Prospectus Summary
This summary highlights selected information contained in greater detail elsewhere in this prospectus. This summary is not complete and does not contain all of the information you should consider in making your investment decision. Before investing in our common stock, you should carefully read this entire prospectus. You should carefully consider, among other things, the sections titled “Risk factors,” “Special note regarding forward-looking statements” and “Management’s discussion and analysis of financial condition and results of operations” and our consolidated financial statements and the related notes included elsewhere in this prospectus. Unless the context otherwise requires, the terms “Expensify,” the “company,” “we,” “us,” “our” and similar references in this prospectus refer to Expensify, Inc. and its consolidated subsidiaries.
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 10 million members to our community, and processed and automated over 1.1 billion expense transactions on our platform, freeing people to spend less time managing expenses and more time doing the things they love. For the quarter ended June 30, 2021, an average of 639,000 paid members across 53,000 companies and over 200 countries and territories used Expensify to make money easy.
Small and medium businesses (“SMBs”) are the cornerstone of the global economy, making up over 99% of businesses and approximately 70% of employment in Organization for Economic Cooperation and Development ("OECD") countries. Despite their significance, the vast majority of SMBs still rely on manual, inefficient processes to manage the critical back office functions that power their businesses every day. As SMBs seek to modernize back office functions like expense management to better compete in today’s digital economy, we believe they will look for comprehensive technologies that are easy to discover, implement, purchase, manage and use. At the same time, individual employees are becoming a powerful source of change as they increasingly expect to bring their own choice of technology into the workplace.
Since the beginning of Expensify, our North Star has been improving the experience of the actual end users of expense management software: everyday employees. We designed Expensify to be easy to set up, integrate, configure and use from any device, which has enabled us to serve employees of all types and organizations of all sizes, industries and geographies.
Our intense focus on improving the everyday experience of regular employees with an easy-to-use but powerful platform has enabled a viral, “bottom-up” business model that is capital efficient and extremely scalable. By allowing people to spend less time managing receipts and more time pursuing their real goals, our users (who we refer to as members) have adopted, championed and spread Expensify to their colleagues, managers and friends. We believe our happy members are the best form of marketing and our self-service, bottom-up approach takes advantage of strong, organic word-of-mouth adoption. Underlying our platform is a secure, scalable and defensible technology and user-centric legal foundation that supports and fuels our viral growth. The combination of these factors has allowed us to avoid the costly pitfalls of traditional, top-down enterprise sales and marketing methods that focus solely on decision makers, and invest our time and resources on making features our members love. This has created a massive, untapped and growing market opportunity for us that we believe we are in prime position to capture.
Behind our platform is a company with passionate people and a unique culture that guides everything we do. Our company operates with a flat, generalist organizational structure united by a robust set of common values that foster the long-term happiness and retention of our employees. The efficiency of our business model allows us to prioritize attracting, retaining and inspiring talented, ambitious and humble people committed to a long-term vision. We are a team that likes to solve real problems, and though expense reports are problematic for most people, there are other pressing problems facing our world that we want to also help solve. In 2020, we launched our 501(c)(3) non-profit, Expensify.org, to increase transparency in the donation process while connecting with donors, volunteers and people in need across five relevant issues facing our communities today: housing equity, youth advocacy, food security, reentry services and climate justice. The Expensify platform and our expertise in expense management enables us to connect donors and volunteers directly through our platform and cut out the administrative expenses that take away from typical donations. We believe that our unique culture, our commitment to all of our stakeholders, and our long-term vision are critical components to the success of our company. We are committed to transparent and robust environmental, social and governance practices and disclosures. Our core stakeholders include employees, members, customers, shareholders and communities we impact. We engage with stakeholders to inform product development and company operations, and aim to align with all stakeholders towards long-term sustainable growth.
We believe that our unique approach has created a highly scalable and efficient business model. We have experienced rapid growth in recent periods. Our revenue was $80.5 million and $88.1 million in the years ended December 31, 2019 and 2020, respectively. Our net income (loss) was $1.2 million and $(1.7) million in the years ended December 31, 2019 and 2020, respectively. Our adjusted EBITDA was $7.6 million and $26.8 million in the years ended December 31, 2019 and 2020, respectively. For the six months ended June 30, 2020 and 2021, our revenue was $40.6 million and $65.0 million, respectively. Our net income was $3.5 million and $14.7 million in the six months ended June 30, 2020 and 2021, respectively. Our adjusted EBITDA was $9.2 million and $22.9 million in the six months ended June 30, 2020 and 2021, respectively. See the section titled “Management’s discussion and analysis of financial condition and results of operations” for additional information on our non-GAAP metrics.
Our industry
SMBs are the bedrock of the global economy and have distinctive technology requirements
Small and medium businesses are the foundation of the global economy. According to the OECD, SMBs, defined as firms with fewer than 250 employees, make up over 99% of all businesses and approximately 70% of all employment across the 36 OECD countries.
Given their size, SMBs typically have one person overseeing the discovery and implementation of new systems, a responsibility that is often in addition to their core job function. As a result, SMBs have specific requirements when adopting new technologies:
•Easy to discover. SMBs increasingly rely on online channels for finding new technologies and heavily consider recommendations from experts, friends and colleagues.
•Easy to implement. IT departments within SMBs are often one person or the business owner themselves and are incapable of taking time away from their business to support cumbersome implementation, maintenance and training requirements.
•Easy to purchase. With no procurement department and limited resources, the individuals making the purchasing decision at SMBs often prefer vendors with transparent, self-service monthly subscription plans that can be paid by credit card.
•Easy to manage. SMBs prefer a single, comprehensive platform from one provider that can solve multiple pain points.
•Easy to use. Many SMBs prioritize ease of use and convenience over cost and seek solutions with elegant, intuitive user experiences that require no training or expertise to operate.
Back office processes are critical to every SMB, but remain antiquated and inefficient
Back office functions, such as HR, accounting and expense management, are ubiquitous and fundamental activities for businesses of every size and industry. Despite the mission criticality of these activities, the vast majority of SMBs rely on manual, inefficient processes to manage and execute most back office functions. 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.
Every business manages expenses, most do it manually
While the accounting function has seen some improvements in efficiency with the advent of cloud-based accounting platforms, the critical data-gathering processes that precede the accounting workflow (“preaccounting”) have largely remained unchanged since the last century. Expense management, which refers to the collection, processing, auditing and reimbursement of employee expenses, is one of these preaccounting processes, and is among the most complicated. For most SMBs, the standard procedure for expense management remains manual and laborious, with employees filing expense claims by physically tracking down and handing in receipts, or scanning and attaching receipts to emails for approval. As a result, employees, accountants and managers across every business unit are bogged down by time-consuming, manual tasks related to expense management, reducing their productivity and job satisfaction.
The modern day employee is increasingly empowered to drive technology change
Traditionally, business software solutions have been sold to key decision makers, deployed by centralized IT departments, and forced onto employees with little regard to end user experiences and their unique workflows. In recent years, the consumerization of enterprise technology has completely transformed this framework. In the SMB segment, employees are even more influential in driving company-wide adoption: with infrequent technology evaluation and less employees per company than enterprises, SMBs require a smaller critical mass for technological change.
Limitations of traditional approaches
We believe both existing solutions and their underlying business models have fundamental shortcomings that limit their ability to solve the inefficiencies of expense management and other back-office functions for SMBs.
Existing solutions
We believe the vast majority of SMBs still rely on manual, cumbersome methods to manage expenses, with employees physically filing expense claims via paper and pen or spreadsheets, and managers chasing employees across the organization for receipts, confirming expenses one-by-one and performing repetitive data entry on multiple platforms to synchronize information. A small subset of SMBs use more modern form-based software tools, but these solutions typically optimize the experience for decision makers and ignore the needs and preferences of regular, everyday employees. All of these solutions possess one or more of the following limitations that fail to address the back-office challenges faced by SMBs:
•Not designed for the employee;
•Multiple, disparate product lines for different features;
•Inaccurate receipt scanning;
•Lack purposeful automation;
•Lack integration with key systems and applications; and •Partitioned database design.
Traditional approaches
The traditional approach for software sales has historically been “top-down,” whereby software providers deploy costly, targeted ads and a legion of sales representatives focused on selling large, multi-year deals with vague product specifications to decision makers and business owners. This type of approach poses key challenges for traditional software providers, including:
•High cost of sale. The traditional top-down approach relies on an army of salespeople to sell, retain and upsell decision makers, requiring an ever-increasing pipeline of sales talent.
•SMB decision makers are hard to identify and talk to. Discovering and buying software is typically not the core job function for anyone at most SMBs, and software providers leveraging a top-down approach struggle to identify, engage with and sell to key decision makers at SMBs.
•Contracts and sales processes tailored to enterprises. Traditional enterprise sales models are designed to address long procurement processes, which emphasize pricing and control features over the user experience.
•Company-owned data and legal terms. Traditional approaches have a legal structure where all employee data is owned by the company. This company-centric legal approach acts as an impediment to viral employee adoption within and across organizations.
Our market opportunity
We believe we address a massive market opportunity today that is significantly underpenetrated by modern solutions. We estimate our total addressable market (“TAM”) was approximately $16.0 billion in the United States and $21.5 billion in our core geographies in 2020, which consisted of the United States, United Kingdom, Canada and Australia in 2020. To estimate our TAM in the United States, we identified the number of employees at SMBs with less than 1,000 employees based on data from the U.S. Bureau of Labor Statistics and segmented these companies into three cohorts based on number of employees: (1) companies with 1-9 employees, (2) companies with 10-499 employees, and (3) companies with 500-999 employees. We then multiplied the total number of employees in each cohort by our average revenue per paid member in each such cohort as of June 30, 2021. Given our focus on SMBs, this excludes the U.S. market opportunity for companies with greater than 1,000 employees, which we estimate to be $7.1 billion using the same methodology described above.
To estimate our TAM in our core geographies outside of the United States, in the United Kingdom, Canada, and Australia, we identified the number of employees in SMBs in these geographies based on data from the United Kingdom Department for Business, Energy & Industrial Strategy, Statistics Canada and the Australian Government. We then multiplied the total number of employees at SMBs in these geographies by our average revenue per paid member for customers with less than 1,000 paid members as of June 30, 2021. SMBs are defined as businesses with fewer than 1,000 employees in the United States, businesses with fewer than 250 employees in the United Kingdom, businesses with fewer than 500 employees in Canada and businesses with fewer than 200 employees in Australia. We believe there is considerable runway for long-term growth given the majority of our market opportunity is untapped; we estimate that the majority of SMBs within our core geographies have not adopted end-to-end software solutions and are using manual processes for expense management today.
We believe we are able to monetize approximately three times the amount of average revenue per user (“ARPU”) in our target market of SMBs compared to some of our enterprise competitors' list prices. In addition to being able to monetize SMBs at a higher ARPU in comparison to enterprise competitors, SMBs by nature tend to grow at a faster rate than enterprises.
We believe there are multiple sources of upside to our TAM in the near-term future:
•Monetizing transactions on our platform. We launched the Expensify Card for early access to a limited number of customers in late 2019 and then launched fully in early 2020. We estimate that the current TAM for our Expensify Card will be approximately $17 billion by 2022. We arrived at our TAM by multiplying an industry standard take rate by the estimated small business credit card spend in the United States in 2022 according to a study by the Mercator Advisory Group.
•Platform expansion. While expense management tends to touch the majority of company employees at least once or twice in a given year, a smaller population are consistently paid members of expense management. We plan to increase our TAM by launching features that will be relevant to all of our customers’ employees every month, resulting in more paid members and more revenue per customer even at the same paid member price.
•Continued international expansion. We believe there is a large, untapped opportunity outside of our core geographies.
Our approach
Since our founding, we have taken a unique approach to expense management built on key, complementary elements:
•Platform strategy hyper-focused on the employee. We designed Expensify to be easily configured and used by every single employee within an organization, not just decision makers or managers.
•Viral, bottom-up business model driven by the employee. Our employee-focused platform strategy enables a viral, “bottom-up” adoption cycle that starts with an individual employee. After signing up for free on the website or downloading our free app to submit expenses and realizing the benefits of using Expensify, our enthusiastic members champion our platform internally, spreading it via word-of-mouth to other employees and convincing decision makers to adopt Expensify company-wide.
•Word-of-mouth adoption supported by a market consensus approach. We believe that our happy members are the best form of marketing. We strive to build a superior platform that makes the lives of employees and admins easier so that they become our champions and promote us to other individuals and organizations. We deploy large scale brand advertising to build on this platform superiority and help create market consensus that Expensify is the category leader for expense management software.
•Unique company culture and long-term vision. Our platform strategy and business model are complemented by our unique company culture and intense focus on the long-term happiness of our employees.
We believe that these elements of our approach are hard to replicate, self-reinforcing and work together to drive a powerful competitive advantage.
Our platform strategy
Our platform strategy centers around the following key concepts:
•Built for everyone. We designed our platform to be used by everyone in an organization, from employees to managers to the finance department. We believe that the more intuitive and simple Expensify is, the more employees and administrators will want to use it.
•Easy to set up. We believe that by making our platform easily accessible, simple to set up and easily configurable attracts more members to download and try Expensify.
•Designed to improve experiences for all members. We believe that always having the pain points of our members at the center of every technology decision and feature we develop enables us to consistently deliver an improved experience for every employee in an organization.
•One platform, many features. Expensify is one platform, with one price that unlocks access to every feature on the platform, from expense management to bill payment. Our features are just different configurations of the same underlying tool, and are not different products in some kind of combined suite.
•Highly integrated. We designed our platform to easily integrate with other business and consumer applications.
We believe that elements of our platform strategy are a critical driver of the viral, widespread adoption of Expensify across and between any type of organization.
Our business model
Our platform strategy enables a viral “bottom-up” business model that is capital efficient and extremely scalable. The adoption of Expensify within an organization often starts with the individual employee, who downloads our mobile application or signs up on our website for free and uses it to easily submit expenses to their manager with a few taps. After the employee realizes the benefits of our platform, they become a champion of Expensify and often spread it internally to other employees. With multiple employees using Expensify and valuable features simplifying the manager’s job, the decision maker purchases a subscription to Expensify and becomes a paying customer with a few members.
We offer simple, transparent and flexible subscription plans for both individuals and businesses that are completely self-service and payable by credit card. In the quarter ended June 30, 2021, 95% of our revenue came from recurring, automated monthly payments made via credit cards. We designed our pricing plans to facilitate the easy adoption of our platform by the smallest mom-and-pop stores to the largest and most complex organizations.
We believe that our happy members are the best form of marketing, and our self-service, bottom-up approach takes advantage of strong, organic word-of-mouth adoption. We support this powerful word-of-mouth marketing with large-scale brand advertising to build market consensus that Expensify is the software of choice for expense management.
We believe that our frictionless, viral and bottom-up business model and word-of-mouth adoption allows us to not rely on traditional outbound marketing efforts that are costly and often ineffective. As a result, we can dedicate our energy and resources on strengthening our brand, improving our features and making it easier for more people to adopt Expensify.
Our culture
At Expensify, our culture is deeply embedded in everything we do.
Our culture is centered on the belief that a life well lived is one that enables you to achieve the following three life goals, which we all work towards with a long-term mindset: Live Rich, Have Fun and Save The World.
We believe that there are three common qualities critical to achieving these three goals and the success of our company: Talent, Ambition and Humility Finally, our long-term commitment to our three life goals is guided by two simple rules: Get Shit Done and Don’t Ruin It for Everyone Else.
We believe that our unique culture and our employees’ happiness and long-term commitment to Expensify is a critical component of our success.
Our competitive strengths
We believe our platform strategy, business model and culture provide us with competitive strengths that will allow us to maintain our position as a category leader for expense management and extend our leadership to improving other back-office functions.
•Hyper-focus on an improved experience for our members. Since our inception, our principal goal has been to offer a single, intuitive and powerful platform with features designed for the actual end users of expense management software: everyday employees.
•Viral, bottom-up business model. We leverage an efficient, self-service business model driven by the viral, bottom-up adoption of our platform by employees.
•Recognized market consensus and efficient word-of-mouth. Our members drive the adoption and expansion of Expensify within organizations, and our platform and business model are intensely focused on improving their everyday experience.