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What changed in Expensify, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Expensify, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+392 added−421 removedSource: 10-K (2024-02-27) vs 10-K (2023-03-08)

Top changes in Expensify, Inc.'s 2023 10-K

392 paragraphs added · 421 removed · 321 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

64 edited+11 added−11 removed101 unchanged
Biggest changeIntellectual Property Our intellectual property is an important aspect of our business and helps us maintain our competitive position. To establish and protect our rights in our proprietary intellectual property, we rely upon a combination of patent, copyright, trade secret and trademark laws, and contractual restrictions such as confidentiality agreements, licenses and intellectual property assignment agreements.
Biggest changeTo establish and protect our rights in our proprietary intellectual property, we rely upon a combination of patent, copyright, trade secret and trademark laws, and contractual restrictions such as confidentiality agreements, licenses and intellectual property assignment agreements. 17 Table of Contents As of December 31, 2023, we had 15 trademark registrations in the United States, including EXPENSIFY, EXPENSICON, EXPENSIFY THIS, SMARTSCAN, CONCEIRGE, YOU WEREN’T BORN TO DO EXPENSES, LAT* TALKS LAT TALKS, SWIPE TO WIN, and LONG ASS TABLE TALKS.
The efficiency of 5 Table of Contents our business model allows us to prioritize attracting, retaining and inspiring talented, ambitious and humble people committed to a long-term vision.
The efficiency of our 5 Table of Contents business model allows us to prioritize attracting, retaining and inspiring talented, ambitious and humble people committed to a long-term vision.
We believe that always having the pain points of our members at the center of every technology decision 7 Table of Contents and feature we develop enables us to consistently deliver an improved experience for every employee in an organization. • One platform, many features.
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. 7 Table of Contents • One platform, many features.
For example, every year, we bring the whole company, plus families and kids, to a warm and sunny international location for a month-long "working vacation" to enable our employees to collaborate in person from a remote beach, build friendships with their colleagues, broaden their perspective and have a great time.
For example, we aim to bring the whole company, plus families and kids, to a warm and sunny international location every year for a month-long "working vacation" to enable our employees to collaborate in person from a remote beach, build friendships with their colleagues, broaden their perspective and have a great time.
We designed our platform to easily integrate with other business and consumer applications. We offer over 40 pre-built integrations, allowing Expensify to seamlessly connect with HR, payroll and accounting systems, travel management software, business and employee bank accounts and credit cards.
We designed our platform to easily integrate with other business and consumer applications. We offer over 40 pre-built integrations, allowing Expensify to seamlessly connect with accounting and HR systems, travel management software, business and employee bank accounts and credit cards.
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 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.
Since then, we have expanded our platform to include features that help businesses manage corporate credit cards, generate and send invoices, pay bills and book travel, all from our single, easy-to-use mobile application. We intend to continue adding complementary features to retain and add value to existing customers and attract new members.
Since then, we have expanded our platform to include features that help businesses manage corporate credit cards, generate and send invoices, pay bills, collect payments and book travel, all from our single, easy-to-use mobile application. We intend to continue adding complementary features to retain and add value to existing customers and attract new members.
To provide a seamless experience for our customers, we integrate with the accounting, ERP and travel software used by SMBs and their employees every day. We also have frictionless integrations with many of the technology providers that generate the most receipts for our members, such as Uber and Lyft. Through our ExpensifyApproved!
To provide a seamless experience for our customers, we integrate with the accounting, HR and travel software used by SMBs and their employees every day. We also have frictionless integrations with many of the technology providers that generate the most receipts for our members, such as Uber and Lyft. Through our ExpensifyApproved!
Invoicing & Bill Pay Key capabilities of our invoicing and bill payment features include: • Payments made easy. With multiple payment options, including credit/debit card, ACH, check, Venmo and PayPal, customers across the globe have access to quick, easy and frictionless payment options. • Eliminate manual entry.
Invoicing & Bill Pay Key capabilities of our invoicing and bill payment features include: • Payments made easy. With multiple payment options, including credit/debit card, ACH and check, customers across the globe have access to quick, easy and frictionless payment options. • Eliminate manual entry.
For more information on the potential impacts of government regulations affecting our business, see “Risk Factors—Risks Related to Our Business.” Corporate Information We were incorporated on April 29, 2009 as Expensify, Inc., a Delaware corporation. Our principal executive offices are located at 401 SW 5th Street, Portland, Oregon 97204. Available Information 18 Table of Contents Our website address is www.expensify.com.
For more information on the potential impacts of government regulations affecting our business, see “Risk Factors—Risks Related to Our Business.” Corporate Information We were incorporated on April 29, 2009 as Expensify, Inc., a Delaware corporation. Our principal executive offices are located at 401 SW 5th Street, Portland, Oregon 97204. Available Information Our website address is www.expensify.com.
The superiority of our solution and its user-friendly nature creates advocates of our platform and allows Expensify to spread virally, through word-of-mouth, across teams, departments and organizations. This word-of-mouth marketing increases organically as more individual members and teams discover our platform.
The strength of our solution and its user-friendly nature creates advocates of our platform and allows Expensify to spread virally, through word-of-mouth, across teams, departments and organizations. This word-of-mouth marketing increases organically as more individual members and teams discover our platform.
Companies can save time by exporting invoices and bills to QuickBooks, Xero, Sage Intacct, Oracle NetSuite and more. Invoices are automatically linked to the corresponding customer and exported as a receivable in the accounting system.
Companies can save time by exporting invoices and bills to QuickBooks, Xero, Sage Intacct, Oracle NetSuite and more. Invoices are automatically linked to the corresponding customer and exported as a receivable in the accounting system. Bills are automatically linked to the corresponding vendor and exported as a payable.
Customizable approval workflows help companies of all sizes tailor their approval hierarchies, route specific expenses to budget or project owners and 11 Table of Contents approve expenses through an intuitive “Guided Review” that highlights specific items requiring review. • Intelligent auditing. Process data automatically or configure which types of transactions require review.
Customizable approval workflows help companies of all sizes tailor their approval hierarchies, route specific expenses to budget or project owners and approve expenses through an intuitive “Guided Review” that highlights specific items requiring review. • Intelligent auditing. Process data automatically or configure which types of transactions require review.
Because word-of-mouth drives significant adoption, we have experienced member growth outside of our core geographies without investment in marketing or regional sales forces. We have the opportunity to accelerate international growth by investing in 10 Table of Contents marketing, developing a localized platform experience and expanding international partnership and integrations.
Because word-of-mouth drives significant adoption, we have experienced member growth outside of our core geographies without investment in marketing or regional sales forces. We have the opportunity to accelerate international growth by investing in marketing, developing a localized platform experience and expanding international partnership and integrations.
While other financial processes have seen vast efficiency improvements with the widespread adoption of cloud-based ecosystems, company-focused preaccounting tasks such as expense management have largely remained unchanged, and therefore are still overwhelmingly inefficient, unscalable and time-consuming.
While other financial processes have seen vast efficiency improvements with the widespread adoption of cloud-based ecosystems, company-focused preaccounting tasks such as expense management have largely remained unchanged, and 10 Table of Contents therefore are still overwhelmingly inefficient, unscalable and time-consuming.
Outside of expense management, we have expanded our platform and built invoicing and bill payment features with the goal of replicating the frictionless adoption of our expense management feature. By sending an invoice using Expensify, accounts receivable departments naturally promote Expensify to their clients.
Outside of expense management, we have expanded our platform and built invoicing and bill payment features with the goal of replicating the frictionless adoption of our expense management feature. By sending an invoice using Expensify, 9 Table of Contents accounts receivable departments naturally promote Expensify to their clients.
Our sales model focuses on enabling customer self-service and low-friction entry points enhanced with AI powered customer service. Our customers can access free and fully functional trials. When a member has completed their platform evaluation, purchasing is coordinated online through an automated, easy-to-use web or mobile based process.
Our sales model focuses on enabling customer self-service and low-friction entry points enhanced with AI powered customer service. Our customers can access free and fully functional trials. When a member has 16 Table of Contents completed their platform evaluation, purchasing is coordinated online through an automated, easy-to-use web or mobile based process.
We also engage third-party vendors to supply on-demand workers as needed to support our operations. We have not experienced any work stoppages, and we believe that our employee 15 Table of Contents relations are strong. We remain relentlessly committed to reevaluating ourselves and continuing to foster a workplace environment that prioritizes the well-being of each and every Expensify employee.
We also engage third-party vendors to supply on-demand workers as needed to support our operations. We have not experienced any work stoppages, and we believe that our employee relations are strong. We remain committed to reevaluating ourselves and continuing to foster a workplace environment that prioritizes the well-being of each and every Expensify employee.
Whether companies require visibility into transaction approvals, help with corporate credit card reconciliation and remittance, or insights into travel spend, financial data is visible throughout the platform. PAY After capturing and approving relevant company spend, businesses require an easy and fast method for disbursing funds to employees and vendors.
Whether companies require visibility into transaction approvals, help with corporate credit card reconciliation and remittance, or insights into travel spend, financial data is visible throughout the platform. 11 Table of Contents PAY After capturing and approving relevant company spend, businesses require an easy and fast method for disbursing funds to employees and vendors.
We believe that our unique culture and our employees’ happiness and long-term commitment to Expensify is a critical component of our success. As of December 31, 2022 we had 138 full-time employees. None of our employees are represented by a labor union or covered by collective bargaining agreements.
We believe that our unique culture and our employees’ happiness and long-term commitment to Expensify is a critical component of our success. As of December 31, 2023 we had 133 full-time employees. None of our employees are represented by a labor union or covered by collective bargaining agreements.
Our goal is to continue increasing the amount of companies that have adopted the Expensify Card and the number of members that have a card provisioned per company, both of which would increase the amount of total spend converted to the Expensify Card.
Our goal is to continue increasing the number of companies that have adopted the Expensify Card and the number of members that have a card provisioned per company, both of which would increase the amount of total spend c onverted to the Expensify Card.
We leverage a variety of targeted marketing strategies that involve industry conferences, industry influencers, partner marketing, our own conference and more to achieve market consensus that Expensify is the premier, industry standard expense management platform. This is essential to our viral and word-of-mouth business model.
We leverage a variety of targeted marketing strategies that involve industry conferences, industry influencers, partner marketing, our own conference and more with the goal of achieving market consensus that Expensify is the premier, industry standard expense management platform. This is essential to our viral and word-of-mouth business model.
Individual employees download the Expensify mobile app or sign up on 9 Table of Contents our website, for free, and use it to submit their expenses to their bosses – turning every expense report into a highly targeted marketing message, straight to a decision maker.
Individual employees download the Expensify mobile app or sign up on our website, for free, and use it to submit their expenses to their bosses – turning every expense report into a highly targeted marketing message, straight to a decision maker.
We operate with a flat, generalist organizational structure, where everybody is encouraged to participate in every discussion and contribute to every decision they choose to. Our culture is centered on the belief that a life well lived is one that enables you to achieve the following three goals, which we all work towards with a long-term mindset: • Live Rich.
We operate with a flat, generalist organizational structure, where everybody is encouraged to participate in the discussions and contribute to the decisions they choose to. Our culture is centered on the belief that a life well lived is one that enables you to achieve the following three goals, which we all work towards with a long-term mindset: • Live Rich.
Expensify’s payments platform streamlines how modern payments are made and reconciled in the following ways: • Next day ACH direct deposit. For companies that enable automatic processing and reimbursement, employees receive expense reimbursements in their bank account the following business day. • Centralized travel procurement .
Expensify’s payments platform streamlines how modern payments are made and reconciled in the following ways: • Next day ACH direct deposit. For companies that enable automatic processing and reimbursement, employees receive expense reimbursements in their bank account the following business day. • Global reimbursement.
Daily settlement also helps smooth cash flows throughout the month, as opposed to one large, uncertain lump sum at month end. Companies can also choose monthly settlement if they prefer a more classic experience. • Integrated travel booking .
Daily settlement also helps smooth cash flows throughout the month, as opposed to one large, uncertain lump sum at month end. Companies can also choose monthly settlement if they prefer a more classic experience. 12 Table of Contents • Integrated travel booking .
We believe the principal competitive factors that drive leadership in the markets we compete in include the following: • End user design focus; • Ease of access, adoption, deployment and use; • Platform functionality and ability to automate processes; • Mobile access across devices; • Ability to purchase without a sales representative; • Viral, bottom-up business model supported by word-of-mouth adoption; • High interoperability with internal and third party systems and consumer applications; • Flexible, employee-centric legal terms regarding data ownership; • Data security and privacy; • Speed and scalability of architecture underlying the platform; • Brand reputation and market consensus around platform superiority; and • Customer service and support. 17 Table of Contents We believe we compete favorably with our competitors on the basis of the factors described above.
We believe the principal competitive factors that drive leadership in the markets we compete in include the following: • End user design focus; • Ease of access, adoption, deployment and use; • Platform functionality and ability to automate processes; • Mobile access across devices; • Ability to purchase without a sales representative; • Viral, bottom-up business model supported by word-of-mouth adoption; • High interoperability with internal and third party systems and consumer applications; • Flexible, employee-centric legal terms regarding data ownership; • Data security and privacy; • Speed and scalability of architecture underlying the platform; • Brand reputation and market consensus around platform superiority; and • Customer service and support.
Our Collect plan enables our members to integrate with popular small business accounting systems, configure simple expense report approval workflows, as well as pay employees, contractors and volunteers via Direct Deposit ACH. ◦ Control.
Our Collect plan enables our members to integrate with popular small business accounting systems, configure simple expense report approval workflows, as well as pay employees, contractors and volunteers via Direct Deposit ACH or internationally via Global Reimbursements. ◦ Control.
Since our founding in 2008, we have added over 12 million members to our community, and processed and automated over 1.4 billion expense transactions on our platform as of December 31, 2022, freeing people to spend less time managing expenses and more time doing the things they love.
Since our founding in 2008, we have added over 15 million members to our community, and processed and automated over 1.5 billion expense transactions on our platform as of December 31, 2023, freeing people to spend less time managing expenses and more time doing the things they love.
We control access to our intellectual property and confidential information through internal and external controls. We maintain a policy requiring our employees, contractors, consultants and other third parties involved in the development of intellectual property on our behalf to enter into confidentiality and proprietary rights agreements to control access to our proprietary information.
We maintain a policy requiring our employees, contractors, consultants and other third parties involved in the development of intellectual property on our behalf to enter into confidentiality and proprietary rights agreements to control access to our proprietary information.
Companies receive an automated approval decision in seconds, and card provisioning for an entire organization is possible in a few minutes. Every member receives a virtual card for immediate use. • Continuous automatic reconciliation . Card transactions are synchronized in real-time between Expensify and a company’s accounting systems.
Key capabilities of the Expensify Card include: • Streamlined card application/setup. Companies receive an automated approval decision in seconds, and card provisioning for an entire organization is possible in a few minutes. Every member receives a virtual card for immediate use. • Continuous automatic reconciliation . Card transactions are synchronized in real-time between Expensify and a company’s accounting systems.
CUSTOMER SUCCESS Concierge is our customer support engine. Concierge is designed for speed and accuracy and optimized for cost. Concierge is powered by AI and trained by customer support agents, with different levels of skill and training, spread out across the world. First Responders provide simple support that requires minimal training, with the primary requirement being English proficiency.
Concierge is powered by AI and trained by customer support agents, with different levels of skill and training, spread out across the world. First Responders provide simple support that requires minimal training, with the primary requirement being English proficiency.
Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to reports filed or furnished pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”) are also available free of charge on our investor relations website, investors.expensify.com as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.
Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to reports filed or furnished pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”) are also available free of charge on our investor relations website, investors.expensify.com as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. 18 Table of Contents We provide notifications of news or announcements regarding our financial performance, including SEC filings, investor events, press and earnings releases, on our investor relations website.
Our Free plan enables our members to roll out a corporate card program with the Expensify Card, reimburse cash expenses for employees, send invoices to clients and set up bill payment for their team. • Paid Plans ◦ Collect.
Collect and Control customers can access additional discounts if they spend on the Expensify Card: • Free Plans ◦ Free. Our Free plan enables our members to roll out a corporate card program with the Expensify Card, reimburse cash expenses for employees, send invoices to clients and set up bill payment for their team. • Paid Plans ◦ Collect.
Our culture and values, including our adherence to Environmental, Social, and Governance ("ESG") principles, will be shared in our company code of ethics and conduct and in future sustainability reporting; • Continue to strengthen our market consensus. We have worked hard to establish and maintain Expensify as the dominant expense management platform for SMBs.
We believe our company code of ethics and conduct demonstrates our culture and values, including our adherence to Environmental, Social, and Governance ("ESG") principles; • Continue to strengthen our market consensus. We have worked hard to establish and maintain Expensify as a dominant expense management platform for SMBs.
This market consensus strategy ensures we get the lion's share of the best new customers in the market by default, without needing to pay a high marginal cost to acquire each new customer. SALES Our viral and word-of-mouth lead generation enables us to employ a self-service and inbound sales model.
This market consensus strategy enables us to attract new customers without needing to pay a high marginal cost to acquire each new customer. SALES Our viral and word-of-mouth lead generation enables us to employ a self-service and inbound sales model.
We want to have a “comfortable baseline,” where on a dull, ordinary day we wake up refreshed and excited to take on the day’s challenges, and go to bed each night fully satisfied in life well lived and a job well done. • Have Fun. Sometimes, we want to do stuff that is awesome just for the sake of awesomeness.
We want to have a “comfortable baseline,” where on a dull, ordinary day we wake up refreshed and excited to take on the day’s challenges, and go to bed each night fully satisfied in life well lived and a job well done. 14 Table of Contents • Have Fun.
The feature is designed to fix the common pain points seen with traditional corporate cards, namely the lack of real-time receipt capture and transaction visibility, enhanced access to credit for small businesses and streamlined setup of corporate card programs. Key capabilities of the Expensify Card include: • Streamlined card application/setup.
The Expensify Card leverages our wealth of experience acquired by working directly with finance administrators. The feature is designed to fix the common pain points seen with traditional corporate cards, namely the lack of real-time receipt capture and transaction visibility, enhanced access to credit for small businesses and streamlined setup of corporate card programs.
We believe our unique approach, business model, and company culture drive significant competitive differentiation. We intend to continue our intense design focus on the employee experience, support our viral bottom-up business model to drive profitable growth, and nurture our one-of-a-kind company structure and culture to maintain this competitive advantage.
We intend to continue our intense design focus on the employee experience, support our viral bottom-up business model to drive profitable growth, and nurture our one-of-a-kind company structure and culture to maintain this competitive advantage. Intellectual Property Our intellectual property is an important aspect of our business and helps us maintain our competitive position.
We believe that consumers are more likely to both use and recommend products from brands they admire. By consistently acting on and vocally promoting our values, we have the ability to both drive positive change and create brand awareness that can add to the virality of our platform.
By consistently acting on and vocally promoting our values, we have the ability to both drive positive change and create brand awareness that can add to the virality of our platform.
Every receipt we process through our OCR technology makes our SmartScan technology more accurate, every transaction we process and backtest enhances our fraud protection capabilities and every customer inquiry we resolve allows Concierge to answer future questions faster.
Every receipt we process through our OCR technology makes our SmartScan technology more accurate, every transaction we process and backtest enhances our fraud protection capabilities and every customer inquiry we resolve allows Concierge to answer future questions faster. We believe that our data asset will continue to expand the value of our platform and drive future growth.
We take privacy and data security seriously and are in compliance with domestic and international data privacy regulations, which sometimes change faster than the wind. Our Data As of December 31, 2022, we have processed over 1.4 billion expense transactions for our customers.
We take privacy and data security seriously and design our systems and processes based on applicable domestic and international data privacy regulations, which sometimes change faster than the wind. Our Data As of December 31, 2023, we have processed over 1.5 billion expense transactions for our customers.
We believe that our data asset will continue to expand the value of our platform and drive future growth. 14 Table of Contents Our Culture, Employees and Human Capital At Expensify, our culture is deeply embedded in everything we do. We strive to create a diverse, inclusive and collaborative workplace that prioritizes and fosters the long-term happiness of our employees.
Our Culture, Employees and Human Capital At Expensify, our culture is deeply embedded in everything we do. We strive to create a diverse, inclusive and collaborative workplace that prioritizes and fosters the long-term happiness of our employees.
Not too often, but often enough to remind ourselves that we are living life to its fullest, and enabling others to do the same.
Sometimes, we want to do stuff that is awesome just for the sake of awesomeness. Not too often, but often enough to remind ourselves that we are living life to its fullest, and enabling others to do the same.
We will continue to focus on maintaining and extending the virality of our features to support our viral, bottom-up business model; • Expand and monetize transaction volume from existing and new customers. We fully launched the Expensify Card in 2020 and, despite pullback in corporate expenses with the COVID-19 pandemic, customers began adopting the card.
We will continue to focus on maintaining and extending the virality of our features to support our viral, bottom-up business model; • Expand and monetize transaction volume from existing and new customers.
Companies can use the Expensify Card in conjunction with existing expense policies at no additional cost, or independently as a separate corporate card program through our platform. The Expensify Card leverages our wealth of experience acquired by working directly with finance administrators.
Expensify Card The Expensify Card is a natural extension of our expense management platform and is powered by the Visa network. Companies can use the Expensify Card in conjunction with existing expense policies at no additional cost, or independently as a separate corporate card program through our platform.
Each customer has either a "pay per use" plan in which they are billed a flat rate or each active member, or an "annual" plan where they commit to a minimum number of monthly seats in exchange for a discount. Collect and Control customers can access additional discounts if they spend on the Expensify Card: • Free Plans ◦ Free.
Each customer has either a "pay per use" plan in which they are billed a flat rate for each active member, or an "annual" plan where they commit to a minimum number of 8 Table of Contents monthly seats in exchange for a discount.
Our business subscriptions can be used by teams, organizations, and companies for free or upgraded to one of our paid plans, which include our Collect and Control plans, following a free trial.
Our business subscriptions can be used by teams, organizations, and companies for free or upgraded to one of our paid plans, which include our Collect and Control plans, following a free trial. We bill customers on Collect and Control plans at the start of each month based on the number of policy members who were active in the previous month.
We provide notifications of news or announcements regarding our financial performance, including SEC filings, investor events, press and earnings releases, on our investor relations website. The contents of these websites are not intended to be incorporated by reference into this report or in any other report or document we file. 19 Table of Contents
The contents of these websites are not intended to be incorporated by reference into this report or in any other report or document we file. 19 Table of Contents
This removes the need for an arduous once-a-month statement reconciliation. • Real-time compliance. Cardholders receive an immediate push notification when their card is charged, which helps protect against fraud.
This removes the need for an arduous once-a-month statement reconciliation. • Real-time compliance. Cardholders receive an immediate push notification when their card is charged, which helps protect against fraud. In addition, eReceipts mean that no receipt capture is required for nearly all purchases, though companies can stipulate their own receipt policy where preferred. • Spend control with Smart Limits.
Our Customer Success team works closely with our customers to identify our members’ greatest needs and act as our primary Product Managers to develop features that reflect their feedback. We build our software with the end user at the center of every decision, investing substantial time, energy and resources to ensure we have a deep understanding of our members’ needs.
Our Customer Success team works closely with our customers to identify our members’ greatest needs and act as our primary Product Managers to develop features that reflect their feedback.
If nothing else, it's good for employee retention and morale, by framing our work in a more powerful context than it might otherwise seem. Everyone here knows that we cannot succeed as a business without also giving back and making the world a better place than we found it.
Everyone here knows that we cannot succeed as a business without also giving back and making the world a better place than we found it.
For the quarter ended December 31, 2022, an average of 779,000 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 almost all businesses and the majority of employment in Organisation for Economic Co-operation and Development ("OECD") member countries.
Small and medium-sized businesses (“SMBs”) are the cornerstone of the global economy, making up almost all businesses and the majority of employment in Organisation for Economic Co-operation and Development ("OECD") member countries.
We also had approximately 35 trademark registrations and approximately 19 applications in certain foreign jurisdictions. We will pursue additional trademark registrations to the extent we believe it would be beneficial and cost effective. We also own several domain names, including www.expensify.com, use.expensify.com, www.expensify.org and new.expensify.com.
We also had approximately 83 trademark registrations (including international registrations) and approximately 29 pending applications in certain foreign jurisdictions, including Canada, the European Union, the United Kingdom, Mexico, Brazil, Australia and New Zealand. We will pursue additional trademark registrations to the extent we believe it would be beneficial and cost effective.
Our marketing efforts are designed to support the bottom-up viral nature of our platform by establishing our brand as the premiere option in preaccounting software.
Our marketing efforts are designed to support the bottom-up viral nature of our platform by establishing our brand as a premiere option in preaccounting software. We invest in brand and platform promotion through partners, conference participation, thought leadership, direct marketing and advertising and content development to educate the market about the benefits of our platform and create market consensus.
We are integrated with most major banks in the United States and our system and processes have been stress tested by each of them. We process billions of dollars in expense reimbursements every year and are audited annually by our processing bank.
Our Compliance and Data Security We are PCI-DSS, SOC1 Type II, and SOC2 Type II compliant, with external parties performing "grey box" testing. We are integrated with most major banks in the United States, and we process billions of dollars in expense reimbursements every year and are audited annually by our processing bank.
If a cardholder fails to submit their expenses in a timely fashion, card activity is suspended until historical card spend is approved. • Cash back.
Companies control the maximum exposure they will accept for each employee by stipulating their individual unapproved spend, which is another cash control feature. If a cardholder fails to submit their expenses in a timely fashion, card activity is suspended until historical card spend is approved. • Cashback.
He developed a platform to load gift cards on-demand from his personal credit card to offer funds immediately for individuals in his neighborhood to purchase food. While this idea didn’t take off, David held onto the concept for more than a decade until it became a reality with the launch of Expensify.org and its corporate-card-fueled donations called Karma Points.
While this idea didn’t take off, David held onto the concept for more than a decade until it became a reality with the launch of Expensify.org and its corporate-card-fueled donations called Karma Points. 13 Table of Contents Through Expensify.org, we seek to empower individuals and communities to eliminate injustice around the world by making giving and volunteering more convenient, accountable, meaningful and collaborative.
So long as the market agrees we are the best, it is relatively inexpensive to maintain that perception. This creates an asymmetric advantage against anybody who would seek to challenge our brand.
Creating market consensus requires a major investment to establish and requires ongoing commitment to our product to maintain. So long as the market agrees in the strength of our platform, it is relatively inexpensive to maintain that perception. This creates an asymmetric advantage against challengers to our brand.
Manage and centrally pay for travel bookings made with any Expensify Card, all while ensuring compliance with company travel policies. • Corporate card remittance. Streamline the process of managing and remitting corporate card payments. Expensify Card The Expensify Card is a natural extension of our expense management platform, and is powered by the Visa network.
For companies or employees based outside of the United States, Expensify offers reimbursement in 5 currencies across 200 countries and territories. • Centralized travel procurement . Manage and centrally pay for travel bookings made with any Expensify Card, all while ensuring compliance with company travel policies. • Corporate card remittance. Streamline the process of managing and remitting corporate card payments.
As of December 31, 2022, we had 19 issued patents and 12 pending patent applications in the United States. Our issued patents expire between August 18, 2028 and October 17, 2037. We have 1 pending application in Europe, Australia and Canada. We continually review our development efforts to assess the existence and patentability of new intellectual property.
We also own several domain names, including www.expensify.com, use.expensiffy.com, www.expensify.org, and new.expensify.com. As of December 31, 2023, we had 23 issued patents and 15 pending patent applications in the United States. Our issued patents expire between August 18, 2028 and March 26, 2040. We have 1 pending application in Europe, Australia and Canada.
Since then, its adoption has grown, especially as business travel resumed following challenges caused by the COVID-19 pandemic. Going forward, we intend to increase the promotion of the Expensify Card to both new and existing customers to drive growth in adoption; • Promote Expensify’s culture and values.
Going forward, we intend to increase the promotion of the Expensify Card to both new and existing customers to drive growth in adoption; • Promote Expensify’s culture and values. We believe that consumers are more likely to both use and recommend products from brands they admire.
We plan to reinforce the market consensus surrounding our platform, as well as expand on these strategies across new feature verticals and markets; • Create physical spaces to attract new members and promote our brand. We are transitioning certain of our office spaces into co-working spaces, which we call lounges.
We plan to reinforce the market consensus surrounding our platform, as well as expand on these strategies across new feature verticals and markets; • Expand integrations and strengthen partnerships. Expense management touches many functions across a company.
Bills are automatically linked to the corresponding vendor and exported as a payable. 13 Table of Contents Expensify.org We started Expensify.org to “create a just and generous world” with the belief that doing good is good for business. We aim to integrate the Expensify.org mission into everything we do.
Expensify.org We started Expensify.org with a goal to “create a just and generous world” with the belief that doing good is good for business. We aim to integrate the Expensify.org mission into everything we do. If nothing else, it's good for employee retention and morale, by framing our work in a more powerful context than it might otherwise seem.
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We bill 8 Table of Contents customers on Collect and Control plans at the start of each month based on the number of policy members who were active in the previous month.
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For the quarter ended December 31, 2023, an average of 719,000 paid members across an average of 47,000 companies and over 200 countries and territories used Expensify to make money easy.
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These spaces are uniquely designed to be extensions of our culture and brand, and we intend to open these spaces to certain members in addition to Expensify employees.
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We fully launched the Expensify Card in 2020 and, despite pullback in corporate expenses with the COVID-19 pandemic, customers began adopting the card, especially as business travel resumed following challenges caused by the COVID-19 pandemic.
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These spaces are designed to showcase how we work and have built our company, which we hope will encourage current members to adopt our culture for their companies and invite their friends to join, adding new members; • Expand integrations and strengthen partnerships. Expense management touches many functions across a company.
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Companies that spend over $250,000 on their Expensify Cards per month receive 2% cashback for all USD purchases or 1% for all USD purchases if monthly spend is under $250,000. • Daily settlement option . Ensure that employees never overspend what a company is able to pay.
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In addition, eReceipts mean that no receipt capture 12 Table of Contents is required for nearly all purchases, though companies can stipulate their own receipt policy where preferred. • Spend control with Smart Limits. Companies control the maximum exposure they will accept for each employee by stipulating their individual unapproved spend, which is another cash control feature.
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Under the original Expensify Card program launched in 2020 (“Legacy Card Program”), Expensify has an agreement with the payment processor, Marqeta, Inc. ("Marqeta"), and relies on Marqeta to manage the relationship with the issuing bank, Sutton Bank, and the card network, Visa, in authorizing and settling transactions.
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Companies that spend over $250,000 per month for each of their first three months receive 4% cash back for all purchases in their first three months and 2% with no limits for all spend on their Expensify Cards afterwards.
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In October 2023, the Company amended the Expensify Card program (“Updated Card Program”) to separately enter into an agreement with a new issuing bank, The Bancorp Bank N.A. ("Bancorp"), to issue Expensify Cards to customers and authorize and settle transactions on the Visa card network, in providing overall card program management services.
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Companies that spend over $25,000 but less than $250,000 per month for each of their first three months receive 2% cash back for all purchases in their first three months and 1% with no limits for all spend on their Expensify Cards afterwards. • Karma Points.
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As of December 31, 2023, the Updated Card Program had not yet launched to customers. Once the Updated Card Program is launched, the Company will concurrently operate the Legacy Card Program and Updated Card Program, with all new Expensify Card issuances being under the Updated Card Program.
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Every time a cardholder makes a purchase, Expensify donates 10% of our interchange amount to Expensify.org for use in one of its five funds – Hunger, Climate, Homes, Youth, Reentry. • Daily settlement option . Ensure that employees never overspend what a company is able to pay.
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He developed a platform to load gift cards on-demand from his personal credit card to offer funds immediately for individuals in his neighborhood to purchase food.
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Through Expensify.org, we seek to empower individuals and communities to eliminate injustice around the world by making giving and volunteering more convenient, accountable, meaningful and collaborative.
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We build our software with the end user at the center of every decision, investing substantial time, energy and resources to ensure we have a deep understanding of our members’ needs. 15 Table of Contents CUSTOMER SUCCESS Concierge is our customer support engine. Concierge is designed for speed and accuracy and optimized for cost.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeAny of these disruptions to data transmission could lead customers to switch to our competitors or avoid using our features, which could negatively impact our revenue or harm our opportunities for growth. 44 Table of Contents We rely upon data centers and other systems and technologies provided by third parties to operate our business, and interruptions or performance problems with these centers, systems and technologies may adversely affect our business and operating results.
Biggest changeWe rely upon data centers and other systems and technologies provided by third parties to operate our business, and interruptions or performance problems with these centers, systems and technologies may adversely affect our business and operating results. We rely on data centers and other technologies and services provided by third parties in order to operate our business.
If we are unable to develop and offer features that meet legal requirements or help our members and customers meet their obligations under the laws or regulations relating to privacy, data protection, or information security, or if we violate or are perceived to violate any laws, regulations, or other obligations relating to privacy, data protection, or information security, we may experience reduced demand for our platform, 41 Table of Contents harm to our reputation and become subject to investigations, claims and other remedies, which would expose us to significant fines, penalties and other damages, all of which would harm our business.
If we are unable to develop and offer features that meet legal requirements or help our members and customers meet their obligations under 41 Table of Contents the laws or regulations relating to privacy, data protection, or information security, or if we violate or are perceived to violate any laws, regulations, or other obligations relating to privacy, data protection, or information security, we may experience reduced demand for our platform, harm to our reputation and become subject to investigations, claims and other remedies, which would expose us to significant fines, penalties and other damages, all of which would harm our business.
Our quarterly and annual financial results may fluctuate due to a variety of factors, many of which are outside of our control and may be difficult to predict, including, but not limited to: • the level of demand across our platform and for individual features within our platform; • our ability to grow or maintain our gross logo retention rate and net seat retention rate (each as described under the section titled "Management's Discussion and Analysis of Financial Condition and Results of Operations—Key Factors Affecting Our Performance—Retaining Existing Customers"), expand usage within organizations, retain and increase sales to existing customers and attract new members and customers; • our ability to convert individuals and organizations using our free features or trial subscriptions into paying customers; • our ability to predictably generate revenue through marketing and sales efforts; • the timing and success of new features, integrations, capabilities and enhancements by us to our platform, or by our competitors to their products, or any other changes in the competitive landscape of our market; • our ability to grow and maintain our relationships and/or integrations with our network of third-party partners, including integration partners, channel partners and professional service partners; • our ability to regulate members and member interactions on an increasingly collaborative platform; • our ability to grow revenue share and customer referrals from our partner ecosystem; • our ability to attract new customers and retain existing customers; • the success of our customers’ businesses; • our ability to achieve widespread acceptance and use of our platform and features, including the Expensify Card and any new features we may introduce; • our ability to retain customers on annual subscriptions; 20 Table of Contents • our ability to maintain and improve employee efficiency, and our ability to manage third party, outsourced or open source workers to provide value-added services like receipt processing, customer support and engineering; • errors in our forecasting of the demand for our platform and features, which would lead to lower revenue, increased costs, or both; • the amount and timing of operating expenses and capital expenditures, as well as entry into operating leases, that we may incur to maintain and expand our business and operations and to remain competitive; • the timing of expenses and recognition of revenue; • actual or perceived security breaches, technical difficulties, or interruptions to our platform and features; • pricing pressure as a result of competition or otherwise; • ineffective pricing strategies that could limit customer base expansion, revenue growth and subscription renewals; • adverse litigation judgments, other dispute-related settlement payments, or other litigation-related costs; • the number of new employees hired; • the timing of the grant or vesting of equity awards to employees, directors, or consultants; • declines in the values of foreign currencies relative to the U.S. dollar; • changes in, and continuing uncertainty in relation to, the legislative or regulatory environment; • legal and regulatory compliance costs in new and existing markets; • costs and timing of expenses related to the potential acquisition of talent, technologies, businesses or intellectual property, and their integration, including potentially significant amortization costs and possible write-downs; • health epidemics, such as the COVID-19 pandemic, or other conditions that impact travel and business spending; and • general economic and market conditions in either domestic or international markets, including geopolitical uncertainty and instability and their effects on software spending.
Our quarterly and annual financial results may fluctuate due to a variety of factors, many of which are outside of our control and may be difficult to predict, including, but not limited to: • the level of demand across our platform and for individual features within our platform; • our ability to grow or maintain our gross logo retention rate and net seat retention rate (each as described under the section titled "Management's Discussion and Analysis of Financial Condition and Results of Operations—Key Factors Affecting Our Performance—Retaining Existing Customers"), expand usage within organizations, retain and increase sales to existing customers and attract new members and customers; • our ability to convert individuals and organizations using our free features or trial subscriptions into paying customers; • our ability to predictably generate revenue through marketing and sales efforts; • the timing and success of new features, integrations, capabilities and enhancements by us to our platform, or by our competitors to their products, or any other changes in the competitive landscape of our market; • our ability to grow and maintain our relationships and/or integrations with our network of third-party partners, including integration partners, channel partners and professional service partners; • our ability to regulate members and member interactions on an increasingly collaborative platform; • our ability to grow revenue share and customer referrals from our partner ecosystem; • our ability to attract new customers and retain existing customers; • the success of our customers’ businesses; • our ability to achieve widespread acceptance and use of our platform and features, including the Expensify Card and any new features we may introduce; • our ability to retain customers on annual subscriptions; • our ability to maintain and improve employee efficiency, and our ability to manage third party, outsourced or open source workers to provide value-added services like receipt processing, customer support and engineering; 20 Table of Contents • errors in our forecasting of the demand for our platform and features, which would lead to lower revenue, increased costs, or both; • the amount and timing of operating expenses and capital expenditures, as well as entry into operating leases, that we may incur to maintain and expand our business and operations and to remain competitive; • the timing of expenses and recognition of revenue; • actual or perceived security breaches, technical difficulties, or interruptions to our platform and features; • pricing pressure as a result of competition or otherwise; • ineffective pricing strategies that could limit customer base expansion, revenue growth and subscription renewals; • adverse litigation judgments, other dispute-related settlement payments, or other litigation-related costs; • the number of new employees hired; • the timing of the grant or vesting of equity awards to employees, directors, or consultants; • declines in the values of foreign currencies relative to the U.S. dollar; • changes in, and continuing uncertainty in relation to, the legislative or regulatory environment; • legal and regulatory compliance costs in new and existing markets; • costs and timing of expenses related to the potential acquisition of talent, technologies, businesses or intellectual property, and their integration, including potentially significant amortization costs and possible write-downs; • health crises, such as the COVID-19 pandemic, or other conditions that impact travel and business spending; and • general economic and market conditions in either domestic or international markets, including geopolitical uncertainty and instability and their effects on software spending.
We believe our growth depends on a number of factors, including, but not limited to, our ability to: • attract new individuals and organizations to use our features, particularly our expense management feature; • convert individuals and organizations using our free features or trial subscriptions into paying customers; • grow or maintain our gross logo retention rate and net seat retention rate, and expand usage within organizations; • price our subscription plans effectively and competitively; • retain our existing individual and organizational customers; • achieve widespread acceptance and use of our platform and features, including in markets outside of the United States; • continue to successfully advance our bottom-up sales strategy as well as strategic relationships with our channel partners; • continue to maintain and build a platform and brand that drives word-of-mouth exposure to new potential members; • grow or maintain our brand through marketing, advertising campaigns, partnerships and other methods; • gain member traction for and generate revenue from our new features and services; • grow or maintain current levels of consideration from a vendor and/or fees generated through transaction-based features; • expand the features and capabilities of our platform and features; • provide excellent customer experience and customer support; • maintain the security and reliability of our platform and features; • maintain the trust of our customers; • successfully compete against established companies and new market entrants, as well as existing software tools; • successfully respond to other competitive challenges in the United States and globally; • attract, hire and retain highly skilled personnel; 22 Table of Contents • the impact of the COVID-19 pandemic, or any other future pandemic, epidemic or other public health crisis and the corresponding pace and rate of recovery on our business; • obtain, expand, maintain, enforce and protect our intellectual property portfolio; • operate as a public company; • grow our member and customer base in new countries and/or markets, and increase awareness of our brand on a global basis; and • obtain and maintain compliance and licenses material to our current and future businesses, and comply with existing and new applicable laws and regulations including in markets outside of the United States.
We believe our growth depends on a number of factors, including, but not limited to, our ability to: • attract new individuals and organizations to use our features, particularly our expense management feature; • convert individuals and organizations using our free features or trial subscriptions into paying customers; • grow or maintain our gross logo retention rate and net seat retention rate, and expand usage within organizations; • price our subscription plans effectively and competitively; • retain our existing individual and organizational customers; • achieve widespread acceptance and use of our platform and features, including in markets outside of the United States; • continue to successfully advance our bottom-up sales strategy as well as strategic relationships with our channel partners; • continue to maintain and build a platform and brand that drives word-of-mouth exposure to new potential members; • grow or maintain our brand through marketing, advertising campaigns, partnerships and other methods; • gain member traction for and generate revenue from our new features and services; • grow or maintain current levels of consideration from a vendor and/or fees generated through transaction-based features; • expand the features and capabilities of our platform and features; • provide excellent customer experience and customer support; • maintain the security and reliability of our platform and features; • maintain the trust of our customers; • successfully compete against established companies and new market entrants, as well as existing software tools; • successfully respond to other competitive challenges in the United States and globally; • attract, hire and retain highly skilled personnel; • the impact of any future pandemic, epidemic or other public health crisis and the corresponding pace and rate of recovery on our business; • obtain, expand, maintain, enforce and protect our intellectual property portfolio; • operate as a public company; • grow our member and customer base in new countries and/or markets, and increase awareness of our brand on a global basis; and 22 Table of Contents • obtain and maintain compliance and licenses material to our current and future businesses, and comply with existing and new applicable laws and regulations including in markets outside of the United States.
A failure on our part to safeguard consumer data adequately or to destroy data securely or otherwise comply with legal obligations may subject us, depending on the personal information in question, to costs associated with notice and remediation, as well as potential regulatory investigations or enforcement actions, and possibly to civil liability, under federal, state, or foreign laws or regulation, industry standards, our internal privacy policies and procedures, or our contracts governing our processing of personal information claims by third parties, and damage to our reputation, any of which could have an adverse effect on our operations, financial performance and business.
A failure on our part to safeguard consumer data adequately or to destroy data securely or otherwise comply with legal obligations may subject us, depending on the personal data in question, to costs associated with notice and remediation, as well as potential regulatory investigations or enforcement actions, and possibly to civil liability, under federal, state, or foreign laws or regulation, industry standards, our internal privacy policies and procedures, or our contracts governing our processing of personal data claims by third parties, and damage to our reputation, any of which could have an adverse effect on our operations, financial performance and business.
In addition, we face risks in doing business internationally that could adversely affect our business and results of operations, including: • the need to localize and adapt our platform and features for specific countries, including translation into foreign languages, tax and regulatory updates and associated expenses; • data privacy laws that impose different and potentially conflicting obligations with respect to how personal data is processed or require that customer data be stored in a designated territory; • more fragmented partner market which proves to be harder for our platform to integrate with; • difficulties in staffing and managing foreign operations; • regulatory and other delays and difficulties in setting up foreign operations; • different pricing environments, longer accounts receivable payment cycles and collections issues; • new and different sources of competition; • weaker protection for intellectual property and other legal rights than in the United States and practical difficulties in enforcing intellectual property and other rights outside of the United States; • laws and business practices favoring local competitors; 37 Table of Contents • compliance challenges related to the complexity of multiple, conflicting and changing governmental laws and regulations; • exposure to liabilities under anti-corruption and anti-money laundering laws, including the U.S.
In addition, we 36 Table of Contents face risks in doing business internationally that could adversely affect our business and results of operations, including: • the need to localize and adapt our platform and features for specific countries, including translation into foreign languages, tax and regulatory updates and associated expenses; • data privacy laws that impose different and potentially conflicting obligations with respect to how personal data is processed or require that customer data be stored in a designated territory; • more fragmented partner market which proves to be harder for our platform to integrate with; • difficulties in staffing and managing foreign operations; • regulatory and other delays and difficulties in setting up foreign operations; • different pricing environments, longer accounts receivable payment cycles and collections issues; • new and different sources of competition; • weaker protection for intellectual property and other legal rights than in the United States and practical difficulties in enforcing intellectual property and other rights outside of the United States; • laws and business practices favoring local competitors; • compliance challenges related to the complexity of multiple, conflicting and changing governmental laws and regulations; • exposure to liabilities under anti-corruption and anti-money laundering laws, including the U.S.
CIBC could also exercise its rights as collateral agent to take possession of, and to dispose of, the collateral securing the term loans, which collateral includes substantially all of our personal property (including intellectual property). Our business, financial condition and results of operations could be materially adversely affected as a result of any of these events.
CIBC could also exercise its rights as collateral agent to take possession of, and to dispose of, the collateral securing the loans, which collateral includes substantially all of our personal property (including intellectual property). Our business, financial condition and results of operations could be materially adversely affected as a result of any of these events.
Additionally, investors may lose confidence in the accuracy and completeness of our financial reports, and the market price of our Class A common stock may be seriously harmed. The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting.
Additionally, investors may lose confidence in the accuracy and completeness of our financial reports, and the market price of our Class A common stock may be seriously harmed. The Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act") requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting.
The GDPR enhances data protection obligations for processors and controllers of personal information, including, for example, expanded disclosure requirements, limitations on retention of personal information, mandatory data breach notification requirements and additional obligations. Non-compliance with the GDPR can trigger fines of up to the greater of €20 million or 4% of our global revenue.
The GDPR enhances data protection obligations for processors and controllers of personal data, including, for example, expanded disclosure requirements, limitations on retention of personal data, mandatory data breach notification requirements and additional obligations. Non-compliance with the GDPR can trigger fines of up to the greater of €20 million or 4% of our global revenue.
This could limit or delay our ability to offer new or competitive features and increase our costs. Any of the foregoing would disrupt the distribution and sale of subscriptions to our platform and harm our business, results of operations and financial condition. Any future litigation against us could be costly and time-consuming to defend.
This could limit or delay our ability to offer new or competitive features and increase our costs. Any of the foregoing would disrupt the distribution and sale of subscriptions to our platform and harm our business, results of operations and financial condition. Any litigation against us could be costly and time-consuming to defend.
Additionally, sanctions or other measures implemented by other countries, as well as potential responses from Russia and other countries, could adversely affect the global economy and financial markets, which could in turn have a material adverse effect on our business, financial condition and results of operations.
Additionally, sanctions or other measures implemented by other countries, as well as potential responses from other countries, could adversely affect the global economy and financial markets, which could in turn have a material adverse effect on our business, financial condition and results of operations.
As such, any transfers by us of personal information from Europe may not comply with European data protection laws and may increase our exposure to the GDPR’s heightened sanctions for violations of its cross-border data transfer restrictions.
As such, any transfers by us of personal data from Europe may not comply with European data protection laws and may increase our exposure to the GDPR’s heightened sanctions for violations of its cross-border data transfer restrictions.
Delaware law provides that a corporation may indemnify such person if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the registrant and, with respect to any criminal proceeding, had no reasonable cause to believe such person’s conduct was unlawful; • we may, in our discretion, indemnify employees and agents in those circumstances where indemnification is permitted by applicable law; • we are required to advance expenses, as incurred, to our directors and officers in connection with defending a proceeding, except that such directors or officers shall undertake to repay such advances if it is ultimately determined that such person is not entitled to indemnification; • the rights conferred in our amended and restated bylaws are not exclusive, and we are authorized to enter into indemnification agreements with our directors, officers, employees and agents and to obtain insurance to indemnify such persons; and • we may not retroactively amend our amended and restated bylaw provisions to reduce our indemnification obligations to directors, officers, employees and agents.
Delaware law provides that a corporation may indemnify such person if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the registrant 60 Table of Contents and, with respect to any criminal proceeding, had no reasonable cause to believe such person’s conduct was unlawful; • we may, in our discretion, indemnify employees and agents in those circumstances where indemnification is permitted by applicable law; • we are required to advance expenses, as incurred, to our directors and officers in connection with defending a proceeding, except that such directors or officers shall undertake to repay such advances if it is ultimately determined that such person is not entitled to indemnification; • the rights conferred in our amended and restated bylaws are not exclusive, and we are authorized to enter into indemnification agreements with our directors, officers, employees and agents and to obtain insurance to indemnify such persons; and • we may not retroactively amend our amended and restated bylaw provisions to reduce our indemnification obligations to directors, officers, employees and agents.
The loss of one or more of our executive officers or key employees could have a serious adverse effect on our business. In addition, we depend on certain professional services firms for a significant portion of our finance function.
The loss of one or more of our executive officers or key employees could have a serious adverse effect on our business. In addition, we depend on certain professional services firms for a portion of our finance function.
While the CJEU upheld the validity of the Standard Contractual Clauses, the CJEU ruled that the underlying data transfers must be assessed on a case-by-case basis by the data controller to determine whether the personal information will be adequately protected.
While the CJEU upheld the validity of the Standard Contractual Clauses, the CJEU ruled that the underlying data transfers must be assessed on a case-by-case basis by the data controller to determine whether the personal data will be adequately protected.
Any of these developments could adversely affect our operating results. 56 Table of Contents Risks Related to the Multiple Class Structure of Our Common Stock and the Voting Trust Agreement The multiple class structure of our common stock and the ownership of all of our LT10 and LT50 common stock by Trust Beneficiaries through the Voting Trust have the effect of concentrating voting control with the Voting Trust for the foreseeable future, which will limit your ability to influence corporate matters, including a change in control.
Any of these developments could adversely affect our operating results. 55 Table of Contents Risks Related to the Multiple Class Structure of Our Common Stock and the Voting Trust Agreement The multiple class structure of our common stock and the ownership of all of our LT10 and LT50 common stock by Trust Beneficiaries through the Voting Trust have the effect of concentrating voting control with the Voting Trust for the foreseeable future, which will limit your ability to influence corporate matters, including a change in control.
Loss of our ability to transfer personal information from Europe may also require us to increase our data processing capabilities in those jurisdictions at significant expense.
Loss of our ability to transfer personal data from Europe may also require us to increase our data processing capabilities in those jurisdictions at significant expense.
As of December 31, 2022 businesses with fewer than 1,000 employees accounted for approximately 95% of our customers by revenue, and we focus our product, marketing and sales efforts on these businesses, including SMBs. These customers may be more susceptible to general economic conditions than larger businesses, which may have greater liquidity and access to capital.
As of December 31, 2023, businesses with fewer than 1,000 employees accounted for approximately 95% of our customers by revenue, and we focus our product, marketing and sales efforts on these businesses, including SMBs. These customers may be more susceptible to general economic conditions than larger businesses, which may have greater liquidity and access to capital.
In the event that our trademarks are successfully challenged or we do not adequately protect our 49 Table of Contents trademarks, we could be forced to rebrand our platform, which would result in loss of brand recognition and would require us to devote resources to advertising and marketing new brands. Policing unauthorized use of our technology and trademarks is difficult.
In the event that our trademarks are successfully 48 Table of Contents challenged or we do not adequately protect our trademarks, we could be forced to rebrand our platform, which would result in loss of brand recognition and would require us to devote resources to advertising and marketing new brands. Policing unauthorized use of our technology and trademarks is difficult.
We experienced rapid growth in recent periods prior to the COVID-19 pandemic. Our business was impacted by the COVID-19 pandemic, with declines in revenue and paid members due to government-imposed lock-downs, a decrease in business travel and other expense-generating activity, and SMBs downsizing or going out of business, among other things.
Although we experienced rapid growth in periods prior to the COVID-19 pandemic, our business was impacted by the COVID-19 pandemic, with declines in revenue and paid members due to government-imposed lock-downs, a decrease in business travel and other expense-generating activity, and SMBs downsizing or going out of business, among other things.
As a result, our 57 Table of Contents governance structure and the Voting Trust may have the effect of depriving our stockholders of an opportunity to sell their shares at a premium over prevailing market prices and make it more difficult to replace our directors and management.
As a result, our governance structure and the Voting Trust may have the effect of depriving our stockholders of an 56 Table of Contents opportunity to sell their shares at a premium over prevailing market prices and make it more difficult to replace our directors and management.
We receive, process, store and use business and personal information, which subjects us to governmental regulation and other legal obligations related to data protection and security, and our actual or perceived failure to comply with such obligations could harm our business and expose us to liability.
We receive, process, store and use business and personal data, which subjects us to governmental regulation and other legal obligations related to data privacy, protection and security, and our actual or perceived failure to comply with such obligations could harm our business and expose us to liability.
We expect our open-source offering to be a complete rewrite of the Expensify front end, built on a new React Native platform that uses the same codebase across iOS, Android, web and desktop.
We expect our open-source offering to be a complete rewrite of the Expensify front end, built on a new React Native platform that uses the same codebase across iOS, Android, web and desktop once completed.
At present, there are few if any viable alternatives to the Standard Contractual Clauses and, therefore, there is uncertainty regarding how to ensure that transfers of personal information from Europe to the United States comply with the GDPR.
At present, there are few if any viable alternatives to the Standard Contractual Clauses and, therefore, there is uncertainty regarding how to ensure that transfers of personal data from Europe to the United States comply with the GDPR.
For example, according to the FTC, failing to take appropriate steps to keep consumers’ personal information secure can constitute unfair acts or practices in or affecting commerce in violation of Section 5(a) of the Federal Trade Commission Act.
For example, according to the FTC, failing to take appropriate steps to keep consumers’ personal data secure can constitute unfair acts or practices in or affecting commerce in violation of Section 5(a) of the Federal Trade Commission Act.
Furthermore, the Federal Trade Commission ("FTC") and many state Attorneys General continue to enforce federal and state consumer protection laws against companies for online collection, use, dissemination and security practices that appear to be unfair or deceptive.
Additionally, the Federal Trade Commission ("FTC") and many state Attorneys General continue to enforce federal and state consumer protection laws against companies for online collection, use, dissemination and security practices that appear to be unfair or deceptive.
If the adoption of cloud based software solutions does not continue at the rate we anticipate, the market for these solutions may stop developing or may develop more slowly than we expect, either of which would harm our business. 33 Table of Contents If we fail to offer a high-quality customer experience, our business and reputation will suffer.
If the adoption of cloud based software solutions does not continue at the rate we anticipate, the market for these solutions may stop developing or may develop more slowly than we expect, either of which would harm our business. If we fail to offer a high-quality customer experience, our business and reputation will suffer.
Identity thieves and those committing fraud using stolen or fabricated credit card or bank account numbers, or other deceptive or malicious practices, can potentially steal significant amounts of money from our business. In configuring our payments services, we face an inherent trade-off between security and customer convenience.
Identity thieves and those committing fraud using stolen or fabricated credit card or bank account numbers, or other deceptive or malicious practices, can potentially steal significant amounts of money from our business. In configuring our payments services, we face an inherent trade-off between 35 Table of Contents security and customer convenience.
Even if our revenue and paid members continue to increase in the near term, we expect that our growth rate will decline as a result of a variety of factors, including the maturation of our business.
Even if our revenue and paid members increase in the near term, we expect that our growth rate will decline as a result of a variety of factors, including the maturation of our business.
We cannot assure you that additional financing will be available to us on favorable terms when required, or at all. If we raise additional funds through the issuance of equity or equity-linked securities, those securities may have rights, preferences, or privileges senior to the rights of existing stockholders, and existing stockholders may experience dilution.
We cannot assure you that additional financing will be available to us on favorable terms when required, or at all. If we raise additional funds through the issuance of equity or equity-linked securities, those securities may have rights, preferences, or privileges senior to the rights of existing stockholders, 51 Table of Contents and existing stockholders may experience dilution.
Furthermore, potential customers may be more willing to incrementally add solutions to their existing infrastructure from competitors than to replace their existing infrastructure with our platform. These competitive pressures in our market, or our failure to compete effectively, may result in price reductions, fewer new customers, lower revenue and loss of market share.
Furthermore, potential customers may be more willing to incrementally add solutions to their existing infrastructure from competitors than to replace their existing infrastructure with our platform. These competitive pressures in our market, or our failure to compete effectively, may 26 Table of Contents result in price reductions, fewer new customers, lower revenue and loss of market share.
There are a number of legislative proposals in the United States, at both the federal and state level, and in the E.U. and more globally, that could impose new obligations in areas such as e-commerce and other related legislation or liability for copyright infringement by third parties.
There are a number of legislative proposals in the United States, at 40 Table of Contents both the federal and state level, and in the E.U. and more globally, that could impose new obligations in areas such as e-commerce and other related legislation or liability for copyright infringement by third parties.
The CJEU also raised questions about whether the European Commission’s Standard Contractual Clauses, one of the primary mechanisms used by companies to transfer personal information out of the EEA, complies with the GDPR.
The CJEU also raised questions about whether the European Commission’s Standard Contractual Clauses, one of the primary mechanisms used by companies to transfer personal data out of the EEA, complies with the GDPR.
Many of our existing competitors have, and our potential competitors could have, substantial competitive advantages such as greater name recognition, longer operating histories, larger sales and marketing budgets and resources, greater customer support resources, lower labor and development costs, larger 26 Table of Contents and more mature intellectual property portfolios and substantially greater financial, technical and other resources.
Many of our existing competitors have, and our potential competitors could have, substantial competitive advantages such as greater name recognition, longer operating histories, larger sales and marketing budgets and resources, greater customer support resources, lower labor and development costs, larger and more mature intellectual property portfolios and substantially greater financial, technical and other resources.
The BSA prohibits, among other things, our involvement in transferring the proceeds of criminal activities. Regulators in the United States and globally may require us to further revise or expand our compliance program, including the procedures we use to verify the identity of our customers and to monitor international and domestic transactions.
The BSA prohibits, among other things, our 38 Table of Contents involvement in transferring the proceeds of criminal activities. Regulators in the United States and globally may require us to further revise or expand our compliance program, including the procedures we use to verify the identity of our customers and to monitor international and domestic transactions.
Additionally, we will need to continue to make substantial investments and expenditures to, among other things: • hire new and retain existing employees; • maintain, expand, update and improve our infrastructure; • expand our sales and marketing activities, including to obtain channel partners and to expand our SMB and consumer advertising; • expand our operations across multiple geographies; • operate as a public company; and • pay for increasing costs associated with our general and administrative organization.
Additionally, we will need to continue to make substantial investments and expenditures to, among other things: • hire new and retain existing employees; • maintain, expand, update and improve our infrastructure; • expand our sales and marketing activities, including to obtain channel partners and to expand our SMB and consumer advertising; • expand our operations across multiple geographies; • operate as a public company; and 32 Table of Contents • pay for increasing costs associated with our general and administrative organization.
A portion of the technologies we use in our platform, database infrastructure (Bedrock), Expensify.com, Expensify.cash and mobile application incorporate “open source” software, and we may incorporate open source software in our platform and mobile application in the future.
A portion of the technologies we use in our platform, database infrastructure (Bedrock), Expensify.com, new.expensify.com and mobile application incorporate “open source” software, and we may incorporate open source software in our platform and mobile application in the future.
If new technologies emerge that deliver competitive products at lower prices, more efficiently, more conveniently, or more securely, it could adversely impact our ability to compete. 23 Table of Contents Our platform must also integrate with a variety of network, hardware, mobile and software platforms and technologies.
If new technologies emerge that deliver competitive products at lower prices, more efficiently, more conveniently, or more securely, it could adversely impact our ability to compete. Our platform must also integrate with a variety of network, hardware, mobile and software platforms and technologies.
The successful development, introduction and customer acceptance of new features, enhancements, integrations, capabilities and versions of our existing features is costly and time-consuming, and our 25 Table of Contents business could be harmed if we fail to deliver new features, enhancements, integrations, capabilities and versions of our existing features that meet customer needs on a timely and cost effective basis.
The successful development, introduction and customer acceptance of new features, enhancements, integrations, capabilities and versions of our existing features is costly and time-consuming, and our business could be harmed if we fail to deliver new features, enhancements, integrations, capabilities and versions of our existing features that meet customer needs on a timely and cost effective basis.
Further, our clients may expect us to 42 Table of Contents comply with more stringent privacy and data security requirements than those imposed by laws, regulations, or self-regulatory requirements, and we may be obligated contractually to comply with additional or different standards relating to our handling or protection of data on or by our offerings.
Further, our clients may expect us to comply with more stringent privacy and data security requirements than those imposed by laws, regulations, or self-regulatory requirements, and we may be obligated contractually to comply with additional or different standards relating to our handling or protection of data on or by our offerings.
We registered all of the shares of Class A common stock issuable upon exercise of outstanding options, restricted stock units ("RSUs") issued following our initial public offering ("IPO") or other equity incentives we may grant in the future, for public resale under the Securities Act.
We registered all of the shares of Class A common stock issuable upon the exercise of outstanding options, upon the settlement of restricted stock units ("RSUs") issued following our initial public offering ("IPO") or in connection with other equity incentives we may grant in the future, for public resale under the Securities Act.
To improve the scalability, security, efficiency and failover aspects of our features, and to support our ongoing efforts to expand and enhance our platform and our business, we are continually updating our software and content and investing in the development, introduction and customer acceptance of new 32 Table of Contents features, enhancements, integrations, capabilities and versions of our existing features.
To improve the scalability, security, efficiency and failover aspects of our features, and to support our ongoing efforts to expand and enhance our platform and our business, we are continually updating our software and content and investing in the development, introduction and customer acceptance of new features, enhancements, integrations, capabilities and versions of our existing features.
In addition, in July 2017, S&P Dow Jones, another provider of widely followed stock indexes, stated that companies with multiple share classes will not be eligible for certain of their indexes. As a result, our Class A common stock will likely not be eligible for these stock indexes.
In addition, 57 Table of Contents in July 2017, S&P Dow Jones, another provider of widely followed stock indexes, stated that companies with multiple share classes will not be eligible for certain of their indexes. As a result, our Class A common stock will likely not be eligible for these stock indexes.
This 62 Table of Contents choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or any of our directors, officers, other employees or stockholders, which may discourage lawsuits with respect to such claims.
This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or any of our directors, officers, other employees or stockholders, which may discourage lawsuits with respect to such claims.
Any actual or perceived compromise or breach of our security measures, or those of our customers, partners or third-party service providers, could violate applicable privacy, data protection, data security, network and information systems security and other laws, and cause significant legal and financial exposure, adverse publicity and a loss of confidence in our security measures, which could have a material adverse effect on our business, results of operations and financial condition.
Any actual or perceived compromise of our IT Systems or Confidential Information, or those of our customers, partners, or third-party service providers, could also violate applicable privacy, data protection, data security, network and information systems security and other laws, and cause significant legal and financial exposure, adverse publicity, and a loss of confidence in our security measures, which could have a material adverse effect on our business, results of operations, and financial condition.
These factors could involve considerable delay to the development or provision of our offerings or services, require significant and costly operational changes, impose restrictions, 39 Table of Contents limitations, or additional requirements on our business, or prevent us from providing our offerings or services in a given geography.
These factors could involve considerable delay to the development or provision of our offerings or services, require significant and costly operational changes, impose restrictions, limitations, or additional requirements on our business, or prevent us from providing our offerings or services in a given geography.
In addition, the use of the Internet as a means of conducting business could be adversely affected due to delays in the development or adoption of new standards and protocols to handle increased demands of Internet activity, security, reliability, cost, ease of use, accessibility and quality of service.
In addition, the use of the Internet as a means of conducting business could be adversely affected due to delays in the development or adoption of new standards and protocols to handle increased demands of 45 Table of Contents Internet activity, security, reliability, cost, ease of use, accessibility and quality of service.
For example, the terms of a judgment may require us to cease some or all of our operations or require the payment of substantial amounts to the other party. Any of these 47 Table of Contents events would cause our business and results of operations to be materially and adversely affected as a result.
For example, the terms of a judgment may require us to cease some or all of our operations or require the payment of substantial amounts to the other party. Any of these events would cause our business and results of operations to be materially and adversely affected as a result.
On an ongoing basis, we are evaluating sources of financing and may raise additional capital in the future. Our ability to obtain additional capital will depend on our development efforts, business plans, investor demand, operating performance, the condition of the capital markets, 52 Table of Contents and other factors.
On an ongoing basis, we are evaluating sources of financing and may raise additional capital in the future. Our ability to obtain additional capital will depend on our development efforts, business plans, investor demand, operating performance, the condition of the capital markets, and other factors.
Moreover, if our operating results do not meet the expectations of the investor community, one or more of the analysts who cover our company may change their recommendations regarding our company, and our stock price could decline. Item 1B. Unresolved Staff Comments None.
Moreover, if our operating results do not meet the expectations of the investor community, one or more of the analysts who cover our company may change their recommendations regarding our company, and our stock price could decline. 62 Table of Contents Item 1B. Unresolved Staff Comments None.
We cannot ensure that customers will renew 24 Table of Contents subscriptions with the same or greater number of members or for the same level of subscription plan or that they will upgrade to use features such as bi-directional accounting sync and invoicing features or the Expensify Card.
We cannot ensure that customers will renew subscriptions with the same or greater number of members or for the same level of subscription plan or that they will upgrade to use features such as bi-directional accounting sync and invoicing features or the Expensify Card.
In the past, regulators have identified violations or alleged violations of certain statutory and regulatory requirements, and we have been subject to fines and other penalties by state regulatory 28 Table of Contents authorities due to their interpretation and application of their respective state money transmitter regime to our activities.
In the past, regulators have identified violations or alleged violations of certain statutory and regulatory requirements, and we have been subject to fines and other penalties by state regulatory authorities due to their interpretation and application of their respective state money transmitter regime to our activities.
Economies domestically and internationally have been affected from time to time by falling demand for a variety of goods and services, restricted credit, poor liquidity, reduced corporate profitability, employment pressures in services sectors, volatility in credit, equity and foreign exchange markets, bankruptcies and outbreaks of COVID-19, as well as war, terrorist activity, political unrest, civil strife and other geopolitical uncertainty, and the resulting impact on business continuity and travel, supply chain disruptions, inflation, security issues, and overall uncertainty with respect to the economy, including with respect to tariff and trade issues.
Economies domestically and internationally have been affected from time to time by falling demand for a variety of goods and services, restricted credit, poor liquidity, 37 Table of Contents reduced corporate profitability, employment pressures in services sectors, volatility in credit, equity and foreign exchange markets, bankruptcies and health crises, including COVID-19, as well as war, terrorist activity, political unrest, civil strife and other geopolitical uncertainty, and the resulting impact on business continuity and travel, supply chain disruptions, inflation, security issues, and overall uncertainty with respect to the economy, including with respect to tariff and trade issues.
There can be no assurance that we will be able to accurately project the rate or timing of increases, if any, in the use of our platform or expand and upgrade our systems and infrastructure to accommodate such increases on a timely basis.
There can be no assurance that we will be able to accurately project the 42 Table of Contents rate or timing of increases, if any, in the use of our platform or expand and upgrade our systems and infrastructure to accommodate such increases on a timely basis.
For example, in July 2017, FTSE Russell, a provider of widely followed stock indexes, stated that it plans to require new constituents of 58 Table of Contents its indexes to have at least five percent of their voting rights in the hands of public stockholders.
For example, in July 2017, FTSE Russell, a provider of widely followed stock indexes, stated that it plans to require new constituents of its indexes to have at least five percent of their voting rights in the hands of public stockholders.
We therefore depend on the interoperability of our platform with such third-party services, mobile devices and mobile operating systems, as well as cloud-enabled hardware, software, networking, browsers, database technologies and protocols that we do not control.
We therefore depend on the interoperability of our platform with such third-party services, mobile devices 44 Table of Contents and mobile operating systems, as well as cloud-enabled hardware, software, networking, browsers, database technologies and protocols that we do not control.
While we have been issued patents for certain aspects of our intellectual property in the United States 48 Table of Contents and have additional patent applications pending in the United States, we have not applied for patent protection in foreign jurisdictions, and may be unable to obtain patent protection for the technology covered in our patent applications.
While we have been issued patents for certain aspects of our intellectual property in the United States and have additional patent applications pending in the United States, we have not applied for patent protection in foreign jurisdictions, and may be unable to obtain patent protection for the technology covered in our patent applications.
Any failure to maintain high-quality customer experience, or a market perception that we do not maintain high-quality customer experience, could harm our reputation, our ability to sell our platform to existing and prospective customers and our business, results of operations and financial condition.
Any failure to maintain high-quality customer experience, or a market perception 33 Table of Contents that we do not maintain high-quality customer experience, could harm our reputation, our ability to sell our platform to existing and prospective customers and our business, results of operations and financial condition.
If the perceived value of our stock declines, it may adversely affect our ability to recruit and retain highly skilled employees. 34 Table of Contents Many of the companies with which we compete for experienced personnel have greater resources than we have.
If the perceived value of our stock declines, it may adversely affect our ability to recruit and retain highly skilled employees. Many of the companies with which we compete for experienced personnel have greater resources than we have.
If our data centers or related systems fail to operate properly or become disabled even for a brief period of time, we could suffer financial loss, a disruption of our business, liability to customers, or damage to our reputation.
If our data centers or related systems fail to operate properly or become disabled even for a brief period of time, we could suffer financial loss, a 43 Table of Contents disruption of our business, liability to customers, or damage to our reputation.
In addition, some of our competitors may be able to disrupt the operations or compatibility of our platform with their products or services, or 45 Table of Contents exert strong business influence on our ability to, and terms on which we operate our platform.
In addition, some of our competitors may be able to disrupt the operations or compatibility of our platform with their products or services, or exert strong business influence on our ability to, and terms on which we operate our platform.
Other unknown or unpredictable factors also could adversely impact our performance, and we undertake no obligation to update or revise any 55 Table of Contents projections, whether as a result of new information, future events, or otherwise.
Other unknown or unpredictable factors also could adversely impact our performance, and we undertake no obligation to update or revise any projections, whether as a result of new information, future events, or otherwise.
Our third-party payment processing partners must also maintain compliance with current and future merchant standards to accept credit cards as payment for our paid 36 Table of Contents subscription plans. Substantial losses due to fraud or our inability to accept credit card payments would cause our customer base to significantly decrease and would harm our business.
Our third-party payment processing partners must also maintain compliance with current and future merchant standards to accept credit cards as payment for our paid subscription plans. Substantial losses due to fraud or our inability to accept credit card payments would cause our customer base to significantly decrease and would harm our business.
The loan and security agreement subjects us, and any future indebtedness would likely subject us, to various customary covenants, including requirements as to financial reporting, insurance and certain liquidity thresholds and restrictions on our ability to dispose of our business or property, to change our line of business, to liquidate or dissolve, to enter into any change in control transaction, to merge or consolidate with any other entity or to acquire all or substantially all the capital stock or property of another entity, to incur additional indebtedness, to incur liens on our property, to pay any dividends or other distributions on capital stock other than dividends payable solely in capital stock, to redeem capital stock, to engage in transactions with affiliates, to encumber our intellectual property and certain other restrictions on our activities.
The loan and security agreement subjects us, and any future indebtedness would likely subject us, to various customary covenants, including requirements as to financial reporting, insurance and certain liquidity and leverage thresholds and restrictions on our ability to maintain cash deposits outside of CIBC above certain thresholds, dispose of our business or property, to change our line of business, to liquidate or dissolve, to enter into any change in control transaction, to merge or consolidate with any other entity or to acquire all or substantially all the capital stock or property of another entity, to incur additional indebtedness, to incur liens on our property, to pay any dividends or other distributions on capital stock other than dividends payable solely in capital stock, to redeem capital stock, to engage in transactions with affiliates, to encumber our intellectual property and certain other restrictions on our activities.
The members of the Executive Committee currently are, and their successors are generally expected to be directors who are also our employees, and the Executive Committee currently consists of David Barrett, Ryan Schaffer, Anu Muralidharan, Jason Mills and Daniel Vidal.
The members of the Executive Committee currently are, and their successors are generally expected to be, directors who are also our employees or service providers, and the Executive Committee currently consists of David Barrett, Ryan Schaffer, Anu Muralidharan, Jason Mills and Daniel Vidal.
In the future, we may sell Class A common stock, convertible securities, or other equity securities, including preferred securities, in one or more transactions at prices and in a manner we determine from 60 Table of Contents time to time. We also expect to issue Class A common stock to employees, consultants and directors pursuant to our equity incentive plans.
In the future, we may sell Class A common stock, convertible securities, or other equity securities, including preferred securities, in one or more transactions at prices and in a manner we determine from time to time. We also expect to issue Class A common stock to employees, consultants and directors pursuant to our equity incentive plans.
Our amended and restated bylaws provide that we will indemnify our directors and officers, in each case to the fullest extent permitted by Delaware law. 61 Table of Contents In addition, as permitted by Section 145 of the Delaware General Corporation Law, our amended and restated bylaws and our indemnification agreements that we have entered or intend to enter into with our directors and officers provide that: • we will indemnify our directors and officers for serving us in those capacities or for serving other business enterprises at our request, to the fullest extent permitted by Delaware law.
In addition, as permitted by Section 145 of the Delaware General Corporation Law, our amended and restated bylaws and our indemnification agreements that we have entered or intend to enter into with our directors and officers provide that: • we will indemnify our directors and officers for serving us in those capacities or for serving other business enterprises at our request, to the fullest extent permitted by Delaware law.
We increased our subscription prices in 2020, and although our new prices have not substantially affected our business to date, we cannot guarantee these price increases, or any future price increases we choose to implement, will not adversely affect our business in the future.
We increased our subscription prices in 2020, and although the increased prices have not substantially affected our business to date, we cannot guarantee any future price increases we choose to implement will not adversely affect our business.
Many very small businesses (“VSBs”) and SMBs experienced substantial revenue and cash liquidity declines in the early months of the COVID-19 pandemic, and there were high observed rates of small business 27 Table of Contents failures.
Many very small businesses (“VSBs”) and SMBs experienced substantial revenue and cash liquidity declines in the early months of the COVID-19 pandemic, and there were high observed rates of small business failures.
In addition, various news sources, bloggers and other publishers often make statements regarding our historical or projected business or financial performance, and you should not rely on any such information even if it is attributed directly or indirectly to us.
In addition, various news sources, bloggers and other publishers often make statements regarding our historical or projected business or financial 54 Table of Contents performance, and you should not rely on any such information even if it is attributed directly or indirectly to us.
Our future success and competitive position depends in part upon our ability to obtain or maintain certain intellectual property used in our platform. We rely primarily on patent, trademark, copyright and trade secrets laws and confidentiality procedures and contractual provisions to protect our technology.
Our future success and competitive position depends in part upon our ability to obtain or maintain certain intellectual property used in our platform. We rely primarily on patent, trademark, copyright and trade 47 Table of Contents secrets laws and confidentiality procedures and contractual provisions to protect our technology.
Maintaining and enhancing our brand may require us to make substantial investments not just in our core expense management service but also in newer features, such as our travel concierge services, and to make substantial investments in foreign markets, and these investments may not be successful.
Maintaining and enhancing our brand may require us to make substantial investments not just in our core expense management service but also in newer features, such as our financial chat services, and to make substantial investments in foreign markets, and these investments may not be successful.
The COVID-19 pandemic also negatively impacted the amount of expenses incurred by our paid members, our annual gross logo retention, our net seat retention, the launch of our Expensify Card and the roll-out of our co-working spaces, which we call lounges.
The COVID-19 pandemic also negatively impacted the amount of expenses incurred by our paid members, our annual gross logo retention, our net seat retention, the launch of our Expensify Card and the roll-out of our co-working spaces.
Governmental and regulatory bodies and authorities may also impose new or additional requirements on our business or issue or promulgate new laws, regulations, or rules applicable to persons engaged in money transmission that adversely affect our business, including those that: • prohibit, restrict, and/or impose taxes or fees on money transmission transactions in, to or from certain countries or with certain governments, individuals, or entities; • impose additional customer identification and customer due diligence requirements; • impose additional reporting or recordkeeping requirements, or require enhanced transaction monitoring; • limit the types of entities capable of providing money transmission services, or impose additional licensing or registration requirements; • impose minimum capital or other financial requirements; • limit or restrict the revenue that may be generated from money transmission, including revenue from interest earned on customer funds, transaction fees, and revenue derived from foreign exchange; • require enhanced disclosures to our money transmission customers; • require the principal amount of money transmission originated in a country to be invested in that country or held in trust until paid; • limit the number or principal amount of money transmission transactions that may be sent to or from a jurisdiction, whether by an individual or in the aggregate; • restrict or limit our ability to process transactions using centralized databases, for example, by requiring that transactions be processed using a database maintained in a particular country or region; or • impose other requirements in furtherance of their missions. 29 Table of Contents The success of our business largely depends on our senior management team, and we depend on professional services firms for a significant portion of our finance function.
Governmental and regulatory bodies and authorities may also impose new or additional requirements on our business or issue or promulgate new laws, regulations, or rules applicable to persons engaged in money transmission that adversely affect our business, including those that: • prohibit, restrict, and/or impose taxes or fees on money transmission transactions in, to or from certain countries or with certain governments, individuals, or entities; • impose additional customer identification and customer due diligence requirements; • impose additional reporting or recordkeeping requirements, or require enhanced transaction monitoring; • limit the types of entities capable of providing money transmission services, or impose additional licensing or registration requirements; • impose minimum capital or other financial requirements; • limit or restrict the revenue that may be generated from money transmission, including revenue from interest earned on customer funds, transaction fees, and revenue derived from foreign exchange; • require enhanced disclosures to our money transmission customers; • require the principal amount of money transmission originated in a country to be invested in that country or held in trust until paid; 28 Table of Contents • limit the number or principal amount of money transmission transactions that may be sent to or from a jurisdiction, whether by an individual or in the aggregate; • restrict or limit our ability to process transactions using centralized databases, for example, by requiring that transactions be processed using a database maintained in a particular country or region; or • impose other requirements in furtherance of their missions.
Our future success also depends in part on our ability to provide additional features to attract new members at existing customers, as well as increase transaction monetization from the Expensify Card.
Our future success also depends in part on our ability to provide 24 Table of Contents additional features to attract new members at existing customers, as well as increase transaction monetization from the Expensify Card.
The degree to which the COVID-19 pandemic, or other pandemics, epidemics and other public health crises, will affect our business in the future will depend on developments that are highly uncertain and cannot currently be predicted.
The degree to which pandemics, epidemics and other public health crises will affect our business in the future will depend on developments that are highly uncertain and cannot currently be predicted.
New investors in subsequent transactions could gain rights, preferences and privileges senior to those of holders of our Class A common stock.
New investors in 59 Table of Contents subsequent transactions could gain rights, preferences and privileges senior to those of holders of our Class A common stock.
Similarly, if any litigation to which we may be a party fails to settle and we go to trial, we may be subject to an unfavorable judgment that may not be reversible upon appeal.
Similarly, if any litigation to which we may be a party fails to settle and we go to trial, we may be 46 Table of Contents subject to an unfavorable judgment that may not be reversible upon appeal.
Our revenue grew from $53.9 million in 2018 to $80.5 million in 2019 to $88.1 million in 2020, but our headcount remained consistent, with 131 employees as of December 31, 2018, 127 employees as of December 31, 2019 and 133 employees as of December 31, 2020.
Our revenue grew from $53.9 million in 2018 to $80.5 million in 2019 to $88.1 million in 2020 to $142.8 million in 2021, but our headcount remained relatively consistent, with 131 employees as of December 31, 2018, 127 employees as of December 31, 2019, 133 employees as of December 31, 2020, and 144 employees as of December 31, 2021.
We may also review or revise our software architecture as we grow, which may require significant resources and investments. For example, we are developing an open-source financial group chat optimized for financial conversations, designed to be used both in and outside of work, and maintained by a community of open source developers.
We may also review or revise our software architecture as we grow, which may require significant resources and investments. For example, we recently released the first version of an open-source financial group chat optimized for financial conversations, designed to be used both in and outside of work, and maintained by a community of open source developers.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeOur office space in Ironwood, consisting of approximately 2,700 square feet, is leased through April 30, 2023. 64 Table of Contents We also lease co-working spaces in New York City, New York and London, United Kingdom. We give all employees the ability to rent a co-working space if we do not provide one.
Biggest changeOur office space in Ironwood, consisting of approximately 2,700 square feet, is leased through April 30, 2026. Our Company leases a lot adjacent to our Portland office space which is leased through April 30, 2030. We also lease co-working spaces in Phoenix, Arizona, New York, New York and London, United Kingdom.
Item 2. Properties In the United States, our company has offices in Portland, Oregon, San Francisco, California, Ironwood, Michigan and New York City, New York. We own our office space in Portland, which consists of approximately 38,500 square feet. Our office space in San Francisco, consisting of approximately 10,500 square feet, is leased through May 31, 2023.
Item 2. Properties In the United States, our company has offices in Portland, Oregon, San Francisco, California, and Ironwood, Michigan. We own our office space in Portland, which consists of approximately 38,500 square feet. Our office space in San Francisco, consisting of approximately 10,500 square feet, is leased through May 31, 2034.
We intend to procure additional space or expand existing facilities in the future as we continue to add employees and expand geographically. We believe our facilities are adequate and suitable for our current needs and that, should it be needed, suitable additional or alternative space on commercially reasonable terms will be available to accommodate our operations.
We believe our facilities are adequate and suitable for our current needs and that, should it be needed, suitable additional or alternative space on commercially reasonable terms will be available to accommodate our operations.
Added
We give all employees the ability to rent a co-working space if we do not provide one. We intend to procure additional space or expand existing facilities in the future as we continue to add employees and expand geographically.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeRegardless of the outcome, any litigation can have an adverse impact on our company as a result of defense and settlement costs, the diversion of management resources, and other factors. Item 4. Mine Safety Disclosures Not applicable. 65 Table of Contents Part II
Biggest changeRegardless of the outcome, any litigation can have an adverse impact on our company as a result of defense and settlement costs, the diversion of management resources, and other factors.
We may receive unfavorable preliminary or interim rulings in the course of litigation, and there can be no assurances that favorable final outcomes will be obtained. The results of any current or future litigation cannot be predicted with certainty.
We may receive unfavorable preliminary or 64 Table of Contents interim rulings in the course of litigation, and there can be no assurances that favorable final outcomes will be obtained. The results of any current or future litigation cannot be predicted with certainty.
Item 3. Legal Proceedings From time to time, we are involved in various legal proceedings arising from the normal course of business activities.
In addition to the matter described above, from time to time, we are involved in various legal proceedings arising from the normal course of business activities.
Added
Item 3. Legal Proceedings On November 29, 2023, a putative securities class action (the “Putative Class Action”) was filed in the United States District Court for the District of Oregon captioned Wilhite v. Expensify, Inc., et al., Case No. 3:23-cv-01784-JR, naming us, two of our executive officers and two of our former directors as defendants.
Added
The lawsuit is purportedly brought on behalf of all those who purchase or acquired our stock pursuant or traceable to our initial public offering (“IPO”). The complaint alleges claims under Sections 11 and 15 of the Securities Act of 1933 based on allegedly false or misleading statements in the offering documents filed in connection with our IPO.
Added
The lawsuit seeks unspecified damages and other relief. On January 29, 2024, three shareholders moved to be appointed lead plaintiff in the Putative Class Action. The court has not yet ruled on those motions. The defendants intend to deny the allegations of wrongdoing and vigorously defend against the claims in the Putative Class Action.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeISSUER PURCHASE OF EQUITY SECURITIES The following table sets forth information regarding our purchases of shares of Class A common stock during the three months ended December 31, 2022: Total number of shares purchased Weighted-average price paid per share Total number of shares purchased as part of publicly announced programs Maximum number (or approximate dollar value) of shares that may yet be purchased under the program(1) October 1 - 31, 2022 — $ — — $ 50,000,000 November 1 - 30, 2022 599,080 $ 10.00 599,080 $ 44,000,000 December 1 - 31, 2022 — $ — — $ 44,000,000 Total 599,080 599,080 66 Table of Contents (1) On May 12, 2022, we announced the approval of a share repurchase program with authorization to purchase up to $50.0 million of our Class A common stock at management’s discretion.
Biggest changeISSUER PURCHASES OF EQUITY SECURITIES The following table sets forth information regarding our purchases of shares of Class A common stock during the three months ended December 31, 2023: Total number of shares purchased Weighted-average price paid per share Total number of shares purchased as part of publicly announced programs Maximum number (or approximate dollar value) of shares that may yet be purchased under the program(1) October 1 - 31, 2023 — $ — — $ 41,000,003 November 1 - 30, 2023 — $ — — $ 41,000,003 December 1 - 31, 2023 — $ — — $ 41,000,003 Total — — 66 Table of Contents (1) On May 12, 2022, we announced the approval of a share repurchase program with authorization to purchase up to $50.0 million of our Class A common stock at management’s discretion.
The graph assumes $100 was invested at the market close on November 10, 2021, which was the first day our Class A common stock began trading. Data for the Nasdaq Composite Index, S&P 500 Index, and S&P 500 Information Technology Index assume reinvestment of dividends.
The graph assumes $100 was invested at the market close on November 10, 2021, which was the first day our Class A common stock began trading. Data for the Nasdaq, S&P 500 and S&P 500 IT indexes assumes reinvestment of dividends.
HOLDERS OF OUR COMMON STOCK As of March 3, 2023 there were 28 stockholders of record of our Class A common stock. This number does not include beneficial owners whose shares are held by nominees in street name.
HOLDERS OF OUR COMMON STOCK As of February 21, 2024 there were 21 stockholders of record of our Class A common stock. This number does not include beneficial owners whose shares are held by nominees in street name.
As of March 3, 2023 the Expensify Voting Trust held all of the outstanding shares of our LT10 common stock and LT50 common stock.
As of February 21, 2024 the Expensify Voting Trust held all of the outstanding shares of our LT10 common stock and LT50 common stock.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe following table sets forth our results of operations for the periods presented: Year ended December 31, 2022 2021 2020 (in thousands, except per share data) Revenue $ 169,495 $ 142,835 $ 88,072 Cost of revenue, net (1) 62,669 53,693 32,414 Gross margin 106,826 89,142 55,658 Operating expenses: Research and development (1) 13,692 10,988 6,728 General and administrative (1) 58,490 60,742 33,372 Sales and marketing (1) 49,876 27,664 9,888 Total operating expenses 122,058 99,394 49,988 (Loss) income from operations (15,232) (10,252) 5,670 Interest and other expenses, net (5,411) (3,480) (2,718) (Loss) income before income taxes (20,643) (13,732) 2,952 (Provision for) benefit from income taxes (6,366) 174 (4,662) Net loss attributable to Class A, LT10 and LT50 common stockholders $ (27,009) $ (13,558) $ (1,710) Net loss per share attributable to Class A, LT10 and LT50 common stockholders: Basic $ (0.33) $ (0.36) $ (0.06) Diluted $ (0.33) $ (0.36) $ (0.06) Weighted-average shares of common stock used to compute net (loss) income per share attributable to Class A, LT10 and LT50 common stockholders: Basic 80,786,725 38,039,222 27,424,480 Diluted 80,786,725 38,039,222 27,424,480 Net loss margin (16) % (9) % (2) % (1) Includes stock-based compensation expense as follows: Year ended December 31, 2022 2021 2020 (in thousands) Cost of revenue, net $ 18,403 $ 4,115 $ 2,272 Research and development 7,875 1,617 2,469 General and administrative 17,850 7,356 12,648 Sales and marketing 8,204 1,486 448 Total stock-based compensation expense $ 52,332 $ 14,574 $ 17,837 74 Table of Contents COMPARISON OF THE YEARS ENDED DECEMBER 31, 2022 AND 2021 Revenue Year ended December 31, Change 2022 2021 Amount % (in thousands, except percentages) Revenue $ 169,495 $ 142,835 $ 26,660 19 % Revenue increased $26.7 million, or 19%, for the year ended December, 31, 2022 compared to the same period in 2021, primarily due to (i) an increase in the number of paid members and reimbursement activity, which was the result of the normalization of business travel and higher rates of returning to office compared to the same period in 2021 and (ii) an increase in average fees per paid member due to an increase in the number of pay-per-use members, who have a higher average fee per member than our annual members, compared to the same period in 2021.
Biggest changeThe following table sets forth our results of operations for the periods presented: Year ended December 31, 2023 2022 (in thousands, except per share data) Revenue $ 150,687 $ 169,495 Cost of revenue, net(1) 66,888 62,669 Gross margin 83,799 106,826 Operating expenses: Research and development(1) 23,368 13,692 General and administrative(1) 49,228 58,490 Sales and marketing(1) 44,352 49,876 Total operating expenses 116,948 122,058 Loss from operations (33,149) (15,232) Interest and other expenses, net (5,327) (5,411) Loss before income taxes (38,476) (20,643) (Provision for) benefit from income taxes (2,980) (6,366) Net loss $ (41,456) $ (27,009) Net loss per share: Basic and diluted $ (0.50) $ (0.33) Weighted average shares of common stock used to compute net loss per share: Basic and diluted 82,493,226 80,786,725 Net loss margin (28) % (16) % (1) Includes stock-based compensation expense as follows: Year ended December 31, 2023 2022 (in thousands) Cost of revenue, net $ 13,868 $ 18,403 Research and development 10,870 7,875 General and administrative 9,842 17,850 Sales and marketing 6,632 8,204 Total stock-based compensation expense $ 41,212 $ 52,332 74 Table of Contents COMPARISON OF THE YEARS ENDED DECEMBER 31, 2023 AND 2022 Revenue Year ended December 31, Change 2023 2022 Amount % (in thousands, except percentages) Revenue $ 150,687 $ 169,495 $ (18,808) (11) % Revenue decreased $18.8 million, or 11%, for the year ended December, 31, 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.
Loan and Security Agreement In September 2021, we amended and restated our 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.
Loan and Security Agreement In September 2021, we amended and restated our loan and security agreement with CIBC (the "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 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, in accordance with applicable securities laws and other restrictions.
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 Exchange Act, in accordance with applicable securities laws and other restrictions.
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.
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 compliance, and human resources.
We believe an additional factor that drives our retention rates is that SMBs generally re-evaluate their technology solutions less frequently, and as such, there is rarely a conscious choice to choose to continue using Expensify for another year. Gross logo retention and net seat retention are important indicators of customer satisfaction and usage of our platform.
We believe an additional factor that drives our retention rates is that SMBs generally re-evaluate their technology solutions less frequently, and as such, there is rarely a conscious choice around whether to choose to continue using Expensify for another year. Gross logo retention and net seat retention are important indicators of customer satisfaction and usage of our platform.
CREDIT FACILITIES Amortizing Term Mortgage In August 2019, we entered into an $8.3 million amortizing term mortgage agreement with CIBC for our commercial building in Portland, Oregon. The agreement requires interest and principal payments to be made each month over a 30-year period.
CREDIT FACILITIES Amortizing Term Mortgage In August 2019, we entered into an $8.3 million amortizing term mortgage agreement with CIBC for our commercial building in Portland, Oregon. The agreement requires interest and principal payments to be made each month over a five-year period.
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, net of consideration from a vendor.
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 our patented scanning technology SmartScan, net of consideration from a vendor.
In order to continue to grow, we believe we must continue prioritizing investments in our platform to delight our members and drive viral expansion. CONTINUING TO CONVERT FREE MEMBERS Our success depends on converting users who try the free aspects of the Expensify platform into paid members.
In order to continue to grow, we believe we must continue prioritizing investments in our platform to delight our members and drive viral expansion. CONVERTING FREE MEMBERS Our success depends on converting users who try the free aspects of the Expensify platform into paid members.
We calculate our gross logo retention rate as of the end of a period by using (a) the number of distinct companies who have ever had five or more paid members paying for a subscription 69 Table of Contents during the period ending one year prior as the denominator and (b) the number of those same companies that are still paying for at least one subscription during the more recent period as the numerator.
We calculate our gross logo retention rate as of the end of a period by using (a) the number of distinct companies who have ever had five or more paid members paying for a subscription during the period ending one year prior as the denominator and (b) the number of those same companies that are still paying for at least one subscription during the more recent period as the numerator.
The effective income tax rate differs from the statutory rate in 2022 primarily due to nondeductible stock-based compensation, the compensation limitations imposed by Internal Revenue Code ("IRC") Section 162(m), and the change in the valuation allowance.
The effective income tax rate differs from the statutory rate in 2023 primarily due to nondeductible stock-based compensation, the change in the valuation allowance, and the compensation limitations imposed by Internal Revenue Code ("IRC") Section 162(m).
We define a customer as any member who pays for themselves and zero or more other members, grouped into one or more "expense policies." This might be an individual, an entire company, or a department of 68 Table of Contents a larger company. The definition of customer inherently excludes sole proprietors on Track or Submit plans.
We define a customer as any member who pays for themselves and zero or more other members, grouped into one or more "expense policies." This might be an individual, an entire company, or a department of a larger company. The definition of customer inherently excludes sole proprietors on Track or Submit plans.
At most companies, not every employee generates expenses that would be submitted via an expense report on a monthly basis. As we add additional features that are used by all employers, we have the potential to monetize the segment of our customers’ employees that are not submitting expense reports.
At most companies, not every employee generates expenses that would be submitted via an expense report on a monthly basis. As we add additional features that are used 69 Table of Contents by all employers, we have the potential to monetize the segment of our customers’ employees that are not submitting expense reports.
EMPLOYEE AND EMPLOYEE-RELATED EXPENSES Allocating our employee and employee-related expenses, which consist of contractor costs, employee salary and wages, stock-based compensation and travel and other employee-related costs, to their appropriate financial statement line items on the Consolidated Statements of Operations, requires us to make estimates and judgments as a result of our generalist model and organizational structure.
EMPLOYEE AND EMPLOYEE-RELATED EXPENSES Allocating our employee and employee-related expenses, which consist of contractor costs, employee salary and wages, stock-based compensation and travel and other employee-related costs, to their appropriate financial statement line items on the Consolidated Statements of Operations, requires us to 83 Table of Contents make estimates and judgments as a result of our generalist model and organizational structure.
A discussion of 2020 items and year-to-year comparisons between 2021 and 2020 can be found in "Management’s Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on March 31, 2022.
A discussion of 2021 items and year-to-year comparisons between 2022 and 2021 can be found in "Management’s Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on March 8, 2023.
We are focused on profitable growth and we consider adjusted EBITDA to be an important measure because it 78 Table of Contents helps illustrate underlying trends in our business that could otherwise be masked by the effect of the income or expenses that are not indicative of the core operating performance of our business.
We are focused on profitable growth and we consider adjusted EBITDA to be an important measure because it helps illustrate underlying trends in our business that could otherwise be masked by the effect of the income or expenses that are not indicative of the core operating performance of our business.
Key Factors Affecting Our Performance Our performance depends on many factors, including the following: INVESTING IN PRODUCT-LED GROWTH We are focused on continuing to grow the number of paid members on our platform. Relative to other software companies, we invest more in product development and less in sales.
Key Factors Affecting Our Performance Our performance depends on many factors, including the following: INVESTING IN PRODUCT-LED GROWTH We are focused on growing the number of paid members on our platform. Relative to other software companies, we invest more in product development and less in sales.
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 actual timing, manner, price and total amount of future repurchases will depend on a variety of factors, 80 Table of Contents including business, economic and market conditions, corporate and regulatory requirements, prevailing stock prices, restrictions under the terms of loan agreements and other considerations.
This investment in product allows us to develop easy-to-use but powerful features that encourage adoption of our platform. Our ability to grow our paid members depends on our viral, bottom-up adoption cycle that starts with an individual employee.
This investment in product allows us to develop easy-to-use but powerful features that encourage adoption of our platform. Our ability to grow our paid members depends on our viral, bottom-up adoption cycle that starts with an individual 68 Table of Contents employee.
Prior to the IPO, the fair value of common stock was determined by the Board of Directors based on a number of factors, including independent third-party valuations of our common stock, which considered estimates of our future performance and valuations of comparable companies.
Prior to the IPO, the fair value of common stock was determined by the Board of Directors based on a number of factors, including independent third-party valuations of our common stock, which considered estimates of our future performance and valuations of 84 Table of Contents comparable companies.
The following discussion and analysis of our financial condition and results of operations generally discusses 2022 and 2021 items and year-to-year comparisons between 2022 and 2021.
The following discussion and analysis of our financial condition and results of operations generally discusses 2023 and 2022 items and year-to-year comparisons between 2023 and 2022.
While our viral model means that employees or contractors often introduce Expensify into SMBs, companies subscribe and pay for the majority of our paid members. INVESTING TO MAINTAIN MARKET CONSENSUS Our viral and word-of-mouth adoption model is effective in part because we have established ourselves as a recognized leader in expense management for SMBs.
While our viral model means that employees or contractors often introduce Expensify into small and medium-sized businesses (“SMBs"), companies subscribe and pay for the majority of our paid members. INVESTING TO MAINTAIN MARKET CONSENSUS Our viral and word-of-mouth adoption model is effective in part because we have established ourselves as a recognized leader in expense management for SMBs.
See Note 7 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for further information. 82 Table of Contents Certain Covenants We are subject to customary covenants under the 2021 Amended Term Loan, which unless waived by CIBC, restrict our and our subsidiaries' ability to, among other things incur additional indebtedness, create or incur liens, permit a change of control, merge or consolidate with other companies, sell or transfer assets, pay dividends or make distributions, make acquisitions, investments or loans, or payments and prepayments of subordinated indebtedness, subject to certain exceptions.
See Note 7 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for further information. 81 Table of Contents Certain Covenants As of December 31, 2023, we were subject to customary covenants under the 2021 Amended Term Loan, which unless waived by CIBC, restrict our and our subsidiaries' ability to, among other things incur additional indebtedness, create or incur liens, permit a change of control, merge or consolidate with other companies, sell or transfer assets, pay dividends or make distributions, make acquisitions, investments or loans, or payments and prepayments of subordinated indebtedness, subject to certain exceptions.
In addition to personnel-related expenses, general and administrative expenses consist of rent, utilities, depreciation on property and equipment, amortization 72 Table of Contents of operating right-of-use assets and external professional services, including accounting, audit, tax, finance, legal and compliance, human resources and information technology.
In addition to personnel-related expenses, general and administrative expenses consist of rent, utilities, depreciation on property and equipment, amortization of operating lease right-of-use assets, information technology and external professional services, including finance and accounting, audit, tax, legal and compliance, and human resources.
We follow the asset and liability method of accounting for income taxes, whereby we recognize deferred income taxes for the tax consequences of temporary differences between the financial statement carrying amounts and the tax basis of the assets and liabilities.
We follow the asset and liability method of accounting for income taxes, whereby we recognize deferred income taxes for the tax consequences of temporary differences between the financial statement carrying amounts and the tax 76 Table of Contents basis of the assets and liabilities.
Share Repurchase Program 81 Table of Contents On May 10, 2022, the Executive Committee 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").
Share Repurchase Program On May 10, 2022, the Executive Committee 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").
In 2022 and 2021, our net seat retention was 108% and 93%, respectively. Our growth will depend on our ability to continue to retain existing customers. INTRODUCING FEATURES TO EXPAND OUR RELATIONSHIP WITH EXISTING CUSTOMERS We fully launched the Expensify Card in 2020 and, despite pullback in corporate expenses with the COVID-19 pandemic, customers began adopting the card.
In 2023 and 2022, our net seat retention was 99% and 108%, respectively. Our growth will depend on our ability to retain existing customers. INTRODUCING FEATURES TO EXPAND OUR RELATIONSHIP WITH EXISTING CUSTOMERS We fully launched the Expensify Card in 2020 and, despite pullback in corporate expenses with the COVID-19 pandemic, customers began adopting the card.
Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized. During the years ended December 31, 2022 and 2021, we recorded an incremental valuation allowance of $2.8 million and $2.5 million, respectively.
Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized. During the years ended December 31, 2023 and 2022, we recorded an incremental valuation allowance of $3.7 million and $2.8 million, respectively.
We deploy large scale brand advertising to promote our platform superiority and create market consensus that Expensify is the category leader for expense management software. Additionally, in 2023 we are hosting our third ExpensiCon, an invite-only, all-expenses paid industry conference, with the goal of increasing our market consensus among our Approved! Accounting partners and increasing adoption of our platform.
We deploy large scale brand advertising to promote our platform strength and create market consensus that Expensify is a category leader for expense management software. Additionally, in 2023 we hosted our third ExpensiCon, an invite-only, all-expenses paid industry conference, with the goal of increasing our market consensus among our Approved! Accounting partners and increasing adoption of our platform.
KEY BUSINESS METRICS Paid Members 77 Table of Contents We believe that our ability to increase the number of paid members on our platform will drive our success as a business. Companies pay for subscriptions on behalf of employees and contractors who use the platform, whom we refer to as paid members.
KEY BUSINESS METRICS Paid Members We believe that our ability to increase the number of paid members on our platform will drive our success as a business. Our customers pay for subscriptions on behalf of employees and contractors who use the platform, whom we refer to as paid members.
Since our founding in 2008, we have added over 12 million members to our community and processed and automated over 1.4 billion expense transactions on our platform as of December 31, 2022, freeing people to spend less time managing expenses and more time doing the things they love.
Since our founding in 2008, we have added over 15 million members to our community and processed and automated over 1.5 billion expense transactions on our platform as of December 31, 2023, freeing people to spend less time managing expenses and more time doing the things they love.
The provision for income taxes reflects taxable income earned and taxed in U.S. federal and state, and non-U.S. jurisdictions. Our effective income tax rate was (30.8)% and 1.3%, for the years ended December 31, 2022 and 2021, respectively.
The provision for income taxes reflects taxable income earned and taxed in U.S. federal and state, and non-U.S. jurisdictions. Our effective income tax rate was (7.7)% and (30.8)%, for the years ended December 31, 2023 and 2022, respectively.
The effective income tax rate differs from the statutory rate in 2021 primarily due to the compensation limitations imposed by IRC Section 162(m), establishing the valuation allowance, and stock-based compensation.
The effective income tax rate differs from the statutory rate in 2022 primarily due to nondeductible stock-based compensation, the compensation limitations imposed by IRC Section 162(m), and the change in the valuation allowance.
In November 2021, upon completion of our IPO, we received aggregate net proceeds of approximately $57.5 million after deducting underwriting discounts and commissions of approximately $4.9 million and offering costs of approximately $8.0 million. As of December 31, 2022, we had $103.8 million in cash and cash equivalents. As of December 31, 2022, we had $67.3 million in outstanding indebtedness.
In November 2021, upon completion of our IPO, we received aggregate net proceeds of approximately $57.5 million after deducting underwriting discounts and commissions of approximately $4.9 million and offering costs of approximately $8.0 million. As of December 31, 2023, we had $47.5 million in cash and cash equivalents. As of December 31, 2023, we had $22.7 million in outstanding indebtedness.
For the year ended December 31, 2022, an average of 779,000 paid members across 53,000 companies and over 200 countries and territories used Expensify to make money easy.
For the year ended December 31, 2023, an average of 719,000 paid members across an average of 47,000 companies and over 200 countries and territories used Expensify to make money easy.
If we fail to perform our obligations under these and other covenants, CIBC’s credit commitments could be terminated and any outstanding borrowings, together with accrued interest, under the credit or loan agreements could be declared immediately due and payable. As of December 31, 2022, we were not in compliance with all of our debt covenants.
If we fail to perform our obligations under these and other covenants, CIBC’s credit commitments could be terminated and any outstanding borrowings, together with accrued interest, under the credit or loan agreements could be declared immediately due and payable.
(Provision for) Benefit from Income Taxes Year ended December 31, Change 2022 2021 Amount % (in thousands, except percentages) (Provision for) benefit from income taxes $ (6,366) $ 174 $ (6,540) (3,759) % We recorded a provision for income taxes of $6.4 million for the year ended December 31, 2022 compared to a $0.2 million benefit from income taxes for the year ended December 31, 2021.
Provision for Income Taxes Year ended December 31, Change 2023 2022 Amount % (in thousands, except percentages) Provision for income taxes $ (2,980) $ (6,366) $ 3,386 (53) % We recorded a provision for income taxes of $3.0 million for the year ended December 31, 2023 compared to a $6.4 million provision for income taxes for the year ended December 31, 2022.
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 71 Table of Contents expense in Cost of revenue, net.
Instead, the net of the Expensify interchange amount and vendor fees are paid to us, which we record as "Consideration from a 71 Table of Contents vendor, net," a contra expense in Cost of revenue, net in the Consolidated Statements of Operations.
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.
We expect that general and administrative expenses will remain consistent as it relates to costs associated with being a publicly traded company, including legal, audit, business insurance and consulting fees.
CASH FLOWS FROM FINANCING ACTIVITIES During the year ended December 31, 2022, net cash used in financing activities was $8.3 million, primarily consisting of payments for employee taxes withheld from stock-based awards and the repurchase and retirement of common stock partially offset by proceeds from common stock purchased under our 2021 Stock Purchase and Matching Plan and proceeds from the issuance of common stock on exercises of stock options.
CASH FLOWS FROM FINANCING ACTIVITIES During the year ended December 31, 2023, net cash used in financing activities was $45.3 million, primarily consisting of principal payments on the 2021 Amended Term Loan, the repurchase and retirement of common stock, and payment for employees taxes withheld from stock-based awards, which was partially offset by proceeds from common stock purchased under the Company's 2021 Stock Purchase and Matching Plan ("Matching Plan").
The remaining proceeds from the initial term loan were utilized to fund our 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 thereafter, which commenced with the first payment due on September 30, 2021.
Under the 2021 Amended Term Loan, the initial term loan of $45.0 million was payable over a 60-month period with principal and accrued interest payments due each quarter thereafter, which commenced with the first payment due on September 30, 2021. Quarterly principal payments were fixed and escalate throughout the term.
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.
Cashback rewards liability is recorded within Accrued expenses and other liabilities on the Consolidated Balance Sheets. 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.
In both 2022 and 2021, our annual gross logo retention was 83%.
In 2023 and 2022, our annual gross logo retention was 74% and 83%, respectively.
CASH FLOWS FROM INVESTING ACTIVITIES During the year ended December 31, 2022, net cash used in investing activities was $2.2 million, primarily consisting of software development costs and the purchase of property and equipment related to multiple booth constructions for marketing conferences.
CASH FLOWS FROM INVESTING ACTIVITIES During the year ended December 31, 2023, net cash used in investing activities was $7.3 million, primarily consisting of software development costs and the purchase of property and equipment.
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.
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 our normal business operations.
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 December 31, 2022.
Interest accrues at a fixed rate of 5.00% per year until August 2024, at which point the remaining outstanding principal balance on the amortizing term mortgage is due in full. The borrowings are secured by the building. The outstanding balance of the amortizing term mortgage was $7.7 million as of December 31, 2023.
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.
Sales and Marketing Sales and marketing expenses primarily consist of personnel-related expenses, including stock-based compensation, advertising expenses, depreciation on property and equipment, outsourcing costs for sales and product demos, branding and public relations expenses, referral fees for strategic partners and other benefits that we provide to our referral and affiliate partners.
CASH FLOWS 80 Table of Contents The following table summarizes our cash flows for the periods indicated: Year ended December 31, 2022 2021 2020 (in thousands) Net cash provided by operating activities $ 32,876 $ 5,486 $ 7,585 Net cash used in investing activities (2,199) (7,614) (4,295) Net cash (used in) provided by financing activities (8,282) 80,565 8,787 Net increase in cash and cash equivalents and restricted cash $ 22,395 $ 78,437 $ 12,077 CASH FLOWS FROM OPERATING ACTIVITIES Net cash provided by operating activities was $32.9 million for the year ended December 31, 2022 as compared to $5.5 million for the same period in 2021.
CASH FLOWS The following table summarizes our cash flows for the periods indicated: Year ended December 31, 2023 2022 (in thousands) Net cash provided by operating activities $ 1,559 $ 32,876 Net cash used in investing activities (7,294) (2,199) Net cash (used in) provided by financing activities (45,317) (8,282) Net (decrease) increase in cash and cash equivalents and restricted cash $ (51,052) $ 22,395 CASH FLOWS FROM OPERATING ACTIVITIES Net cash provided by operating activities was $1.6 million for the year ended December 31, 2023 as compared to $32.9 million for the same period in 2022.
Quarter ended Paid members (in thousands) March 31, 2020 742 June 30, 2020 630 September 30, 2020 633 December 31, 2020 645 March 31, 2021 631 June 30, 2021 639 September 30, 2021 667 December 31, 2021 711 March 31, 2022 706 June 30, 2022 754 September 30, 2022 761 December 31, 2022 779 NON-GAAP FINANCIAL MEASURES Limitations of Non-GAAP Financial Measures Non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation or as substitutes for financial information presented under GAAP.
The following table sets forth the average number of paid members for the quarters ended March 31, 2022 through December 31, 2023 (in thousands): Quarter ended Paid members March 31, 2022 706 June 30, 2022 754 September 30, 2022 761 December 31, 2022 779 March 31, 2023 747 June 30, 2023 742 September 30, 2023 719 December 31, 2023 719 77 Table of Contents NON-GAAP FINANCIAL MEASURES Limitations of Non-GAAP Financial Measures Non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation or as substitutes for financial information presented under GAAP.
The outstanding balances of the 2021 Amended Term Loan and revolving line of credit were $44.4 million and $15.0 million, respectively, as of December 31, 2022.
The borrowings are secured by substantially all of the Company’s assets. The outstanding balances of the 2021 Amended Term Loan and revolving line of credit were $0.0 million and $15.0 million, respectively, as of December 31, 2023.
Recent Accounting Pronouncements See Note 2 to our consolidated financial statements in this Annual Report on Form 10-K for recently adopted accounting pronouncements.
Refer to Note 9 to our consolidated financial statements in this Annual Report on Form 10-K for further detail over stock-based compensation and our stock incentive plans. Recent Accounting Pronouncements See Note 2 to our consolidated financial statements in this Annual Report on Form 10-K for recently issued accounting pronouncements.
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. In May 2020, we updated our terms of service whereby annual contracts became non-cancelable.
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.
See Note 2 to our consolidated financial statements included in this Annual Report on Form 10-K for further information. 70 Table of Contents 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 month-to-month which can be terminated by either party without penalty at any time or annual arrangements based on a minimum number of monthly members.
Additionally, other potential challenging macroeconomic conditions, and the resulting impact on business continuity and travel, could negatively impact our business. 70 Table of Contents 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.
We began offering a cashback rewards program to all customers based on volume of Expensify Card transactions and software as a service ("SaaS") subscription tier in August 2021. Cashback rewards are earned on a monthly basis and are paid out the following month.
We recognize revenue net of applicable taxes imposed on the related transaction. 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 applied against outstanding customer receivables or are paid out the following month.
All RSUs granted to employees after the effectiveness of the IPO Registration Statement are measured based on the fair value of the underlying common stock on the grant date, which is determined by the closing price, on the date of the grant, of our Class A common stock, which is traded on the Nasdaq Global Select Market. 86 Table of Contents Refer to Note 9 to our consolidated financial statements in this Annual Report on Form 10-K for further detail over stock-based compensation and our stock incentive plans.
All RSUs granted to employees after the effectiveness of the IPO Registration Statement are measured based on the fair value of the underlying common stock on the grant date, which is determined by the closing price, on the date of the grant, of our Class A common stock, which is traded on the Nasdaq Global Select Market.
A contract asset is the right to consideration for transferred goods or services and arises when the amount of revenue recognized exceeds amounts billed to a customer.
A contract asset is the right to consideration for transferred goods or services and arises when the amount of revenue recognized exceeds amounts billed to a customer. Since our performance obligation is satisfied monthly, at any reporting period, we have no unsatisfied, or partially unsatisfied, performance obligations.
We are focused on profitable growth and we consider non-GAAP net income to be an important measure because it helps illustrate underlying trends in our business that could otherwise be masked by the effect of stock-based compensation and the one-time IPO-related discretionary cash bonus costs. Both expenses are not considered indicative of the core operating performance of our business.
We define non-GAAP net income margin as non-GAAP net income divided by total revenue for the same period. We are focused on profitable growth and we consider non-GAAP net income to be an important measure because it helps illustrate underlying trends in our business that could otherwise be masked by the effect of stock-based compensation.
Contractual Obligations and Commitments The following table summarizes our contractual obligations and commitments as of December 31, 2022: Payments due by period (in thousands) Less than 1 year 1-3 years More than 3 years Total Principal payments on debt $ 595 $ 59,467 $ 7,191 $ 67,253 Interest payments on debt $ 4,920 $ 13,501 $ 352 $ 18,773 Finance lease commitments $ 476 $ — $ — $ 476 Operating lease commitments $ 332 $ — $ — $ 332 Total $ 6,323 $ 72,968 $ 7,543 $ 86,834 Indemnification Agreements In the ordinary course of business, we enter into agreements of varying scope and terms whereby we agree to indemnify customers, issuing banks, card networks, vendors and other parties with respect to certain matters, including, but not limited to, losses arising out of the breach of such agreements, services to be provided by us or from intellectual property infringement claims made by third parties.
We expect to be in compliance with all debt covenants pursuant to the 2024 Amended Term Loan by the end of the fiscal quarter ended March 31, 2024. 82 Table of Contents Contractual Obligations and Commitments The following table summarizes our contractual obligations and commitments as of December 31, 2023: Payments due by period (in thousands) Less than 1 year 1-3 years More than 3 years Total Principal payments on debt $ 22,671 $ — $ — $ 22,671 Interest payments on debt $ 1,677 $ — $ — $ 1,677 Finance lease commitments $ 153 $ 255 $ — $ 408 Operating lease commitments $ 838 $ 3,130 $ 5,562 $ 9,530 Total $ 25,339 $ 3,385 $ 5,562 $ 34,286 Indemnification Agreements In the ordinary course of business, we enter into agreements of varying scope and terms whereby we agree to indemnify customers, issuing banks, card networks, vendors and other parties with respect to certain matters, including, but not limited to, losses arising out of the breach of such agreements, services to be provided by us or from intellectual property infringement claims made by third parties.
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.
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.
These increases were partially offset by $5.0 million in IPO-related bonus costs impacting the year ended December 31, 2021. 76 Table of Contents Interest and Other Expenses, Net Year ended December 31, Change 2022 2021 Amount % (in thousands, except percentages) Interest and other expenses, net $ (5,411) $ (3,480) $ (1,931) 55 % Interest and other expenses, net increased by $1.9 million, or 55% for the year ended December 31, 2022 compared to the same period in 2021 primarily due to increased interest expense under the 2021 Amended Term Loan (as defined below) and revolving line of credit facility as a result of increases in CIBC's reference rate and increased foreign currency losses resulting from the strengthening U.S. dollar.
Interest and Other Expenses, Net Year ended December 31, Change 2023 2022 Amount % (in thousands, except percentages) Interest and other expenses, net $ (5,327) $ (5,411) $ 84 (2) % Interest and other expenses, net decreased by $0.1 million, or 2%, for the year ended December 31, 2023 compared to the same period in 2022 primarily due to a reduction in foreign currency losses partially offset by an increase in interest expense incurred under the 2021 Amended Term Loan (as defined below) due to increases in CIBC's reference rate.
Cost of Revenue, Net and Gross Margin Year ended December 31, Change 2022 2021 Amount % (in thousands, except percentages) Cost of revenue, net $ 62,669 $ 53,693 $ 8,976 17 % Gross margin $ 106,826 $ 89,142 $ 17,684 20 % Gross margin % 63 % 62 % Cost of revenue, net increased by $9.0 million, or 17%, for the year ended December 31, 2022 compared to the same period in 2021.
Cost of Revenue, Net and Gross Margin Year ended December 31, Change 2023 2022 Amount % (in thousands, except percentages) Cost of revenue, net $ 66,888 $ 62,669 $ 4,219 7 % Gross margin $ 83,799 $ 106,826 $ (23,027) (22) % Gross margin % 56 % 63 % Cost of revenue, net increased by $4.2 million, or 7%, for the year ended December 31, 2023 compared to the same period in 2022.
We satisfy our performance obligation over time each month as it provides the SaaS and support services to customers and as such generally recognizes revenue monthly based on the number of monthly members and contractual rate per member. 84 Table of Contents Certain annual contracts provide the customer the option to increase the minimum number of members and extend the contract term on a prospective basis or to purchase members beyond the minimum contracted number of members at a higher rate for a particular month.
We satisfy our performance obligation over time each month as it provides the SaaS and support services to customers and as such generally recognizes revenue monthly based on the number of monthly members and contractual rate per member.
Year ended December 31, 2022 2021 2020 (in thousands, except percentages) Adjusted EBITDA $ 42,488 $ 9,519 $ 26,755 Adjusted EBITDA margin 25 % 7 % 30 % Non-GAAP Net Income and Non-GAAP Net Income Margin We define non-GAAP net income as net loss from operations in accordance with GAAP excluding stock-based compensation and bonus costs related to our IPO, which we consider to be the discretionary cash bonuses paid to our employees during 2021.
Year ended December 31, 2023 2022 (in thousands, except percentages) Adjusted EBITDA $ 13,174 $ 42,488 Adjusted EBITDA margin 9 % 25 % Non-GAAP Net Income and Non-GAAP Net Income Margin We define non-GAAP net income as net loss from operations in accordance with GAAP excluding stock-based compensation.
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.
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 (our remainder portion, "Expensify interchange amount").
No demands have been made upon us to provide indemnification under such agreements and there are no claims that we are aware of that could have a material effect on our Consolidated Balance Sheets, Consolidated Statements of Operations, Consolidated Statements of Convertible Preferred Stock and Stockholders' Equity (Deficit), or Consolidated Statements of Cash Flows. 83 Table of Contents Off-Balance Sheet Arrangements During the periods presented, we did not have, and we do not currently have, any off-balance sheet financing arrangements or any relationships with unconsolidated entities or financial partnerships, including entities sometimes referred to as structured finance or special purpose entities, that were established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.
Off-Balance Sheet Arrangements During the periods presented, we did not have, and we do not currently have, any off-balance sheet financing arrangements or any relationships with unconsolidated entities or financial partnerships, including entities sometimes referred to as structured finance or special purpose entities, that were established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.
Year ended December 31, 2022 2021 2020 (in thousands, except percentages) Non-GAAP net income $ 25,323 $ 49,432 $ 16,127 Non-GAAP net income margin 15 % 35 % 18 % Reconciliations of Non-GAAP Financial Measures The following tables reconcile the most directly comparable GAAP financial measure to each of these non-GAAP financial measures. 79 Table of Contents Adjusted EBITDA and Adjusted EBITDA Margin Year ended December 31, 2022 2021 2020 (in thousands, except percentages) Net loss $ (27,009) $ (13,558) $ (1,710) Net loss margin (16) % (9) % (2) % Add: Provision for (benefit from) income taxes 6,366 (174) 4,662 Interest and other expenses, net 5,411 3,480 2,718 Depreciation and amortization 5,388 5,197 3,248 Stock-based compensation 52,332 14,574 17,837 Adjusted EBITDA $ 42,488 $ 9,519 $ 26,755 Adjusted EBITDA margin 25 % 7 % 30 % Non-GAAP net income and non-GAAP net income margin Year ended December 31, 2022 2021 2020 (in thousands, except percentages) Net loss $ (27,009) $ (13,558) $ (1,710) Net loss margin (16) % (9) % (2) % Add: Stock-based compensation 52,332 14,574 17,837 IPO-related bonus expense — 48,416 — Non-GAAP net income $ 25,323 $ 49,432 $ 16,127 Non-GAAP net income margin 15 % 35 % 18 % Liquidity and Capital Resources Since our inception, we have financed our operations primarily through our cash flow from operations, sales of our equity securities and borrowings under our credit facilities.
Adjusted EBITDA and Adjusted EBITDA Margin Year ended December 31, 2023 2022 (in thousands, except percentages) Net loss $ (41,456) $ (27,009) Net loss margin (28) % (16) % Add: Provision for income taxes 2,980 6,366 Interest and other expenses, net 5,327 5,411 Depreciation and amortization 5,111 5,388 Stock-based compensation 41,212 52,332 Adjusted EBITDA $ 13,174 $ 42,488 Adjusted EBITDA margin 9 % 25 % Non-GAAP net income and non-GAAP net income margin Year ended December 31, 2023 2022 (in thousands, except percentages) Net loss $ (41,456) $ (27,009) Net loss margin (28) % (16) % Add: Stock-based compensation 41,212 52,332 Non-GAAP net (loss) income $ (244) $ 25,323 Non-GAAP net (loss) income margin — % 15 % Liquidity and Capital Resources Since our inception, we have financed our operations primarily through our cash flow from operations, sales of our equity securities and borrowings under our credit facilities.
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 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.
Our future capital requirements will depend on many factors, including revenue growth and costs incurred to support growth in our business and our need to respond to business opportunities, challenges or unforeseen circumstances. We believe that our existing cash resources will be sufficient to finance our continued operations and growth strategy for the next 12 months and the foreseeable future.
We believe that our existing cash resources will be sufficient to finance our continued operations and growth strategy for the next 12 months and the foreseeable future.
REVENUE RECOGNITION We generate revenue from subscription fees paid by our customers to access and use our hosted software services, as well as standard customer support. We adopted Accounting Standard Update ("ASU") No. 2014-09, Revenue from Contracts with Customers (Topic 606) as of January 1, 2019, utilizing the full retrospective method of transition.
REVENUE RECOGNITION We generate revenue from subscription fees paid by our customers to access and use our hosted software services, as well as standard customer support.
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 Consolidated Statements of Operations. We also record a cashback rewards liability that represents the consideration payable to customers for earned cashback rewards.
We consider our cashback rewards as consideration payable to a customer, and it is recorded as contra revenue within Revenue on the Consolidated Statements of Operations. Cashback rewards applied against outstanding customer receivables are reflected as a reduction to Accounts receivable, net on the Consolidated Balance Sheets.
See the section titled "Risk Factors" in this Annual Report on Form 10-K for further discussion of the possible impact of the COVID-19 pandemic on our business. Additionally, potential challenging macroeconomic conditions, including inflationary pressures, rising interest rates and foreign currency fluctuations, and the resulting impact on business continuity and travel, could negatively impact our business.
See the section titled "Risk Factors" in this Annual Report on Form 10-K for further discussion of the possible impact of such macroeconomic trends on our business.
Sales and Marketing Year ended December 31, Change 2022 2021 Amount % (in thousands, except percentages) Sales and marketing $ 49,876 $ 27,664 $ 22,212 80 % Sales and marketing expenses increased $22.2 million, or 80%, for the year ended December 31, 2022 compared to the same period in 2021, primarily due to an increase in advertising spend and marketing events to gain further brand awareness and increased employee focus on marketing initiatives related to our recently developed products and services, such as the Free Plan and our Expensify Card.
Sales and Marketing Year ended December 31, Change 2023 2022 Amount % (in thousands, except percentages) Sales and marketing $ 44,352 $ 49,876 $ (5,524) (11) % Sales and marketing expenses decreased $5.5 million, or 11%, for the year ended December 31, 2023 compared to the same period in 2022, primarily due to a decrease in advertising spend partially offset by (i) an increase in outsourcing activities related to sales and product demos, and (ii) increased marketing event spend to gain further brand awareness.
Although revenue increased by 19% for the same period, Cost of revenue, net also increased due to the factors described in the preceding paragraph.
Gross margin decreased to 56% in 2023 compared to 63% in the same period in 2022 due to the factors described in the preceding paragraphs for Revenue and Cost of revenue, net.
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.
We expect sales and marketing expenses will decrease as we reduce our outsourced activities as it relates to sales and product demos. 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").
These increases were partially offset by $13.7 million in IPO-related bonus costs impacting the year ended December 31, 2021. Furthermore, Consideration from a vendor, net, was $6.2 million for the year ended December 31, 2022 compared to $2.9 million for the year ended December, 31 2021.
These increases were partially offset by an increase in Consideration from a vendor, net, driven primarily by the increased adoption and spend captured from members using the Expensify Card, which reduced Cost of revenue, net by $10.1 million for the year ended December 31, 2023 compared to $6.2 million for the year ended December, 31 2022.
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.
The following summarizes these various amounts for each of the periods presented: Year ended December 31, 2023 2022 (in thousands) Expensify interchange amount $ 11,144 $ 6,832 Vendor fees (1,009) (616) Consideration from a vendor, net $ 10,135 $ 6,216 OPERATING EXPENSES Research and Development Research and development expenses consist primarily of personnel-related expenses, including stock-based compensation, and external contributor costs incurred related to the planning and preliminary project stage and post-implementation stage of new products or enhancing existing products or services.
Quarterly principal payments are fixed and escalate throughout the term. The amounts borrowed bear interest at the bank’s reference rate plus 2.25% (9.75% as of December 31, 2022) and continue on a quarterly basis through the maturity of the term loan. The borrowings are secured by substantially all our assets.
The amounts borrowed beared interest at the bank’s reference rate plus 2.25% and were to continue on a quarterly basis through the maturity of the term loan. 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%.
Net cash used in investing activities decreased for the year ended December 31, 2022 compared to the same period in 2021, primarily due to IPO bonuses that were capitalized as internally developed software costs of $1.5 million for the year ended December 31, 2021 and a decrease in purchases related to the build-out of offices in Portland and San Francisco.
Net cash used in investing activities increased for the year ended December 31, 2023 compared to the same period in 2022, primarily due to an increase in employee and external contributor software development costs.
Net cash used in financing activities increased for the year ended December 31, 2022 compared to the same period in 2021, primarily due to repurchases of early exercises of common stock and payments for employee taxes withheld from stock-based awards during the year ended December 31, 2022, and the proceeds received from our IPO and loan and security agreement with CIBC during the year ended December 31, 2021.
Net cash used in financing activities increased for the year ended December 31, 2023 compared to the same period in 2022, primarily due to an increase principal payments on the 2021 Amended Term Loan as the outstanding balance on the term loan was repaid in full on October 12, 2023, partially offset by a decrease in the repurchase and retirement of common stock.
Research and Development Year ended December 31, Change 2022 2021 Amount % (in thousands, except percentages) Research and development $ 13,692 $ 10,988 $ 2,704 25 % 75 Table of Contents Research and development expenses increased by $2.7 million, or 25%, for the year ended December 31, 2022 compared to the same period in 2021, due to the recognition of $7.9 million of stock-based compensation costs during the year ended December 31, 2022 as compared to $1.6 million during the year ended December 31, 2021, primarily related to the RSUs granted in September and November of 2021 to employees directly engaged in the planning and preliminary project stage and post-implementation stage of new products and features.
Research and Development Year ended December 31, Change 2023 2022 Amount % (in thousands, except percentages) Research and development $ 23,368 $ 13,692 $ 9,676 71 % Research and development expenses increased by $9.7 million, or 71%, for the year ended December 31, 2023 compared to the same period in 2022, primarily due to an increase in employee and external contributor time spent on project initiatives and new product features. 75 Table of Contents General and Administrative Year ended December 31, Change 2023 2022 Amount % (in thousands, except percentages) General and administrative $ 49,228 $ 58,490 $ (9,262) (16) % General and administrative expenses decreased $9.3 million, or 16%, for the year ended December 31, 2023 compared to the same period in 2022, primarily related to a decrease in employee time allocated to administrative functions resulting from one-time planning and implementation activities incurred in 2022 for first year compliance with Section 404 of the Sarbanes-Oxley Act and other new public company requirements.
The increase was primarily due to an increase in revenue, a decrease in employee stock option exercise cash bonuses, and settlement liabilities, which represent increased expense reimbursement activity, offset by an increase in advertising spend and marketing events to gain further brand awareness, an increase in insurance and professional service costs incurred for accounting, auditing and legal services as a result of our continued requirements as a public company, higher volume of payment processing fees directly related to an increase in reimbursement activity, increased efforts in support and implementation services, increased outsourcing activities related to maintaining the platform, the timing of the payments for costs of our services and operating expenses and an increase in settlement assets, which represent increased expense reimbursement activity and increased Expensify Card receivables due to users adopting monthly settlement and the timing of settlement of accounts payable.
The decrease is primarily due to a reduction in funds held for customers due to the timing of expense reimbursement activity, a decrease in revenue, increased outsourcing activities related to maintaining our platform along with design work for new project initiatives, partially offset by a decrease in insurance, advertising and professional service costs incurred for accounting, auditing and legal service as a result of cost saving measures.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeNonetheless, if our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could harm our business, results of operations or financial condition. 87
Biggest changeNonetheless, if our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could harm our business, results of operations or financial condition. 85

Other EXFY 10-K year-over-year comparisons