Expensify stock surges after IPO in vote of confidence for ‘rare profitable tech company’
Expensify turned public while delivering GAAP profitability, a rarity in the world of tech
Shares of Expensify Inc. rocketed more than 50% Wednesday after the expense-management company made its public-market debut.
Expensify shares EXFY, +52.07% opened at $39.75 Wednesday before heading higher, to a recent $42. The shares priced late Tuesday at $27, which came at the high end of the company’s raised range. The company raised $70.2 million in the process of going public, after offering 2.6 million shares.
The company is aiming to simplify the process of expense reporting, particularly for smaller businesses that are overwhelmingly reliant on paper processes. While the company also services multinational corporations, the bulk of its revenue comes from small businesses.
Expense reporting for the typical business hinges on “email, Excel, and a manila folder” with employees “scanning receipts on a flatbed scanner” before submitting them to the boss, Chief Financial Officer Ryan Schaffer told MarketWatch. Expensify provides a technology-driven offering that enables employees to quickly take photos of receipts from their phones and submit a report that gets automatically emailed to the boss for approval and quick reimbursement.
One way that Expensify is differentiated is that the company is focused on marketing the product to employees rather than chief financial officers, according to Schaffer. “We don’t talk to CFOs about the efficiency gains of their staff and what the payback period is,” he said. “We say to employees that we do expense reports that don’t suck.”
The company also offers its Expensify Card, which allows it to monetize customer spending through interchange, or the fees that merchant banks pay card-issuing banks when cardholders make purchases. Expensify estimates a total addressable market of $17 billion for the card by next year, according to its prospectus.
Expensify reported $65.0 million in revenue during the first six months of 2021, up from $40.6 million in the first six months of 2020. The company also saw $14.7 million in net income during the first six months of 2021, up from the $3.5 million it recorded during the first six months of 2020.
“Profit and growth don’t need to be enemies,” Schaffer said, calling Expensify a “rare profitable tech company” and noting that the company’s profitability comes on a generally accepted accounting principles, or GAAP, basis. Revenue was up 60% in the first six months of the year, but he and his team “don’t think we need to spend 100% of revenue in order to continue that growth.”
While Expensify’s business was impacted by the pandemic, Schaffer emphasized that the company taps into business travel very broadly, beyond cross-country flights for client meetings. A “typical” trip for an Expensify customer might involve a drive from Toledo, Ohio to Fort Wayne, Ind. with an overnight stay.
“Mileage is a huge expense for us,” he said. Home Depot Inc. HD, -0.56% is also one of the company’s top-10 merchants, fueled by customers driving around to pick up supplies before delivering them to job sites.