EXFY - NASDAQ

Welcome to the Q1 2023 Expensify Earnings Call. And today, you have myself, Ryan Schaffer and new Anu Muralidharan. Our CEO, David Barrett, is laser-focused right now on working with the team to get everything ready for ExpensiCon, our conference next week, and we'll be doing a number of important product announcements there, and he is working side-by-side with the team heads down to make sure everything is ready. So today, Any and I are going to take you through the slides. And without further ado, let me turn it over to Any to read the legalese and take us through the business section.

Thanks, Ryan. Good afternoon, everyone. So first, the boring stuff. Before we begin, please note that all the information presented on today's call is unaudited. And during the course of this call, management may make forward-looking statements within the meaning of the federal securities laws. These statements are based on management's current expectations and beliefs, and involve risks and uncertainties that could cause actual results to differ materially from those described in these looking statements. Forward-looking statements in the earnings release that we issued today, along with the comments on this call, are made only as of today and will not be updated as actual events unfold. Please refer to today's press release and our filings with the SEC for a detailed discussion of the risks that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today. We also note that on today's call, management will refer to certain non-GAAP financial measures. While we believe these non-GAAP financial measures provide useful information for investors, the presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. Please refer to today's press release or the investor presentation for a reconciliation of these non-GAAP financial measures to the most comparable GAAP measures. So on that note, next slide, let's begin. I want to remind you and walk you through our long-term strategy in brief. So let's start off with the 3 secrets to Expensify's long-term success. First of all, the market is enormous. And we remind you of this every time, but almost no 1 in the market is actually using any software product, which means the primary competition is really just excel and paper. But the opportunity when you consider the whole market isn't enterprise companies, isn't it the top of the market, rather it is all the small and medium businesses out there that have taken together the largest number of employees, and that's really the value proposition. But the difficulty is how do you acquire these very small businesses at scale. This is good and most well care secrets and why you should believe in. We are the only company out there, the only product out there, that has a viral word-of-mouth adoption model. And this allows us to absorb the lion's share of this market profitably, and that's really our ambition. We are trying to build 1 billion user platform, and we hope you will come along with us for that route. Next slide. So I'm not going to spend a ton of time on this, and we've shown this many times. This is probably by now your most favorite slide, but this illustrates again, the richness of the opportunity as you go from enterprise, which is small chain few company large insights to a huge range of small and medium businesses with a huge collection of employee taken together. Now again, reiterating, that when you look at the small and medium business market, and if you're looking at a company that has a top term sales-driven business model, it's not easy or in at all possible to profitably acquire a small medium business segment. So you need a product-led growth model, you need a viral adoption model, and that's why we are interested. Next slide. So just a quick recap on how the bottom up adoption model work. So Expensify is 1 of the few products out there that solves a real pain point to a largely ignored segment of the market, that's the employee. So employees have a genuine need and we are the only one that built a product to continue to cater to this audience, even when their company has not adopted the product. So an employee can download the app, use it for free. And because it solves a real pain point for them and for free, they end up telling their friends, they end up telling their family or anybody that they know, who has a job, who likely have the same pain point. So what ends up happening is large swaps of individual users are using us for a business use case, sometimes it ends up being various groups within the company. And so this is a tiny wave that ends up taking the company with it. And we are able to convert this company into same customer without ever reaching them with the salesperson. And that is really the beauty of the bottom up adoption model. It can be executed at scale across the market because it doesn't depend on increasing our headcount or spending sales stronger on it. Next slide. So why we acquired a company, when they are small or at least a little small, our philosophy has always been to never let a customer ever outgrow us. So we are being the only product that caters to an individual and so have consumer trade U.S. But at the same time, we also have enterprise level scale. We have a profit capabilities, so we have a rich suite of features, and we also have global reach. Next slide. And you've seen this slide many times, but we -- this is our robust road map. And as you see more and more, you noticed that more patients that are grey, which means they are planned, become green which means they are in beta and then go on to becoming blue, which means they are now fully launched. And the way to read this again is to go from left to right. Anything on the far left is aimed at getting more viral lead generation into the platform and anything on the far right is seen taking the product, making the subscription richer for existing and targeted companies, who are our. Next slide. So having a recap on the long-term strategy and the value proposition of the company, I want to give you a few strategic Q1 updates before I pass it on to -- pass it on to Ryan for financials. So there are 3 things that I want to talk about today. Next slide. The first 1 is our accounting channel, and we've talked about this channel with you many times. But again, as a reminder, we consider this challenge to be our gold mine. That's because every accountant has the ability to bring us hundreds of customers who, in turn, represent thousands of paid numbers for us. Now not only is it a customer scale, it's also customer quality, because these companies generally set up by the accountant, who is well versed in industry best practices. And we also train them, so they're well versed in our product best practices. So these companies are ideally set up and so they become extremely easy to support for us and also as a result very easy to retain. So there's high retention in this channel. Now there are 2 things we've done and we've talked about in the past as well. One is as we've assigned a partner manager to the 500 or so accounting firms that are already on our platform. And these partner managers are all Expensify employees and their job really is to give these accountants one-on-one support as we onboard new customers and support, again, customers end up having issues or need to involve their setup because they are growing so on and so forth. So we keep this channel very warm. We can even very well supported because it is a great opportunity for us to disproportionately grow, our team members. We're also hosting ExpensiCon 3. And of course, as the name indicates, we've done it twice in the past. And the idea behind this is to bring and this 1 is going to bring 140 of the industry-leading experts, accountants and large funds, and we're going to bring them to Italy. And we have top leadership sessions, trading best practices, understanding their pain point even more, so we can find our product to them. And of course, have a good time because nothing else reac loyalty as a good time together, right? So that's the accounting channel. Next slide. We are also working on our sales effort and we've talked about this again in the past. Every quarter that we've been working on it quite consistently. But this effort and this uptake always leads to a lot of questions around where sales fits in with our bottom-up adoption model and product approach model. So I want to address that head on. The way to think about our growth opportunity, the shining star of our growth story is really bottom up adoption, is product-led growth. But we think product led growth in view sort of like a sail boat. When the wind is high, everything is exponentially faster and the wind really can be thought of a lot of besides a lot other things, 1 of the primary drivers is macroeconomic conditions. So of course, right now, given the macroeconomic conditions, wind is a little bit low. And what would be great, what is a very good business is the ability to supplement that growth with something consistent, something steady and being modest, and that's what we consider our sales efforts to be. It's sort of like a motor boat that supplements the wind in our sails. And when the wind is slow, we want to be able to depend on the motor boat to keep going, and when the wind comes back, we go much faster once again. So that's the strategic goal behind building the sales program. It's not intended to replay growth, it is not intended to even go head-to-head with them. It is intended to supply a consistent backup. Now all that said, let's talk a little bit about the results. We've been working on this for a little over a year. Our SDRs, who are really the agents that we've hired and we have been using a flexible outsourced model for all of them as a reminder. But our SDR story, the people that we've hired, who hit the phones and call prospect lists and get a more direct outbound lead gen volume. And we've been ramping up this program more recently. And you can see they really kind of settled into a in the first quarter of 2023. And you can see here from the green bars, that our incoming lead pipeline that is growing very healthily as a result. We've also continued doubling down on our guides program, and you might know that externally our setup specialists and the their job is to absorb the incoming leads and to convert them at a better and better rates. So we've been tracking the deals that guides win and how many paid members they convert. And what would be really encouraging is every month in the first quarter of 2023, the number of paid members, the number of deals that our setup specialists have been able to convert has been persistently doubling. So every month, it doubles versus the previous month, which again is a very encouraging leading indicator for growth. And just these efforts overall. Next slide. That lead, I wanted to come back to what we're going to do for product-led growth. Now of course, the macroeconomic conditions are not under our control, but it's cyclical and what goes down must come up, just like what goes up must come down. So ignoring that for a second, what we want to be ready with is as the market sort if recovers, we want our entire product road map to be complete, fully launched and all. Now that is a very ambitious goal because we have a pretty robust road map, as we've shared with you in the past. And so what we've done is we leaned on an external contributor community, to more outsourced engineering resources to supplement our internal engineering team. And this graph shows you the number of jobs, the number of requests, the number of engineering hours that we have been able to use the external community for. And the idea behind this is not just us to launch new products, new features, but to also lean on them simultaneously to keep finding and fixing bugs, so that we can move fast without breaking things or at least without completely damaging the quality of the product that we're building. And again, as a reminder, the point of using contributors is to go fast when we want and slow down when we don't need to go so fast. So when you hire a lot of engineers, you are kind of bearing the cost on your income statement for a really long time and at the risk of damaging morale. You can't really let employees go and hire them back as fast or as a market has shown us it doesn't work because other companies doing that make the headlines and extremely down press, too. So on this contributor community, and there are no contracts. We basically just worked with them on per job basis. So we are able to sort of expand the contract much more nimbly and that's the idea behind it. So those are the 3 major updates or group channel, our accounting channel, our sales channel and our contributor community and all of the progress we've made in the first quarter has been very encouraging, and we think of it as really setting us up for success as we go into 2022 further. So with all that out of the way, I'm going to pass it back to Ryan who is going to run us through the financials.

Great. Thanks, Anu. All right, everyone. Happy to see everybody again. I'd love to take you through the Q1 financials. So revenue was $40.1 million, that is just a tad hair down year-over-year. But 1 thing to consider is that our cash back is contra revenue. So as the card continues to grow and it has been growing quite nicely, that actually pulls down that revenue number. If you were to adjust for cash back, you would see that revenue is actually higher. We have higher -- we have more users than we had last year. But actually, the card is more successful, that pulls down revenue. So we had a flattish, slightly down revenue year-over-year. Our average paid members were 747,000, up about 6% year-over-year, and our gross interchange is $2.3 million for the quarter, which 85% year-over-year, so the card continues to grow quite nicely despite kind of some headwinds elsewhere in the business. Next slide. Our operating cash flow was $7.6 million. Our free cash flow was $10.2 million, which we're quite happy about. Our GAAP net loss was $5.9 million. Our non-GAAP net income was $4.1 million and a difference, again, between GAAP net loss and non-GAAP net income is stock-based compensation. Our adjusted EBITDA was $8.7 million. All right. So let's talk about what happened in Q1. So our customer count was up in Q1. However, we did see activity across our customers decrease, which resulted in a net decrease in paid members from Q4. So basically what that means is, let's say, the average customer has 14 paid members, and we basically saw that decrease to 13 or 13.3, or something like that. So we saw kind of a decrease across the board, a small decrease, but we have so many customers that even a small decrease in activity kind of outstripped the increase in net new we saw. So subscription members did increase in Q1, but our pay-per-use member decreased with larger than the growth in subscription. So this wasn't a big churn off of customers. It was just an average decrease in activity across the board. The good news is that we believe because it's not a big churn off of customers that we believe the activity decrease is due to economic conditions. We think that is expected given the environment. And ultimately, we think it is temporary. No 1 thinks the economy is going to be bad forever. It's cyclical right, going to come back up. And as long as we retain these customers, when activity goes back up, their user counts will increase. So we want to make sure we're retaining the customers. And if there's kind of some choppiness in terms of their activity going up and down, we will weather that storm, obviously, because we are cash flow positive, and it's just kind of a sign of the times. Next slide, please. All right. So we don't give guidance, but what we do, do is that we let you know how the next -- the first month in the current quarter is trending. So as you can see in April, it's the yellow bar furthest to the right. We're continuing to see some volatility. It actually looks remarkably similar to the kind of up and down we saw in 2021, if you look over on the left-hand side, but as you can see, in every single 1 of these months, we are having our subscription numbers increase, but the pay per use is kind of going up and down a lot. So we are not through the woods yet on the volatility. Next slide, please. Let's talk about free cash flow. So we had a strong free cash flow in Q1, $10.2 million. And people say, what are you going to do with it. Great free cash flow, what do you do with it? So we obviously, we're spending it more and more on sales and marketing, but also, in Q2, we're going to take the free cash flow from Q1. We're going to do a $3 million buyback in the open market that starts tomorrow. And also, we're going to reduce our debt by $8 million. And as Anu said, we are positioning ourselves for success in the future. Our sales efforts are starting to show some real results and pre trials have seen a huge jump. So we are optimistic in the future. We think that the investments we made there are starting to show kind of some early green shoot that makes us quite encouraged. We're well capitalized, and our free cash flow is strong, and we're using that positive free cash flow to reduce our debt, and we're also returning value to our shareholders via buybacks. And very soon, we'll be starting the migration of our users to our next-gen platform. So nothing to announce today, but expect more announcements from us soon during ExpensiCon 3, which is May 18 to 22. We have a lot of product changes that we've been in the lab cooking for a while. So we're excited to get those out in the open pretty soon. Next slide. And just as a reminder, this is the future we've been building. A lot of our efforts on the engineering side have been really focused on this new platform we've been working on and not -- we've put so much work into it and not very many people have seen it yet, which is why we're so excited to start getting actual paid members on to it. And -- but as a reminder, the Superapp that we're building right now is expense management, corporate card with cashback, invoicing, billing, chat, corporate travel management, personal travel management, P2P money transfer, bill splitting, and a personal wallet, all for $9, all in 1 app and coming to you very soon. So we're all very excited about that.All right. Now we'll throw it over to Q&A. And I believe our first analyst is Natalie Hao from Bank of America.

So my question for you guys is, so pay per user went down, and you guys have previously said that they do pay a premium price, and you're trying to find a good balance of subscriptions and pay per use. I think you guys have mentioned 20% would be your ideal number. Have the -- these trends sort of had you guys on that path? Or have you guys sort of thinking about earlier than you anticipated?

Great question. So yes, we are being successful in converting people over from pay-per-use to subscription. We are seeing increases in subscription. However, we also saw a decrease in paper use this quarter. And again, that doesn't mean the customers left. It just means that they have less employees that were active. So we are seeing paper use come down. But this quarter, it was kind of a little bit of come a, little bit calm. We're moving people over to subscription, but also -- they also decreased. So yes, our pay per use percentage to go down, but part of that is attributed to general less activity and also in part because we've been successful in converting. So it's a little bit of both.

Okay. Cool. And then a quick follow-up. It appears that sales and marketing as a percentage of revenue went down, but you guys mentioned you're doing like more investments into that SDR program. Can you provide a bit of color there?

Sure. So we've been -- we ramped down some of our marketing as we ramped our sales, but they didn't coincide perfectly. So we added 100 SDRs in Q1, but a lot of those came on board kind of towards the tail end, so the cost wasn't fully baked into the quarter. So we should expect to see an increase in sales and marketing in Q2, especially because we have ExpensiCon 3 also. So it's kind of a double whammy there. We have a big conference and then also our SDR costs are mutually baked for the full quarter. So we should expect to see an increase in sales and marketing going forward.

But that program is also getting more and more efficient. Like all of our set of specials and SDRs are getting more and more trained and becoming better and better. So we don't think that we need to keep ramping up to get a higher ROI, rather we don't need deep ramping it able to get bigger results. We can just improve the ROI. So there's a little -- so Ryan said the full cost is not maintenance, so the Q2 is going to come in a little bit higher on that cost alone. But I don't think I would expect that it's going to keep ramping up because we are investing in the channel. We're investing in the channel launch in terms growing the head count of those agents, but also making them better and more efficient.

That's a good point. We added 100 SDRS in Q1, but we are now adding 100 SDRs in Q2. We are training and make it more efficient and maybe even cutting low performers. So it's not 100 per quarter, how we are at it. All right, next, we have Steven Enders from Citi.

I guess I just want to ask a little bit about the new Expensify that you talked about both in the press release and in the call on the transcript here. I guess what is the biggest change that we should be, I guess, looking for and kind of any early preview for how we should be kind of thinking about what that could potentially look like as might change the business overall?

Great questions. we are expanding the use cases in which you might use Expensify. So right now, people use it for expense management or if you're on a business trip. You can actually go to new expensify.com right now and sign up. There's also an app in the app store. And what is available to the public right now is basically like Slack or WhatsApp type functionality. And we have more product announcements again, the company in on ExpensiCon 3, but very we are going to be adding all of the functionality that we have in our existing Expensify product onto the new platform. And then once we have parity there and then we're going to start launching into all of our new use cases, and there's a lot of exciting new use cases you're going to have when you have all these on 1 platform. So it's -- it will be a mix of new functionality that we haven't had and also bringing existing functionality onto the new platform. And that will result in more activity basically. So let's say maybe you don't go on a business trip, but you do talk to someone within your business through the Expensify platform, that's activity as well. So we're trying to add use cases beyond this month. So I didn't have Expensify, I wasn't active. So we're just making -- trying to Expensify is something that you use every day instead of maybe once a month or sometimes for some people less than 1 month.

Having vital leadgen, is the goal is to have bottom-up adoption, then you want to turn every 1 of your individual users in to sort of your champion, right? And the more functionality we give them to live easier lives, the more they're going to talk about us. So that's really growth. There are some features that are in that increased activity to turn users into paid members, and there are others that are aimed at better variation to reduce individual more opportunities to talk about it. So there's a bit of a both.

Okay. So I guess is the view here that if they both increase growth, the viral nature but also maybe to have a more consistent subscription user number in paper use.

Yes.

Okay. That's helpful. And then I wanted to ask on the credit card side. I mean it looks like pretty good growth here. But I guess where are we in terms of ramp-up curve to having that move from contra revenue to revenue and being recognized in a more traditional way.

Yes, so we have all of our -- like an operational perspective, we have all our works done. So we have all the contracts done. We have the revenue recognition related like memos from the auditors. So the tough part is over. But as you probably noted, it's like this road map right in front of you. And the slide I was presenting around using contributors more and more in order to keep competing on this at a more rapid pace. The challenge is always engineering resources and sort of prioritizing what is going to be the most return to our business. So that's kind of where we are. Like we are right now on implementing the new program, but then launching it only ourselves. So like moving all of the Expensify employees of the old program, into the new program for all for. So that will give us a good testing ground users of our products every single employee uses of the account every single day. So we are going through the motions on that right now. And then once we are done with that, I think we started to build it out or rather launch to specific company, maybe we'll launch to someone adjusting the now. So we don't go to the recording in the side what we have to get prioritized in a sense, but everything is about like what is going to biggest bang for our buck from an engineering perspective. So that's going to be the consistent answer going forward, because we are done with everything that -- we are actually done with everything that we don't control and now we control this. So this is the priority.

All right. Next, we have Mauro Molina from Piper Sandler.

So I just had a couple of questions around the SDR initiative. So just first off, what sort of drove the decision to outsource the SDR functions out of that vendor that you mentioned? And in what scenario might it make sense for Expensify to bring that sort of initiative in-house over the long term? And then the second thing around that is how long might you expect this initiative to sort of -- how long might it take to reach sort of a breakeven or flip to a positive ROI?

Yes. Good question. So let me start by just kind of commenting like our general approach to doing something in-house versus outsourcing and SDR is a classic example. Whenever we have a job that is repeatable that you can write down and it's simple and someone can execute it over and over again. The matter doing it many times. And it requires very little scale that is repeatable. That's when we outsource it because what we can do then is hire a large number of agents, giving them a very clear set of instructions, even diversify across multiple vendors, and that way, we have some negotiating power in terms of pricing and we can get better bang for our buck. Well, what we then do is manage them internally. So we structure the sales program as we have internal employees and our sales team who do things like partner management with our accounting channels. We handle more strategic pieces of the business. And then they manage the subspecialists. And so the subspecialists have something of lower skill than our internal employees job because they are converting incoming leads. So they need to be able to anticipate and block and tackle, but it's not so high skill that they require the kind of training that and kind of experience in general tendencies that we've hired internal employees for. And then the question is and our internal employees, the SDR pipeline. And their job is really very repeatable and they have a script and the they hit the script and they just do it and over again. So that's sort of how we structured it and never say never, but I don't think the SDRs are the type of job requirements or the type of job profile that we would ever take internally, because we could do it much more cost effectively and ramp up and down much easily if we outsource this. So that -- let me stop there and see if that answers your question.

Yes. That's helpful on that front. And actually, just as a follow-up to thta part before touching on the ROI, how long -- how easy is it, so to speak, to ramp up the SCR headcount month-over-month or quarter-over-quarter, and that's all I have there.

Yes. So that is also a very interesting question. We started this at late last year. I want to say like Q4 like October, November. And we did in fact think that it could be, like we told these centers that we started with very few just in attaching to work at all. And when we saw that it could work, we wanted to scale it to 100. So we started with like 10 and then we wanted to scale it to 100. And we did notice that it took those vendors up to a month to hire them, and then a few more weeks after that to just like give them some basic training and let them hit the firms. So that's quite a while we started this initiative and kind of announced that we're ramping up in Q4, we didn't fully ramp up until maybe mid Q1. So we were -- it was a continuous process. It didn't go from 0 to 100 overnight, but it went from 10 to 25 to 45, so on and so forth. So it seems like it takes them something of a quarter to get to 100. But that said, it's also behind us and going forward, and I think we were responding to this another 1 of your questions earlier, we're not trying to keep growing the headcount. And is where maybe I'll come back to your second question. The idea behind this entire arm of growth model will be to meet yield something consistent, something steady, something modest that we are happy with. And do it more and more cost effectively. So right now, we have 77 of specialists and 100 SDRs. And the idea isn't even to maintain that. The idea is to sort of deploy that, identify the real winners and then very aggressively performance manage the bottom of the team, if you will, and then keep optimizing. So we can kind of identify the 20% team that contributed to 80% of output because that's generally how it ends up being. So that's the challenge now. Like over the next few quarters, that's what we're going to be focused on identifying the winners, identifying the losers, so to speak and then being aggressive about managing this program for ROI, and I'll let Ryan add anything that he wants to as well.

Yes. I would just say it's pretty flexible and that we can drastically upscale and downscale numbers intra-quarter. So it's -- we're not locked into annual numbers or anything like that. It's very flexible, which is 1 of the reasons we like it. All right. Up next, we have Daniel Jester from BMO.

So maybe on the paid growth there [indiscernible] had pretty strong growth [indiscernible] it looks like [indiscernible] really the avenue of growth --

I think there's a little bit of echo. I know you talk real quick, sorry about that, Daniel. Sorry, can you repeat the question. Sorry about that.

Is this better now?

Yes.

All right. So on the free product or the free trials, you talked about growth there for a while. It's been pretty good for a bit. Is that -- can you give us any sort of like color about the conversion rate of those free to subscription or is it more important to look at those free trials as drivers of growth for interchange?

Good question. So the free trials -- I see -- so the free trials are not related to the free plan. So there's a free plan where you can use like basic Expensify Light for free, you can run a simple business off of it for free. The free trials are for the paid -- the paid program. So what we've seen is basically we are really focusing on our sales and marketing. We've seen a substantial increase in the number of free trials for the paid product in Q1 versus previous quarters. And we basically, what we're saying is that some encouraging data because it's the huge lift in the free trials. So it's actually -- it's not related to the free plan. I understand that -- now that you say that might get it is actually kind of confusing. We have a free plan. And then when you are trying to pay for our product, we give you a free trial, and we've seen those free trials increase substantially in Q1.

Got you. Okay. That is helpful. And then maybe philosophically, I know you're not guidance, but as you think about sort of the growth trajectory this year, obviously, the macro is what the macro is. Do you think that interchange growth is really going to be a big potential overall growth this year? Or maybe kind of walk through the puts and takes for the different variables in terms of getting the top line moving on?

Yes. Great question. So yes, I think now -- the interchange isn't revenue. I know a lot of people adjust for it in their models. But by GAAP, it's not revenue, but yes, interchange is growing well. And when we do get that moved over into the interchange line item, we think that it is reaching a point where it's going to be a good contributor to the top line revenue. Now in terms of the subscriptions. So we're adding new customers every quarter. Subscription numbers are going up. The pay per use has just been kind of all over the place. So I think that if we continue to retain our customers and kind of continue to add more when this kind of decreased activity from economic conditions stuff, we're going to be in a much better place in the future. So we're kind of like in the waiting out the storm and making sure that we don't lose our customers and if their activity decreases, obviously, we don't love that, but we want to make sure we're holding on to the customers. And we do believe that as everything kind of opens up, people are hiring, activity overall increases also, we're adding new use cases to our platform, which gives people more opportunity to be active on our platform that we'll see those activity numbers increase. So we ultimately believe that the decrease in activity is temporary. And -- but obviously, in the short term, I think Q1 did decrease, which kind of hurts us a little bit.

Okay. And then 1 more, if I can squeeze it in. The product road map has been very compelling. You got -- you've made a lot of progress there. Can you just help us think about customer usage of the various products, how that has trended? I'm just trying to get a sense for what the demand pull for your customer base is for some of the new products that you're launching and some of the new pipeline that we'll hear at ExpensiCon 3.

Yes. So I can't say too much because I do want to -- David has got all the big announcements lined up. I don't want to spoil them, but basically almost everyone uses expense management, right? It's Expensify. People know us for that. Also, we're seeing more and more people using Expensify card. Actually, all the kind of turmoil in the banking sector has been a big boon to us like card-wise. We saw a lot of customers come over to the Expensify card. After that, we are seeing people want to use the invoice and solution. I don't have any official numbers to give there. But we have -- also, we're getting a lot of good feedback from the chat product. And -- but that's currently only available if you go to new.expensify.com, so we do have people actually actively using it. But I think that's kind of all the -- all that I can say right now without spoiling -- I would say stay tuned, ExpensiCon 3 is coming up on May 18, so we're going to have a number of announcement there, but we're excited to start migrating customers over to the new platform. We think it's going to be a big boon to the business, and it's something we've been working on for the last couple of years. So we're all just excited to get it in the hands of more of our customers. All right. Next up, we have Sam Flynn from -- no, we have Mark Schappel from Loop Capital.

Can you hear me okay?

Yes.

Perfect. Sort of 2 quick ones for you. The first thing, have you seen obviously, subs were up in the quarter, which is great. But just wondering if you've seen any turnover from your larger accounts?

So churn has been quite low. It's -- the decrease in paid members is more just kind of an overall decreasing activity across the user base. What we see actually is most churn being in the smaller segments of the business. So like the 1 and 2, 1 and 2 employee businesses. And in general, the larger the business, the less likely they are to churn and higher our net seat retention is. So I think maybe the opposite right. The bigger customers are not churning and the small customers, those are the more likely to go out of business kind of in an environment like this or kind of be there for a couple of months and bounce off type of thing, but they're also our smallest the 1 in 2 customer segment is our lowest revenue customer segment. So in general, it's not from a churn off of customers. It's just the decrease in activity across the board, which we feel is attributed to the macro element.

Perfect. That's helpful. I appreciate it. And then secondly, and then I'll hop off. Just wondering what sort of trends you're seeing in business travel recently?

I think we've seen a return in business travel, but also the -- as a reminder, business travel isn't 1 to one. We don't need people to take 2 or 3 trips a month in order to be active on the platform. We need them to expense 1 item, right? They need to buy a cup of coffee from Starbucks or a dinner with a client type of thing, and then they're actually on the platform. So it's not -- if you say travel increased 3x, that doesn't mean our subscribers can increase 3x. We need the unique number of business travelers to increase. We don't need the actual current audience of business travel to travel 3x more. So it's a little different, I think, than what people expect. But 1 thing -- a boon business travel does for Expensify is it creates more opportunities for word-of-mouth growth because you are experiencing the pain point that we solve. So the worst part of expense management is going on that trip or maybe back-to-back trips and you have this huge pile receipts and then you start complaining to your network. And then if you're complain you have this problem, you're more likely to hear about Expensify and that creates an overall lift. So business travel is good for the business, but it's a little different than what the way you think is. We're not like pulling transactional revenue off the business trips. We just -- business travel creates activity, and that's how we monetize. That's the end. That is operating off of old list. All right. Well, thank you, everyone, for joining the call. We really appreciate it. We love talking about the business now with you all. Just kind of as a closing, we're all very excited. I think we had a little -- a bit of a shareholder letter in our earnings release from David, but we're all very excited about the future of the business here. We've been cooking in the lab for a long time on our new platform, and it's so close to being released. So we are excited to get that in the hands of all of our users. And we'll see you all next quarter. Thank you all very much.