liabilities11,650 9,070 
Borrowings under line of credit15,000 15,000 
Current portion of long-term debt, net of original issue discount and debt issuance costs557 551 
Lease liabilities, current278 800 
Settlement liabilities32,500 33,882 
Total current liabilities61,676 60,362 
Lease liabilities, non-current6,226  
Other liabilities1,441 1,204 
Long-term debt, net of original issue discount and debt issuance costs43,180 51,434 
Total liabilities112,523 113,000 
Commitments and contingencies (Note 4)
Stockholders' equity:
Preferred stock, par value $0.0001; 10,000,000 shares of preferred stock authorized as of June 30, 2023 and December 31, 2022; no shares of preferred stock issued and outstanding as of June 30, 2023 and December 31, 2022
  
Common stock, par value $0.0001; 1,000,000,000 shares of Class A common stock authorized as of June 30, 2023 and December 31, 2022; 68,347,794 and 68,238,245 shares of Class A common stock issued and outstanding as of June 30, 2023 and December 31, 2022, respectively; 24,996,238 and 24,997,561 shares of LT10 common stock authorized as of June 30, 2023 and December 31, 2022, respectively; 7,334,868 and 7,336,191 shares of LT10 common stock issued and outstanding as of June 30, 2023 and December 31, 2022, respectively; 24,999,020 shares of LT50 common stock authorized as of June 30, 2023 and December 31, 2022; 7,093,829 and 6,854,931 shares of LT50 common stock issued and outstanding as of June 30, 2023 and December 31, 2022, respectively
7 7 
Additional paid-in capital216,422 194,807 
Accumulated deficit(116,566)(97,573)
Total stockholders' equity99,863 97,241 
Total liabilities and stockholders' equity$212,386 $210,241 
See accompanying notes to Condensed Consolidated Financial Statements.
2


Expensify, Inc.
Condensed Consolidated Statements of Operations
(unaudited, in thousands, except share and per share data)
Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
Revenue$38,884 $43,162 $78,985 $83,532 
Cost of revenue, net16,925 15,876 32,700 30,010 
Gross margin21,959 27,286 46,285 53,522 
Operating expenses:
Research and development5,094 3,584 10,512 7,285 
General and administrative11,712 15,432 24,141 29,438 
Sales and marketing14,714 12,244 23,897 25,616 
Total operating expenses31,520 31,260 58,550 62,339 
Loss from operations(9,561)(3,974)(12,265)(8,817)
Interest and other expenses, net(1,367)(1,955)(2,783)(2,856)
Loss before income taxes(10,928)(5,929)(15,048)(11,673)
Provision for income taxes(376)(2,065)(2,201)(3,697)
Net loss$(11,304)$(7,994)$(17,249)$(15,370)
Net loss per share:
Basic and diluted$(0.14)$(0.10)$(0.21)$(0.19)
Weighted average shares of common stock used to compute net loss per share:
Basic and diluted82,011,477 80,473,097 81,890,624 80,311,053 
See accompanying notes to Condensed Consolidated Financial Statements.
3


Expensify, Inc.
Condensed Consolidated Statements of Changes in Stockholders’ Equity
(unaudited, in thousands, except share data)

Preferred stockCommon stockAdditional paid-in capitalAccumulated deficitTotal stockholders'
equity
SharesAmountSharesAmount
Three months ended June 30, 2023
Balance at March 31, 2023 $ 82,806,528 $7 $206,207 $(103,518)$102,696 
Issuance of common stock on exercise of stock options— — 51,871 — 59 — 59 
Vesting of early exercised stock options— — — — 186 — 186 
Issuance of restricted stock units— — 3,760 — 30 — 30 
Repurchases of early exercised stock options— — (588)— (6)— (6)
Issuance of common stock under Matching Plan— — 278,425 — 977 — 977 
Issuance of common stock in connection with restricted stock units vesting— — 261,840 — — — — 
Shares withheld from common stock issued to pay employee payroll taxes— — (120,852)— (858)— (858)
Repurchase and retirement of common stock— — (504,493)— (1,256)(1,744)(3,000)
Stock-based compensation— — — — 11,083 — 11,083 
Net loss— — — — — (11,304)(11,304)
Balance at June 30, 2023 $ 82,776,491 $7 $216,422 $(116,566)$99,863 

See accompanying notes to Condensed Consolidated Financial Statements.
4


Expensify, Inc.
Condensed Consolidated Statements of Changes in Stockholders’ Equity
(unaudited, in thousands, except share data)
Preferred stockCommon stockAdditional paid-in capitalAccumulated deficitTotal stockholders'
equity
SharesAmountSharesAmount
Three months ended June 30, 2022
Balance at March 31, 2022 $ 81,606,993 $6 $157,743 $(73,282)$84,467 
Issuance of common stock upon exercise of stock options— — 101,345 — 183 — 183 
Vesting of early exercised stock options— — — — 456 — 456 
Issuance of restricted stock units— — 3,896 — 28 — 28 
Repurchases of early exercised stock options— — (10,740)— (16)— (16)
Issuance of common stock under Matching Plan— — 71,522 — 1,188 — 1,188 
Stock-based compensation— — — — 14,379 — 14,379 
Net loss— — — — — (7,994)(7,994)
Balance at June 30, 2022 $ 81,773,016 $6 $173,961 $(81,276)$92,691 

See accompanying notes to Condensed Consolidated Financial Statements.
5


Expensify, Inc.
Condensed Consolidated Statements of Changes in Stockholders’ Equity
(unaudited, in thousands, except share data)
Preferred stockCommon stockAdditional paid-in capitalAccumulated deficitTotal stockholders'
equity
SharesAmountSharesAmount
Six months ended June 30, 2023
Balance at December 31, 2022 $ 82,429,367 $7 $194,807 $(97,573)$97,241 
Issuance of common stock on exercise of stock options— — 102,865 — 125 — 125 
Vesting of early exercised stock options— — — — 402 — 402 
Issuance of restricted stock units— — 5,308 — 61 — 61 
Repurchases of early exercised stock options— — (1,323)— (13)— (13)
Issuance of common stock under Matching Plan— — 441,842 — 2,076 — 2,076 
Issuance of common stock in connection with restricted stock units vesting— — 507,153 — — — — 
Shares withheld from common stock issued to pay employee payroll taxes— — (204,228)— (1,524)— (1,524)
Repurchase and retirement of common stock— — (504,493)— (1,256)(1,744)(3,000)
Stock-based compensation— — — — 21,744 — 21,744 
Net loss— — — — — (17,249)(17,249)
Balance at June 30, 2023 $ 82,776,491 $7 $216,422 $(116,566)$99,863 

See accompanying notes to Condensed Consolidated Financial Statements.
6


Expensify, Inc.
Condensed Consolidated Statements of Changes in Stockholders’ Equity
(unaudited, in thousands, except share data)
Preferred stockCommon stockAdditional paid-in capitalAccumulated deficitTotal stockholders'
equity
SharesAmountSharesAmount
Six months ended June 30, 2022
Balance at December 31, 2021 $ 81,400,860 $6 $142,515 $(65,906)$76,615 
Issuance of common stock upon exercise of stock options— — 307,075 — 435 — 435 
Vesting of early exercised stock options— — — — 751 — 751 
Issuance of restricted stock units— — 6,629 — 46 — 46 
Repurchase of early exercised stock options— — (13,070)— (20)— (20)
Issuance of common stock under Matching Plan— — 71,522 — 1,188 — 1,188 
Stock-based compensation— — — — 29,046 — 29,046 
Net loss— — — — — (15,370)(15,370)
Balance at June 30, 2022 $ 81,773,016 $6 $173,961 $(81,276)$92,691 
See accompanying notes to Condensed Consolidated Financial Statements.
7

Table of Contents
Expensify, Inc.
Condensed Consolidated Statements of Cash Flows
(unaudited, in thousands)
Six Months Ended June 30,
20232022
Cash flows from operating activities:
Net loss$(17,249)$(15,370)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization2,789 2,735 
Reduction of operating lease right-of-use assets334 358 
Loss on impairment, receivables and sale or disposal of equipment402 475 
Stock-based compensation expense20,345 28,428 
Amortization of original issue discount and debt issuance costs49 21 
Deferred tax assets(65)(319)
Changes in assets and liabilities:
Accounts receivable, net1,358 (906)
Settlement assets, net(5,244)(8,999)
Prepaid expenses3,775 2,006 
Related party loan receivable 14 
Other current assets(952)1,193 
Other assets(88)2 
Accounts payable632 (1,583)
Accrued expenses and other liabilities2,670 (1,366)
Operating lease liabilities(294)(404)
Settlement liabilities(1,382)19,910 
Other liabilities128 963 
Net cash provided by operating activities7,208 27,158 
Cash flows from investing activities:
Purchases of property and equipment(479)(267)
Software development costs(2,043)(468)
Net cash used in investing activities(2,522)(735)
Cash flows from financing activities:
Principal payments of finance leases(404)(394)
Principal payments of term loan(8,300)(297)
Repurchases of early exercised stock options(13)(20)
Proceeds from common stock purchased under Matching Plan2,076 1,188 
Proceeds from issuance of common stock on exercise of stock options125 519 
Payments for employee taxes withheld from stock-based awards(1,524) 
Repurchase and retirement of common stock(3,000) 
Net cash (used in) provided by financing activities(11,040)996 
Net (decrease) increase in cash and cash equivalents and restricted cash(6,354)27,419 
Cash and cash equivalents and restricted cash, beginning of period147,710 125,315 
Cash and cash equivalents and restricted cash, end of period$141,356 $152,734 
Supplemental disclosure of cash flow information:
Cash paid for interest$2,912 $1,750 
Cash paid for income taxes$2,251 $606 
Noncash investing and financing items:
Stock-based compensation capitalized as software development costs$1,399 $618 
Right-of-use assets acquired through operating leases$6,402 $ 
Accrued property and equipment$373 $ 
Reconciliation of cash and cash equivalents and restricted cash to the Condensed Consolidated Balance Sheets
Cash and cash equivalents$97,795 $105,537 
Restricted cash included in other current assets20,986 16,077 
Restricted cash included in settlement assets, net22,575 31,120 
Total cash, cash equivalents and restricted cash$141,356 $152,734 
See accompanying notes to Condensed Consolidated Financial Statements.
8

Table of Contents
Expensify, Inc.
Notes to the Condensed Consolidated Financial Statements
(unaudited)

NOTE 1 – GENERAL INFORMATION
Description of the Business
Expensify, Inc. ("Expensify") was incorporated in Delaware on April 29, 2009. Expensify offers a comprehensive expense management platform that integrates with a variety of third-party accounting applications, including QuickBooks Desktop, QuickBooks Online, Xero, NetSuite, Intacct, Sage, Microsoft Dynamics, MYOB and others. Expensify's product simplifies the way that employees and vendors manage and submit expense receipts and bills and provides efficiencies to companies for the payment of those bills. Expensify delivers its services over the internet to corporations and individuals under license arrangements and offers unique pricing options for small and midsized businesses and enterprises on a per-active-member basis.
Expensify also offers an Expensify charge card (the "Expensify Card"), which is primarily distributed to corporate customers in the United States ("U.S.") that subsequently distribute the card to their employees for business use. The Expensify Card allows customers to have real-time control over their employees' spending and compliance with spending limits in addition to eReceipt reporting on purchases.
Basis of Presentation and Principles of Consolidation
The accompanying condensed consolidated financial statements include the accounts of Expensify and its wholly-owned subsidiaries (the "Company") and have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP") and the applicable rules and regulations of the Securities and Exchange Commission ("SEC") for interim reporting in conformity with the instructions to Form 10-Q and Article 10 of Regulation S-X. Certain information and footnote disclosures normally included in financial statements presented in accordance with GAAP have been condensed or omitted pursuant to such SEC rules. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Annual Report on Form 10-K for the year ended December 31, 2022 ("2022 Annual Report").
All intercompany transactions and balances have been eliminated in consolidation. In the opinion of management, the accompanying condensed consolidated financial statements reflect all normal and recurring adjustments that are necessary for the fair presentation of the Company's financial position, results of operations, equity, and cash flows for the periods presented.
Results of operations for the three and six months ended June 30, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023 or for any other future annual or interim period.
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Estimates and judgments are based on historical experience, forecasted events and various other assumptions that the Company believes to be reasonable under the circumstances. Estimates and judgments are evaluated on an ongoing basis. Actual results could differ from those estimates. Changes in estimates are recorded in the period in which they become known.
Significant estimates and assumptions by management affect the Company’s classification of employee and employee-related expenses, the useful lives and recoverability of long-lived assets, income taxes, capitalization of internal-use software costs, stock-based compensation and the Company's incremental borrowing rate (IBR) utilized to measure its operating lease assets and lease liabilities.
9

Table of Contents
Expensify, Inc.
Notes to the Condensed Consolidated Financial Statements
(unaudited)


Updates to Significant Accounting Policies
The Company’s significant accounting policies are discussed in Note 2 of the 2022 Annual Report. Since the date the 2022 Annual Report was filed with the SEC, there have been no material changes to the Company's significant accounting policies, including the status of recent accounting pronouncements adopted, other than those detailed below.
Recently Adopted Accounting Pronouncements
In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326) Measurement of Credit Losses on Financial Instruments, with subsequent ASUs issued that clarify the guidance (collectively, "Topic 326"). Topic 326 requires an entity to utilize a new impairment model known as the current expected credit loss ("CECL") model to estimate its “lifetime expected credit losses" using a forward-looking approach and to record an allowance that, when deducted from the amortized cost basis of the financial asset, presents the net amount expected to be collected on the financial asset. The CECL model is expected to result in more timely recognition of credit losses. Topic 326 also requires new disclosures for financial assets measured at amortized cost, loans and available-for-sale debt securities.
As a result of no longer qualifying as an emerging growth company as of December 31, 2022, the Company was required to adopt Topic 326 retroactive to January 1, 2022. The Company was not required to amend quarterly filings issued subsequent to January 1, 2022 in which the Company filed under the legacy credit loss guidance of Accounting Standards Codification ("ASC") Topic 310. As such, the 2022 Annual Report was the first period under which the Company reported credit loss estimates in accordance with Topic 326. The adoption of Topic 326 did not have a material impact on the Company's financial position or results of operations as of and for the three and six months ended June 30, 2022.

NOTE 2 - REVENUE AND CERTAIN STATEMENT OF OPERATIONS COMPONENTS
Revenue by geographic region, based on user address, was as follows (in thousands):
Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
United States$35,487 $39,388 $72,122 $75,906 
All other locations3,397 3,774 6,863 7,626 
Total revenue$38,884 $43,162 $78,985 $83,532 
No individual customer represented more than 10% of the Company’s total revenue during the three and six months ended June 30, 2023 and 2022.
Cashback Rewards
The Company offers a cashback rewards program to all Expensify Card customers based on volume of Expensify Card transactions and Software as a Service ("SaaS") subscription tier. Cashback rewards are earned on a monthly basis and paid out the following month. The Company considers the cashback payments to customers as consideration payable to a customer and it is recorded as contra revenue within Revenue on the Condensed Consolidated Statements of Operations. Cashback rewards for the three months ended June 30, 2023 and 2022 was $1.8 million and $0.7 million, respectively. Cashback rewards for the six months ended June 30, 2023 and 2022 was $3.0 million and $1.2 million, respectively.

10

Table of Contents
Expensify, Inc.
Notes to the Condensed Consolidated Financial Statements
(unaudited)
Consideration From a Vendor, Net
The Company receives consideration from a vendor for monetizing Expensify Card activities. This consideration, net of credit card processing fees paid to the vendor, is included as a reduction to Cost of revenue, net within the Condensed Consolidated Statements of Operations. Consideration from a vendor, net for the three months ended June 30, 2023 and 2022 was $2.4 million and $1.5 million, respectively. Consideration from a vendor, net for the six months ended June 30, 2023 and 2022 was $4.5 million and $2.7 million, respectively.
NOTE 3 - CERTAIN BALANCE SHEET COMPONENTS
Other Current Assets
Other current assets consisted of the following (in thousands):
As of June 30,As of December 31,
20232022
Expensify Card posted collateral for funds held for customers$9,024 $11,509 
Cash in transit for funds held for customers6,088 2,361 
Expensify.org restricted cash5,721 5,518 
Income tax receivable3,325 2,471 
Expensify Payments LLC restricted cash99 102 
Matching Plan escrow and other restricted cash
54 52 
Deferred contract acquisition costs53  
Other242 204 
Other current assets$24,606 $22,217 
Capitalized Software, Net
Capitalized software, net consisted of the following (in thousands):
As of June 30,As of December 31,
20232022
Capitalized software development costs$17,139 $14,052 
Less: accumulated amortization (8,522)(7,171)
Capitalized software, net$8,617 $6,881 
Amortization expense related to capitalized software development costs is recorded in Cost of revenue, net on the Condensed Consolidated Statements of Operations. Amortization expense was $0.8 million and $0.7 million for the three months ended June 30, 2023 and 2022, respectively. Amortization expense was $1.5 million and $1.3 million for the six months ended June 30, 2023 and 2022, respectively.



11

Table of Contents
Expensify, Inc.
Notes to the Condensed Consolidated Financial Statements
(unaudited)


Property and Equipment, Net
Property and equipment, net consisted of the following (in thousands):
As of June 30,As of December 31,
20232022
Computers and equipment$178 $178 
Furniture and fixtures1,855 1,698 
Leasehold improvements6,957 6,948 
Commercial building6,493 6,493 
Land4,151 4,151 
Construction in progress3,339 2,551 
Total property and equipment22,973 22,019 
Less: accumulated depreciation(8,428)(7,527)
Property and equipment, net$14,545 $14,492 
Depreciation expense related to property and equipment is recorded in General and administrative and Sales and marketing on the Condensed Consolidated Statements of Operations. Depreciation expense related to property and equipment for the three months ended June 30, 2023 and 2022 was $0.4 million and $0.5 million, respectively. Depreciation expense related to property and equipment for the six months ended June 30, 2023 and 2022 was $0.9 million and $1.0 million, respectively.
Accrued Expenses and Other Liabilities
Accrued expenses and other liabilities consisted of the following (in thousands):
As of June 30,As of December 31,
20232022
Sales, payroll and other taxes payable$3,254 $2,721 
Professional fees2,704 1,473 
Partner payouts and advertising fees1,444 669 
Interest payable1,389 1,318 
Restricted common stock liability for early stock option exercises881 1,283 
Cashback rewards524 223 
Matching Plan payroll liability
183 195 
Accrued expense reports168 291 
Commissions payable135  
Hosting and license fees85 75 
Credit card processing fees41 22 
Other842 800 
Accrued expenses and other liabilities$11,650 $9,070 
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Table of Contents
Expensify, Inc.
Notes to the Condensed Consolidated Financial Statements
(unaudited)
NOTE 4 - COMMITMENTS AND CONTINGENCIES
Finance and Operating Lease Arrangements
During the six months ended June 30, 2023, the Company entered into four operating lease agreements. The components of lease cost reflected in the Condensed Consolidated Statements of Operations for all leases were as follows (in thousands):
Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
Finance lease cost:
Amortization of ROU assets $197 $198 $395 $395 
Interest on lease liabilities1 6 4 14 
Total finance lease cost198 204 399 409 
Operating lease cost244 173 430 358 
Total lease cost$442 $377 $829 $767 
Other information related to leases was as follows (in thousands, except as noted within):
As of June 30,As of December 31,
20232022
Finance lease ROU asset (included within Lease right-of-use assets)$66 $461 
Operating lease ROU asset (included within Lease right-of-use assets)$6,351 $284 
Weighted average remaining lease term (in years):
Finance leases0.080.58
Operating leases9.610.42
Weighted average discount rate:
Finance leases2.50 %2.50 %
Operating leases8.30 %5.30 %
Supplemental cash flow information related to leases was as follows (in thousands):
Six months ended June 30,
20232022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases$(322)$(399)
Operating cash flows from finance leases$(4)$(14)
Financing cash flows from finance leases$(404)$(394)
13

Table of Contents
Expensify, Inc.
Notes to the Condensed Consolidated Financial Statements
(unaudited)


Maturities of lease liabilities as of June 30, 2023 were as follows (in thousands):
For the year ending:Finance leasesOperating leases
Remainder of 2023$68 $176 
2024 838 
2025 1,079 
2026 1,018 
2027 1,033 
Thereafter 5,562 
Total future lease payments68 9,706 
Less: imputed interest (3,270)
Less: Lease liabilities, current(68)(210)
Lease liabilities, non-current$ $6,226 
Amortizing Term Mortgage
In August 2019, the Company entered into an $8.3 million amortizing term mortgage agreement with Canadian Imperial Bank of Commerce ("CIBC") for the Company's commercial building located in Portland, Oregon. The agreement requires principal and interest payments due each month over a 30 year period. Interest accrues at a fixed rate of 5.00% per year until August 2024, at which point the interest rate changes to the Wall Street Journal Prime Rate less 0.25% for the remaining term of the mortgage. The borrowings are secured by the building. The outstanding balance of the amortizing term mortgage was $7.8 million as of June 30, 2023 and December 31, 2022.
2021 Amended Term Loan
In September 2021, the Company amended and restated its loan and security agreement with CIBC ("2021 Amended Term Loan") to refinance the existing non-amortizing and amortizing term loans, establish a single term loan of up to $75.0 million, consisting of a $45.0 million initial term loan effective immediately with an option to enter into an additional $30.0 million delayed term loan, and increase the monthly revolving line of credit to $25.0 million. The option for the delayed term loan expired in March 2023. The term loan and revolving line of credit mature in September 2026 and September 2024, respectively. Approximately $23.5 million of the loan proceeds were used to immediately repay the remaining balances under the amortizing and non-amortizing term loans at the time of the amendment, as well as commitment fees and other debt issuance costs associated with the amendment. The remaining proceeds from the initial term loan were utilized to fund the Company's normal business operations.
Under the 2021 Amended Term Loan, the initial term loan of $45.0 million is payable over a 60 month period with principal and accrued interest payments due each quarter, commencing on September 30, 2021. The 2021 Amended Term Loan amortizes in equal quarterly installments of $0.1 million through September 30, 2024, $0.2 million beginning October 1, 2024 and $0.6 million beginning October 1, 2025, with any remaining principal balance due and payable on maturity. The amounts borrowed bear interest at the bank’s reference rate plus 2.25% (10.50% as of June 30, 2023) beginning on September 30, 2021 and continuing on a quarterly basis through maturity of the term loan. The borrowings are secured by substantially all the Company’s assets. As of June 30, 2023 and December 31, 2022, the outstanding balance of the 2021 Amended Term Loan was $36.2 million and $44.5 million, respectively.
14

Table of Contents
Expensify, Inc.
Notes to the Condensed Consolidated Financial Statements
(unaudited)
During the three months ended June 30, 2023, the Company made a prepayment of $8.0 million for the 2021 Amended Term Loan. As a result of this prepayment, the Company recorded an immaterial amount of loss on extinguishment within Interest and other expenses, net.
Monthly Revolving Line of Credit
The line of credit agreement, as amended with the 2021 Amended Term Loan, provides borrowings up to $25.0 million. Borrowings under the line of credit bear interest at CIBC’s reference rate plus 1.00% (9.25% as of June 30, 2023) and are secured by substantially all of the Company’s assets. As of June 30, 2023 and December 31, 2022, there were $15.0 million of borrowings under the line of credit and $10.0 million of capacity available for additional borrowings.
In connection with the amortizing term mortgage and the 2021 Amended Term Loan, the Company recorded an immaterial amount of debt issuance costs and the 2021 Amended Term Loan was subject to an original issue discount. These amounts are being amortized to interest expense over the term of the respective agreements using the effective interest method. As of June 30, 2023 and December 31, 2022, unamortized original issue discount and debt issuance costs were $0.2 million and $0.3 million, respectively.
Future aggregate annual principal payments on long-term debt as of June 30, 2023 is expected to be as follows (in thousands):
For the year ending:
Remainder of 2023$297 
2024715 
20251,398 
202634,356 
2027176 
Thereafter7,014 
Total principal payments43,956 
Less: unamortized original issue discount and debt issuance costs(219)
Less: Current portion of long-term debt, net of unamortized original issue discount and debt issuance costs(557)
Long-term debt, net of unamortized original issue discount and debt issuance costs$43,180 
As of June 30, 2023, the Company was not in compliance with all debt covenants, specifically the covenant restricting the amount of repurchases of common stock, which includes RSU net share settlements, and the covenant related to the requirement to maintain all deposit, operating and collateral accounts with CIBC with certain exceptions during the period. A waiver was obtained from CIBC. The Company does not believe non-compliance with these covenants had any material impact on the Company or its operations.




15

Table of Contents
Expensify, Inc.
Notes to the Condensed Consolidated Financial Statements
(unaudited)


Defined Contribution Plans
The Company sponsors a U.S. 401(k) defined contribution plan for all eligible employees who elect to participate. The Company is permitted to make discretionary profit sharing and 401(k) matching contributions as defined in the plan and as approved by the Board of Directors. Effective January 1, 2018, the Company matches up to 4.50% of each participant’s eligible compensation. The Company’s actual contribution may be reduced by certain available forfeitures, if any, during the plan year. No discretionary profit-sharing contributions were made during the three and six months ended June 30, 2023 and 2022. The Company’s 401(k) matching contributions for the three months ended June 30, 2023 and 2022 were $0.2 million. The Company’s 401(k) matching contributions for the six months ended June 30, 2023 and 2022 were $0.5 million and $0.4 million, respectively.
Legal
From time to time in the normal course of business, the Company may be involved in claims, proceedings and litigation. In the case of any litigation, the Company records a provision for a liability when management believes that it is both probable that a liability has been incurred, and the amount of the loss can be reasonably estimated. The Company reviews such provisions at least quarterly and adjusts such provisions to reflect the impact of negotiations, settlements, rulings, advice of legal counsel and other information and events pertaining to a particular case.
As of June 30, 2023, there were no legal contingency matters, either individually or in aggregate, that would have a material adverse effect on the Company’s financial position, results of operations or cash flows.
NOTE 5 - STOCK INCENTIVE PLANS
2009 and 2019 Stock Plans
In 2009, the Board of Directors approved the 2009 Stock Plan ("2009 Stock Plan"). As amended in 2015, the 2009 Stock Plan permitted the Company to grant up to 16,495,150 shares of common stock. In January 2018, the Company increased the number of shares of common stock reserved under the 2009 Stock Plan by 535,130 shares, from 16,495,150 shares to 17,030,280 shares. In April 2019, the Board of Directors approved the adoption of the 2019 Stock Plan ("2019 Stock Plan", and together with the 2009 Stock Plan, "Stock Plans"). The 2019 Stock Plan permitted the Company to grant up to 8,173,970 additional shares, increasing the overall common stock reserved for grant under the Stock Plans to 25,204,250 shares. In September 2021, the Board of Directors approved the grant of 8,679,380 restricted stock units under the 2019 Stock Plan, covering an aggregate of 4,339,690 shares of each of Class A and LT50 common stock effective immediately prior to the effectiveness of the Company's IPO Registration Statement on Form S-1 ("IPO Registration Statement") on November 9, 2021. On November 9, 2021, the Board of Directors amended and restated the 2019 Stock Plan to, among other things, increase the common stock reserved for issuance under the 2019 Stock Plan to an aggregate of 16,856,770 shares of Class A and LT50 common stock.
Following the completion of the initial public offering of the Company’s Class A common stock ("IPO"), the Company did not and does not intend to make any further grants under the Stock Plans. However, the Stock Plans will continue to govern the terms and conditions of the outstanding awards granted under the Stock Plans. Upon the expiration, forfeiture, cancellation, withholding of shares upon exercise or settlement of an award to satisfy the exercise price or tax withholding, or repurchase of any shares of Class A common stock underlying outstanding stock-based awards granted under the 2009 Stock Plan or of Class A or LT50 common stock underlying outstanding stock-based awards granted under the 2019 Stock Plan, an equal number of shares of Class A common stock will become available for grant under the 2021 Incentive Award Plan ("2021 Plan") and the Company's 2021 Stock Purchase and Matching Plan ("Matching Plan" and together with the 2021 Plan, "2021 Incentive Plans").
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Expensify, Inc.
Notes to the Condensed Consolidated Financial Statements
(unaudited)
2021 Incentive Plans
In November 2021, the Board of Directors adopted, and its stockholders approved, the 2021 Incentive Plans, which both became effective immediately before the effectiveness of the IPO Registration Statement and use a combined share reserve. Under the 2021 Incentive Plans, 11,676,932 shares of Class A common stock were initially reserved for issuance pursuant to a variety of stock-based awards, including incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock awards, restricted stock units ("RSUs"), and other forms of equity and cash compensation under the 2021 Plan and purchase rights and matching awards under the Matching Plan. The number of shares initially reserved for issuance or transfer pursuant to awards under the 2021 Incentive Plans will be increased upon the expiration, forfeiture, cancellation, withholding of shares upon exercise or settlement of an award to satisfy the exercise price or tax withholding, or repurchase of any shares of Class A common stock underlying outstanding stock-based awards granted under the 2009 Stock Plan or of Class A or LT50 common stock underlying outstanding stock-based awards granted under the 2019 Stock Plan. The number of shares of Class A common stock reserved for issuance under the 2021 Incentive Plans as of June 30, 2023 and December 31, 2022 was 22,282,735 shares and 17,336,973 shares, respectively. The number of shares will automatically increase each subsequent January 1 through January 1, 2031, by the lesser of (A) 6% of the aggregate number of shares of all classes of common stock outstanding on the immediately preceding calendar year, or (B) such lesser number of shares as determined by the Company’s board of directors or compensation committee; provided, however, that no more than 87,576,990 shares of Class A common stock may be issued upon the exercise of incentive stock options.
Matching Plan
The Matching Plan operates using consecutive three month offering periods that commenced on March 15, 2022. Employees, consultants and directors (collectively, "Service Providers") of the Company can participate in the Matching Plan by electing to contribute compensation through payroll deductions or from fee payments or may be granted discretionary awards under the Matching Plan. On the last day of the offering period the contributions made during the offering period are used to purchase shares of Class A common stock.
The price at which Class A common stock is purchased under the Matching Plan equals the average of the high and low trading price of a share of Class A common stock as of the last trading day of the offering period. At the end of each offering period, the Company may provide a discretionary match up to 1/10 of a share of Class A common stock for each share of Class A common stock purchased by or issued to a service provider under the Matching Plan that is retained through the end of the applicable offering period. No fractional shares will be issued by the Company. The Company will round to the nearest full share for shares purchased by a service provider as well as any matched shares issued to a service provider under the Matching Plan. The match rate applicable to each offering period shall be limited to 1.50% of the shares of any class of capital stock outstanding as of the exercise date applicable to such offering period. The Company estimates the fair value of matched shares provided under the Matching Plan using the Black-Scholes option-pricing model on the date of grant. The Company recognizes stock-based compensation expense related to the matched shares pursuant to its Matching Plan on a straight-line basis over the applicable three month offering period.
Service Providers who participated in the Matching Plan for the offering period ended June 14, 2023 purchased a total of 140,158 Class A common shares, based on a purchase price of $6.97, resulting in gross cash proceeds to the Company of $1.0 million.
Service Providers who participated in the Matching Plan for the offering period ended June 14, 2022 purchased a total of 67,946 Class A common shares, based on a purchase price of $17.42, resulting in gross cash proceeds to the Company of $1.2 million.
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Expensify, Inc.
Notes to the Condensed Consolidated Financial Statements
(unaudited)


For the offering period ended June 14, 2023, the Company elected to match each share of Class A common stock purchased by or issued under the Matching Plan with 1/20 of a share of Class A common stock. During the three and six months ended June 30, 2023, the Company granted a total of 20,748 and 36,846 shares, respectively, of Class A common stock as a matching contribution under the Matching Plan, net of a total of 6,817 shares withheld for taxes during the three months ended June 30, 2023.
For the offering period ended June 14, 2022, the Company elected to match each share of Class A common stock purchased by or issued under the Matching Plan with 1/20 of a share of Class A common stock. During the three and six months ended June 14, 2022, the Company granted a total of 3,576 shares of Class A common stock as a matching contribution under the Matching Plan.
In June 2023, the Company made a discretionary contribution under the Matching Plan to eligible Service Providers. During the three and six months ended June 30, 2023, the Company granted a total of 75,311 shares of Class A common stock as a discretionary contribution under the Matching Plan, net of a total of 35,391 shares withheld for taxes.
Restricted Stock Units
On September 24, 2021, under the 2019 Stock Plan, the Company approved the grant of Class A and LT50 common stock RSUs to Service Providers effective November 9, 2021, the date the Company amended its Certificate of Incorporation, to include, among other things, LT50 common stock. RSUs granted to Service Providers on November 9, 2021 that were approved in September 2021 vest upon the satisfaction of both a performance and service condition. The performance condition was satisfied immediately prior to the effectiveness of the IPO Registration Statement. The service condition is satisfied over eight years with 1/8 of the grant vesting on September 15, 2022 and quarterly vesting of 1/32 of the grant every December 15, March 15, June 15 and September 15 (each, a "Specified Quarterly Date") thereafter until fully vested, in each case subject to continued service to the Company. All RSUs granted to Service Providers after the IPO, under the 2021 Plan, have a service condition only, which is satisfied over eight years from the vesting commencement date corresponding to one of the Specified Quarterly Dates nearest the date of grant, with 1/8 of each grant vesting on the first anniversary of the vesting commencement date and 1/32 of each grant vesting in equal quarterly installments thereafter until fully vested, in each case, subject to continued service to the Company.
Pursuant to the Company's Non-Employee Director Compensation Program, which was adopted under the 2021 Incentive Plans, the Company granted 55,731 Class A common stock RSUs for the six months ended June 30, 2023. A total of 24,792 Class A common RSUs vested during the six months ended June 30, 2023 related to previously granted RSU awards as the quarterly service conditions were satisfied.
During the six months ended June 30, 2023, RSU activity for Service Providers and non-employee directors was as follows:
Class A Common StockLT50 Common StockWeighted average grant date fair value per share
Outstanding at December 31, 2022
3,379,657 3,304,643 $33.88 
RSUs granted55,731  $8.17 
RSUs vested(266,381)(238,898)$32.65 
RSUs cancelled/forfeited/expired(100,709)(100,709)$40.92 
Outstanding at June 30, 2023
3,068,298 2,965,036 $33.71 
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Expensify, Inc.
Notes to the Condensed Consolidated Financial Statements
(unaudited)
As of June 30, 2023, there was $177.8 million of unamortized stock-based compensation cost related to unvested RSUs, which is expected to be recognized over the remaining weighted average life of 5.80 years. As of December 31, 2022, there was $204.2 million of unamortized stock-based compensation cost related to unvested RSUs, which was expected to be recognized over the remaining weighted average life of 6.23 years.
Stock Options
The Stock Plans and the 2021 Plan provide for the grant of incentive and nonstatutory stock options to employees, non-employee directors and consultants of the Company. Under the Stock Plans and the 2021 Plan, the exercise price of incentive stock options must be equal to at least 110% of the fair market value of the common stock on the grant date for a “ten-percent holder” or 100% of the fair market value of the common stock on the grant date for any other participant. The exercise price of nonstatutory options granted must be equal to at least 100% of the fair market value of the Company’s common stock on the date of grant.
The Company has only granted options under the Stock Plans. Options typically vest over four years and are exercisable at any time after the grant date, provided that Service Providers exercising unvested options receive restricted common stock that is subject to repurchase at the original exercise price upon termination of service. The repurchase right lapses in accordance with the vesting schedule of the exercised option. Early exercises of options prior to vesting are not deemed to be substantive exercises for accounting purposes and accordingly, amounts received for early exercises of unvested options are recorded as a liability. These repurchase terms are considered to be a forfeiture provision and do not result in variable accounting. There was an immaterial amount of exercised restricted common stock repurchased during the six months ended June 30, 2023 and 2022.
As of June 30, 2023 and December 31, 2022, there were 584,037 and 813,311 shares subject to repurchase, respectively, related to unvested stock options that had been early exercised. As of June 30, 2023 and December 31, 2022, the Company recorded a liability related to shares subject to repurchase of $0.9 million and $1.3 million, respectively, which is included within Accrued expenses and other liabilities in the accompanying Condensed Consolidated Balance Sheets. These amounts are reclassified to Common stock and Additional paid-in capital as the underlying shares vest.
A summary of the Company's stock option activity was as follows:
SharesWeighted average exercise price per shareWeighted average
remaining contractual life
(in years)
Outstanding at December 31, 2022
6,301,650 $1.67 5.20
Options exercised (102,865)$1.21 
Options cancelled/forfeited/expired(44,789)$3.40 
Outstanding at June 30, 2023
6,153,996 $1.66 4.63
Exercisable at June 30, 2023
6,024,296 $1.46 4.59
The total pretax intrinsic value of options exercised during the six months ended June 30, 2023 and 2022 was $0.7 million and $7.8 million, respectively. The total pretax intrinsic value of options outstanding at June 30, 2023 and December 31, 2022 was $39.9 million and $46.0 million, respectively. The intrinsic value is the difference between the estimated fair market value of the Company’s common stock at the date of exercise and the exercise price for in-the-money options.
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Expensify, Inc.
Notes to the Condensed Consolidated Financial Statements
(unaudited)


As of June 30, 2023, there was $6.0 million of unrecognized stock-based compensation cost related to unvested stock options, which is expected to be recognized over a weighted average period of 0.98 years. As of December 31, 2022, there was $8.1 million of unrecognized stock-based compensation cost related to unvested stock options, which was expected to be recognized over a weighted average period of 1.21 years.
Cash received from option exercises and purchases of shares under the Stock Plans for the six months ended June 30, 2023 and 2022 was $0.1 million and $0.5 million, respectively.
Stock-Based Compensation
The following table summarizes the stock-based compensation recognized for options granted under the 2009 Stock Plan, options and RSUs granted under the 2019 Stock Plan, RSUs granted under the 2021 Plan and matching and discretionary shares issued under the Matching Plan (in thousands):
Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
Matching Plan shares$1,072 $15 $1,321 $17 
Stock options874 993 1,774 1,999 
Restricted stock units9,137 13,040 18,649 26,412 
Stock-based compensation$11,083 $14,048 $21,744 $28,428 
Stock-based compensation expense is allocated based on the cost center to which the award holder spent time during the reported periods. Stock-based compensation expense is included in the following components of expenses on the accompanying Condensed Consolidated Statements of Operations (in thousands):
Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
Cost of revenue, net$3,600 $4,704 $6,906 $9,611 
Research and development2,455 1,877 4,661 4,298 
General and administrative2,376 5,463 5,020 10,439 
Sales and marketing1,910 2,004 3,758 4,080 
Stock-based compensation expense$10,341 $14,048 $20,345 $28,428 
Stock-based compensation capitalized as internally developed software costs was $0.7 million and $0.3 million for the three months ended June 30, 2023 and 2022, respectively. Stock-based compensation capitalized as internally developed software costs was $1.4 million and $0.6 million for the six months ended June 30, 2023 and 2022, respectively.
NOTE 6 - INCOME TAXES
For the three and six months ended June 30, 2023, the Company prepared its interim tax provision by applying a year-to-date effective tax rate, which the Company believes results in the best estimate of the annual effective tax rate.
For the three months ended June 30, 2023 and 2022, the Company recorded a provision for income taxes of $0.4 million and $2.1 million, respectively, which resulted in effective tax rates of (3.4)% and (34.8)%, respectively.
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Expensify, Inc.
Notes to the Condensed Consolidated Financial Statements
(unaudited)
For the six months ended June 30, 2023 and 2022, the Company recorded a provision for income taxes of $2.2 million and $3.7 million, respectively, which resulted in effective tax rates of (14.6)% and (31.7)%, respectively.
The principal reasons for the difference between the statutory rate and the effective rate for 2023 were primarily due to non-deductible stock-based compensation, Section 162(m) of the Internal Revenue Code ("IRC") compensation limitations, and the change in the valuation allowance. The principal reasons for the difference between the statutory rate and the effective rate for 2022 was due to the change in valuation allowance.
The Company follows the provisions of ASC 740-10, Accounting for Uncertainty in Income Taxes. ASC 740-10 prescribes a comprehensive model for the recognition, measurement, presentation and disclosure in financial statements of uncertain tax positions that have been taken or expected to be taken on a tax return. As of June 30, 2023 and December 31, 2022, the Company recorded an uncertain tax position liability, inclusive of interest and penalties, of $1.3 million and $1.2 million respectively, within Other liabilities on the Condensed Consolidated Balance Sheets. This liability includes an immaterial amount of interest and penalties as of June 30, 2023 and no interest and penalties as of December 31, 2022.
NOTE 7 - NET LOSS PER SHARE
The following table sets forth the computation of basic and diluted net loss per share (in thousands, except share and per share data):
Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
Numerator
Net loss, basic and diluted$(11,304)$(7,994)$(17,249)$(15,370)
Denominator
Weighted average shares of common stock used to compute net loss per share, basic and diluted82,011,477 80,473,097 81,890,624 80,311,053 
Net loss per share, basic and diluted$(0.14)$(0.10)$(0.21)$(0.19)
The rights, including the liquidation and dividend rights, of the holders of Class A, LT10 and LT50 common stock are identical, except with respect to voting, conversion and transfer rights. Each share of Class A common stock is entitled to one vote per share, each share of LT10 common stock is entitled to 10 votes per share and each share of LT50 common stock is entitled to 50 votes per share. Each share of LT10 and LT50 common stock is convertible into one share of Class A common stock voluntarily at the option of the holder after the satisfaction of certain requirements, which includes a 10-month notice period for LT10 common stock and a 50-month notice period for LT50 common stock to convert to Class A common stock, or automatically upon certain events. The Class A common stock has no conversion rights. As the liquidation and dividend rights are identical for Class A, LT10 and LT50 common stock, the undistributed earnings are allocated on a proportional basis based on the number of weighted average shares within each class of common stock during the period and the resulting net loss per share attributable to common stockholders will be the same for the Class A, LT10 and LT50 common stock on an individual or combined basis.
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Expensify, Inc.
Notes to the Condensed Consolidated Financial Statements
(unaudited)


The following potentially dilutive shares were not included in the calculation of diluted shares outstanding as the effect would have been anti-dilutive:
Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
Weighted-average stock options4,061,602 5,418,741 4,213,114 6,065,482 
Matching shares247 6,220 352 6,748 
Total4,061,849 5,424,961 4,213,466 6,072,230 
NOTE 8 - EQUITY
On May 10, 2022, the Executive Committee of the Board of Directors approved a share repurchase program with authorization to purchase up to $50.0 million of shares of Class A common stock ("2022 Share Repurchase Program"). The Company may repurchase shares from time to time through open market purchases, in privately negotiated transactions or by other means, including the use of trading plans intended to qualify under Rule 10b5-1 of the Securities Exchange Act of 1934 ("Exchange Act"), in accordance with applicable securities laws and other restrictions. The actual timing, manner, price and total amount of future repurchases will depend on a variety of factors, including business, economic and market conditions, corporate and regulatory requirements, prevailing stock prices, restrictions under the terms of loan agreements and other considerations. The 2022 Share Repurchase Program does not obligate the Company to acquire any particular amount of Class A common stock, and the program may be suspended or terminated at any time by the Company at its discretion without prior notice.
During the three and six months ended June 30, 2023, the Company repurchased 504,493 shares of Class A common stock under the 2022 Share Repurchase Program, at a total cost to the Company of $3.0 million.
NOTE 9 - RELATED PARTY TRANSACTIONS
During the six months ended June 30, 2023 and 2022, Expensify, Inc. contributed $0.2 million and $1.9 million, respectively, to its wholly-owned subsidiary, Expensify.org, a nonprofit benefit organization established by the Company. There was an immaterial amount of commitments from Expensify, Inc. that remained open for contribution as of June 30, 2023 and December 31, 2022.
There are no other significant related party transactions for the Company as of June 30, 2023, except as noted elsewhere in these condensed consolidated financial statements.
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and with our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2022 ("2022 Annual Report"). This discussion contains forward-looking statements based upon current plans, expectations and beliefs involving risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under Part I, Item 1A. "Risk Factors" in our 2022 Annual Report and included elsewhere in this Quarterly Report on Form 10-Q. See "Special Note Regarding Forward-Looking Statements."
OVERVIEW
Expensify is a cloud-based expense management software platform that helps the smallest to the largest businesses simplify the way they manage money. Every day, people from all walks of life in organizations around the world use Expensify to scan and reimburse receipts from flights, hotels, coffee shops, office supplies and ride shares. Since our founding in 2008, we have added over 12 million members to our community and processed and automated 1.5 billion expense transactions on our platform as of June 30, 2023, freeing people to spend less time managing expenses and more time doing the things they love. For the quarter ended June 30, 2023, an average of 742,000 paid members across 45,300 companies and over 200 countries and territories used Expensify to make money easy.
Components of Results of Operations
Revenue
We generate revenue from subscription fees based on the usage of our cloud-based expense management software platform under arrangements paid monthly in arrears that are either (i) month-to-month and can be terminated by either party without penalty at any time or (ii) annual arrangements based on a minimum number of monthly members. Annual subscription customers who wish to terminate their contracts before the end of the term are required to pay the remaining obligation in full plus any fees or penalties set forth in the agreement. We charge our customers subscription fees for access to our platform based on the number of monthly active members and level of service. The contractual price is based on either negotiated fees or rates published on our website. We generate most of our revenue from customers who have a credit card or debit card on file with us that is automatically charged each month. Virtually all of our customers have a standard terms of service contract, with the few exceptions on bespoke service contracts.
Our contracts with our customers include two performance obligations: access to the hosted software service, inclusive of all features available within the platform, and the related customer support. We account for the platform access and the support as a combined performance obligation because they have the same pattern of transfer over the same period and are therefore delivered concurrently. We satisfy our performance obligation over time each month as we provide platform access and support services to customers and as such recognize revenue over time. We recognize revenue net of applicable taxes imposed on the related transaction.
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We offer a cashback rewards program to all customers based on volume of Expensify Card transactions and software as a service ("SaaS") subscription tier. Cashback rewards are earned on a monthly basis and are paid out the following month. We consider our cashback payments to customers as consideration payable to a customer, and the payments are recorded as contra revenue within Revenue on the Condensed Consolidated Statements of Operations. We also record a cashback rewards liability that represents the consideration payable to customers for earned cashback rewards. The cashback rewards fluctuate over time as customers meet eligibility requirements in conjunction with the applicable SaaS subscription tier of each customer and the timing of payments made to customers. Additional details pertaining to the Company's cashback program can be found in Part I, Item 1A. "Risk Factors" in our 2022 Annual Report. Subsequent to the date the 2022 Annual Report was filed with the SEC and effective as of March 2023, the Company removed a $25,000 monthly threshold for companies to qualify for 1% cash back and now offers a minimum of 1% cash back for all purchases.
Cost of Revenue, Net
Cost of revenue, net primarily consists of expenses related to hosting our service, including the costs of data center capacity, credit card processing fees, third-party software license fees, outsourcing costs to support customer service and outsourcing costs to support and process our patented scanning technology SmartScan, net of consideration from a vendor. Additional costs include amortization expense on capitalized software development costs and personnel-related expenses, including stock-based compensation and employee costs attributable to supporting our customers and maintenance of our platform.
Consideration from a vendor is related to the Expensify Card. We use a third-party vendor to issue Expensify Cards and process the related transactions. When purchases are made with the Expensify Card, a fee is charged by the card network to the merchant (also known as "interchange"). The vendor is contractually entitled to the interchange through its relationships with the card network and card issuing bank. The vendor keeps a portion of the interchange for their services, and our agreement with the vendor results in us receiving the remainder of the interchange less the amount retained by the vendor (our remainder portion, "Expensify interchange amount"). The vendor also charges us fees ("vendor fees") for the services it provides to us. Due to the nature of the vendor agreement, we do not record the Expensify interchange amount as revenue. Instead, the net of the Expensify interchange amount and vendor fees are paid to us, and we record it as "Consideration from a vendor, net," a contra expense in Cost of revenue, net. The following summarizes these various amounts for the periods presented:
Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
(in thousands)
Expensify interchange amount$2,657 $1,708 $4,918 $2,928 
Vendor fees(254)(160)(443)(257)
Consideration from a vendor, net$2,403 $1,548 $4,475 $2,671 
OPERATING EXPENSES
Research and Development
Research and development expenses consist primarily of personnel-related expenses, including stock-based compensation, incurred related to the planning and preliminary project stage and post-implementation stage of new products or enhancing existing products or services. We capitalize certain software development costs that are attributable to developing or adding significant functionality to our internal-use software during the application development stage of the projects. All research and development expenses, excluding capitalized software development costs, are expensed as incurred.
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We believe delivering new functionality is critical to attract new customers and expand our relationships with existing customers. We expect to continue to make investments in and expand our product and service offerings to enhance our customers’ experience and satisfaction and to attract new customers. We expect research and development expenses will increase as we expand our research and development team to develop new products and product enhancements.
General and Administrative
General and administrative expenses primarily consist of personnel-related expenses, including stock-based compensation, for any employee time allocated to administrative functions, including finance and accounting, legal and human resources. In addition to personnel-related expenses, general and administrative expenses consist of rent, utilities, depreciation on property and equipment, amortization of operating right-of-use assets and external professional services, including accounting, audit, tax, finance, legal and compliance, human resources and information technology. We expect that general and administrative expenses will continue to increase as we scale our business and as we incur additional costs associated with being a publicly traded company, including legal, audit, business insurance and consulting fees.
Sales and Marketing
Sales and marketing expenses primarily consist of personnel-related expenses, including stock-based compensation, advertising expenses, branding and public relations expenses and referral fees for strategic partners and other benefits that we provide to our referral and affiliate partners. We expect sales and marketing expenses will increase as we expand our sales efforts to pursue our market opportunity.
Interest and Other Expenses, Net
Interest and other expenses, net, consist primarily of interest paid under our credit facilities with Canadian Imperial Bank of Commerce ("CIBC"). It also includes realized gains and losses on foreign currency transactions and foreign currency remeasurement.
Provision for Income Taxes
Income taxes primarily consist of income taxes in the United States, United Kingdom, Australia, Netherlands and Canada, as well as states in the United States in which we do business.
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Results of Operations
The results of operations presented below should be reviewed in conjunction with the condensed consolidated financial statements and notes included elsewhere in this Quarterly Report on Form 10-Q.
The following table sets forth our results of operations for the periods presented:
Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
(in thousands, except percentages, share and per share data)
Revenue$38,884 $43,162 $78,985 $83,532 
Cost of revenue, net(1)
16,925 15,876 32,700 30,010 
Gross margin21,959 27,286 46,285 53,522 
Operating expenses:
Research and development(1)
5,094 3,584 10,512 7,285 
General and administrative(1)
11,712 15,432 24,141 29,438 
Sales and marketing(1)
14,714 12,244 23,897 25,616 
Total operating expenses31,520 31,260 58,550 62,339 
Loss from operations(9,561)(3,974)(12,265)(8,817)
Interest and other expenses, net(1,367)(1,955)(2,783)(2,856)
Loss before income taxes(10,928)(5,929)(15,048)(11,673)
Provision for income taxes(376)(2,065)(2,201)(3,697)
Net loss$(11,304)$(7,994)$(17,249)$(15,370)
Net loss per share:
Basic and diluted$(0.14)$(0.10)$(0.21)$(0.19)
Weighted average shares of common stock used to compute net loss per share:
Basic and diluted82,011,477 80,473,097 81,890,624 80,311,053 
Net loss margin(29)%(19)%(22)%(18)%
(1)Includes stock-based compensation expense as follows:
Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
(in thousands)
Cost of revenue, net$3,600 $4,704 $6,906 $9,611 
Research and development2,455 1,877 4,661 4,298 
General and administrative2,376 5,463 5,020 10,439 
Sales and marketing1,910 2,004 3,758 4,080 
Stock-based compensation expense$10,341 $14,048 $20,345 $28,428 

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COMPARISON OF THE THREE MONTHS ENDED JUNE 30, 2023 AND 2022
Revenue
Three Months Ended June 30,Change
20232022Amount%
(in thousands, except percentages)
Revenue$38,884 $43,162 $(4,278)(10)%
Revenue decreased by $4.3 million, or 10%, for the three months ended June 30, 2023 compared to the same period in 2022, primarily due to (i) a decrease in billable activity across our user base, including a decrease in pay-per-use billable activity which has a higher average fee per member than our annual members, and (ii) an increase in contra revenue related to cashback payments driven by the increased adoption and spend captured from members using the Expensify Card.
Cost of Revenue, Net and Gross Margin
Three Months Ended June 30,Change
20232022Amount%
(in thousands, except percentages)
Cost of revenue, net$16,925 $15,876 $1,049 %
Gross margin$21,959 $27,286 $(5,327)(20)%
Gross margin %56 %63 %
Cost of revenue, net increased by $1.0 million, or 7%, for the three months ended June 30, 2023 compared to the same period in 2022. Cost of revenue, net increased primarily due to increased outsourcing activities related to maintaining our platform. These increases were partially offset by an increase in Consideration from a vendor, net, driven primarily by the increased adoption and spend capt