Expensify: Upside Potential Is Attractive If We Look Beyond FY23

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As I mentioned before, nan full addressable marketplace for Expensify (NASDAQ:EXFY), an artificial intelligence-based disbursal guidance platform, is enormous. The model's imaginable successful nan SMB abstraction is highlighted by nan accelerated maturation rates and exceptional profitability for a institution of this size. The platform's blockchain architecture, successful my opinion, sets it isolated from competing package and positions nan business for accelerated growth. Even though nan 2020 rollout of nan Expensify Card coincided pinch nan tallness of nan pandemic, I still deliberation it presents a bully opportunity for nan institution to summation gross beyond what tin beryllium achieved done subscriptions alone. As for 4Q results, pinch salary per usage volatility persisting, EXFY reported 4Q22 gross of $43.5 cardinal and non-GAAP EPS of $0.07, some of which were little than expected and operating metrics. Average paid members person continued to diminution from nan erstwhile year, while mean gross per paid personnel has remained comparatively unchangeable successful caller periods. Conversely, arsenic a consequence of operating leverage, margins moved importantly higher. I judge nan value of nan EXFY inaugural to person those users to subscriptions was further highlighted by nan truth that paid members decreased successful January owed to nan seasonal alteration successful salary per use. Another item successful FY23 is that EXFY will trust much connected nonstop sales. Overall, I deliberation EXFY is simply a promising profitable grower, and I judge nan GTM initiatives could lend to its occurrence successful 2023. My original proposal to put successful EXFY still stands.

GTM strategy

Because of its imaginable value successful FY23, I deliberation this worthy a deeper discussion. As I mentioned successful my past post, EXFY's main targeted conception is SMBs, and its bottom-up take exemplary is what sets it isolated from nan competition. With nan displacement successful GTM, location are 2 results of EXY's displacement toward nonstop income successful 2023:

  1. EXFY will person much leverage successful nan arena of a deterioration successful nan macro environment. In different words, EXFY is amended capable to negociate its existing relationships, relying connected onboarding support and relationship managers to summation customer retention and value, while besides actively pursuing caller business.
  2. On nan different hand, nan request for EXFY to prosecute aggregate teams of income reps, which tin beryllium costly, peculiarly successful nan opening erstwhile these reps are not productive, whitethorn effect nan P&L.


Despite a weaker-than-anticipated apical line, EXFY printed a beardown adj EBITDA separator of 25.7%, which was higher than nan statement estimate of 23.2%. EXFY's strategy is besides evolving distant from depending connected salary per usage income. The existent percent of salary per usage customers is 35%, but EXFY semipermanent extremity is 20%. While pay-per-use models tin make doubly arsenic overmuch gross arsenic subscription models, they besides person little predictability and greater gross volatility, arsenic I for illustration to constituent retired erstwhile playing devil's advocate.


As mentioned above, mean paid members and gross per paid personnel operating metrics were not great. First, owed to fluctuations successful pay-per-use, mean gross per paid personnel remained unchanged astatine $55.8 complete nan preceding 3 months. Second, yearly maturation successful 4Q mean paid rank was 9.6% to 779K, down from a 14% summation successful 3Q. More importantly, January's paid members figures (745k) were not awesome either, which was driven by seasonally little salary per use.


EXFY is presently trading astatine 3.4x guardant revenue, which is adjacent to nan lowest it has ever traded since its IPO. When compared to its mean (since IPO), this represents a 50% discount, and erstwhile adjusted for nan caller liking complaint environment, it still represents a discount connected a valuation basis. The trough valuation today, I believe, is owed to nan anemic FY23 outlook and a alteration successful GTM strategy, which whitethorn effect nan near-term separator description trajectory. However, I judge that if we look beyond FY23 and into FY25, nan upside is appealing. Consensus forecasts $250 cardinal successful revenues successful FY25, and applying nan existent aggregate of 3.4x guardant gross successful FY24 results successful an endeavor worth of $850 million, implying a stock value of $10.80, aliases a 27% increase. If we presume that multiples will rise, nan upside could beryllium moreover greater.


In conclusion, while EXFY faced immoderate challenges successful 2022, I stay optimistic astir its semipermanent prospects. Its artificial intelligence-based disbursal guidance platform, blockchain architecture, and attraction connected SMBs group it isolated from competitors and position it for accelerated growth. Additionally, its displacement toward nonstop income successful 2023 should supply much leverage to negociate existing relationships and actively prosecute caller business. While nan request to prosecute aggregate teams of income reps whitethorn effect nan P&L, EXFY's beardown travel done and evolving strategy distant from salary per usage income are positives. Despite a existent trough valuation, I judge nan upside imaginable is attractive, peculiarly if we look beyond FY23 and into FY25. Therefore, my original proposal to put successful EXFY still stands.

This article was written by

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I see an finance perfect if it performs its halfway business successful a assemblage projected to acquisition structural (organic) maturation successful excess of GDP maturation complete nan adjacent 5-10 years; profits from sustainable competitory advantages that construe into charismatic portion economics; In nan hands of competent, ethical, and semipermanent thinkers; pinch a adjacent valuation

Disclosure: I/we person nary stock, action aliases akin derivative position successful immoderate of nan companies mentioned, and nary plans to initiate immoderate specified positions wrong nan adjacent 72 hours. I wrote this article myself, and it expresses my ain opinions. I americium not receiving compensation for it (other than from Seeking Alpha). I person nary business narration pinch immoderate institution whose banal is mentioned successful this article.

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