Expensify, Inc. (EXFY) Earnings Call Transcript & Summary

All right. Let's kick it off. My name is Koji Ikeda. I am one of the software analysts on the enterprise software team at BofA. We are absolutely thrilled to be hosting Expensify. We have David Barrett, Chief Executive Officer. And Anu, I'm going to -- what's your last name, I'm going to try, Muralidharan. Close?

Close enough.

Okay. All right. I get a pass. So I guess for -- let's start off with introductions. For anyone that is new to the Expensify story, let's give a brief introduction of yourselves, a little background, a couple of minutes on the background. What does Expensify do? What is the opportunity that you guys are disrupting?

Sure. I'll start. My name is David Barrett, the Founder and CEO of Expensify. I've been a programmer since I was 6. Computer graphics and video games are my jam, worked in the virtual reality lab at the University of Michigan. Then I did a peer-to-peer content distribution, real-time voice over IP. So it's the traditional background for the expense report magnate that I've become. And so always been hard technologies, kind of fell into the expense management space while doing a prepaid debit card for -- handing out to homeless people in the street to give them free lunch. The banks thought that was nuts and they're like, "Well, this is too crazy." I tried to invent some fictional company called Expensify to justify the technology I wanted to build. And then the market crashed, and I'm like, "S***, I better build this thing for real," and then I ended up with this company. And so now that's Expensify, and that's what we do.

I'm Anu. I'm the Chief Operating Officer at Expensify. I'm a software engineer in another life. I was working at a payments company, Marqeta. Some of you might have heard of them.

Might have heard of it.

When I met David and his vision and his just general approach for Expensify was just cooky enough that I decided to pitch him on hiring me, which is how I came to work here. I've been here 7.5 years. I think we're on to something really huge. I can't wait to take it to an even bigger platform. And happy to be here, looking forward to some good questions.

Thanks. Thanks, guys. So what I've been doing is asking every management team 3 big picture questions, one on the macro, one on the hiring from Expensify's viewpoint. And I think it's interesting given your structure over there. So I think that will be an interesting question, and kind of comp structure, the kind of the balance between cash and stock compensation. Okay. So first question on the macro. Lots of stuff going on, Ukraine war, Russia war, European macro, China slowdown, inflation rate risk, interest rate risk, recessionary risk here in the U.S. So how do we think about the potential impacts of these types of risks to your business? And more so, what are you guys doing to rightsize or position the business? I mean rightsize is not the right word, but position the business for any sort of recessionary future.

Do you want to take it?

Sure. So -- if you're familiar at all with our business fundamentals, we are a subscription-based expense management business. Now coming -- I think we're coming out of COVID, hopefully, it's safe to say we're in pre-pandemic -- post-pandemic times. But the way we think about it is there's so much chaos in the market. There's recessionary concerns war, to your point. But expenses are fundamental to every business' existence. And going into a market with more chaos, more turmoil, what you want to do as a business is watch your expenses and control your expenses a lot better. And we have a product that helps everybody do that. So to the extent that a recession is good for anybody, it's good for us. We're also a cash-positive business, which is the real unicorn, I guess, out there. So we are not in need of funding. We are not in need of raising money in this market where things are getting more chaotic and more uncertain. And those are our 2 biggest strengths. We have a business. We have a fundamental product that's going to help businesses get through a recession if one hits us hard. We are cash positive. So we're going to do just fine in that environment. And that's really, I think, our biggest strength going into this market.

Yes, I would agree with all that. I'd maybe add on maybe kind of a personal morbid note, I hope this recession is deep and long because it's going to wipe out all of our competition. Like we're like an old-fashioned real business. We sell an important product. We sell it at a fair price. We take good margins. We scale with unit economics. So like a real business, it's like weird, I know. And so -- but these past few years have been so distracting because like interest rates are free, everything is just up and to the right, like valuations get us f****** insane and everything is wild. And that's a super distracting and noisy to the market. And so I'm so excited that all that noise is being turned off. Everyone is like, "Oh, s***, maybe actually cash is a good thing." And I think that we're just -- we're primed for reality. And I think this is a massive reality check, and I think it's a healthy thing for the market. And I think this correction is actually a good thing for everyone in the long run. I think it's going to wipe out a lot of kind of the noisy sort of like distraction, and it's going to position us so much better for the long run. So sorry, everyone, but I like it.

Okay. So Expensify has a unique structure in the way that the people that you have. You have roughly 150 people, give or take 5 or 10, right? So a very lean organization, but I wanted to ask you about hiring. And how are you guys are viewing hiring, right? So 6 months ago, very difficult to hire people. Has that changed for you guys at all? How are you guys thinking about the hiring?

Sure. I guess I would say, so Expensify is an unusual company because in a bunch of reasons. So maybe just kind of step back to caveat all this. So Expensify's differentiation at the grand scheme of things is that we acquire customers in a completely different way than everyone else. And so we are all in on this vision that it's possible to sort of link people through their conversations, and every financial transaction is a conversation between 2 or more people. And so this creates a viral word-of-mouth opportunity that can reach basically the other untapped portion of the market. So if you were to add up all of the customers of all of our competition, it would add up to something like a couple of hundred thousand customers in the world. But there's 300 million businesses in the world. That means that from our perspective, 99% of the opportunity is completely untapped. And so the question is, how is it that no one's tapped into -- more than the sum of all of the enterprise sales teams of all of our competition hasn't even penetrated 1% of the opportunity. The problem isn't the product. Like basically, it's relatively easy to build technology, everything is going to get copied. The problem we solve is synonymous of business. Expense management is your very first accounting problem. Like way before you have revenue, you definitely have expenses. So every company on the planet has this problem. And so the problem, I would say, for growth comes on to customer acquisition. So that's kind of [indiscernible] to say, so our differentiation is that we acquire customers completely unlike anyone else. All of our competition, 100%, they live their sort of short, miserable unprofitable lives basically with the enterprise sales model, taking out the enterprise into the SMB. And so all of this basically means that everyone is fighting over the same tiny corner of the market, the market which can be like kind of almost acquired with the enterprise sales model. We're just going after everyone else the other 99%, and we do it because we start with an individual product that employees can download for free without [indiscernible], without asking permission, just download the app, scan receipt, send it to their boss. And so we turn their expense report into a highly targeted marketing message directly to the decision maker. This is super weird. It changes everything about it. Like if you were to download Concur right now, you couldn't sign up. It's literally impossible to sign up for Concur with a mobile app because they wouldn't even talk to you in the first place. You're not the buyer. So Expensify's design in the very first user interaction is completely unlike everyone else. It's much more like a LinkedIn than it is like a Salesforce. Basically, everyone owns their own accounts and so forth. This changes our technology. It changes our branding. Then now it's like more of a user consumer branding and so forth. It changes our sales approach. Basically, we have no one on commissions. We don't have anyone on a quota. Everyone is basically -- even if you're to take a phone call, you're there to onboard customers that comes to this very radical approach. And so everything in our company is weird because it's about this viral bottom-up dynamic that no one else has. And so that's my very roundabout way to say that weirdness comes and produces a very different kind of company. We're only like 140 people, which is wild. We're like basically doing, I think it was $1.2 million in revenue per employee. It's like one of the highest in public tech companies. So I think Facebook beats us, but we beat Microsoft or something like that, I can't recall. And so -- but this is an unusual business model. That means that our team with like 140 generalists. Everyone in our team basically does everything. Like there's no one that has a specific title. No one just does one thing. Everyone is involved in doing everything. Everyone does product management. Even like I say our accountants because like we sell an accounting platform. And so they're very involved. Like when we do payroll, we're building our own payroll solution. And the people running the payroll system are designing the payroll system. And so everyone has a very cross-functional role. And this means Expensify is as an incredible place for a very specific kind of person, a person that has their own personal ambition and the desire to do things their lives. So Expensify is incredible for some people, and it's awful for everyone else. And so when it comes to hiring, we hire very, very slow in particular. We had like maybe one a month, like maybe. And we've been doing that sustainably for the past 14 years. And that we also -- we don't allow a lot of [indiscernible] to accumulate. We're very proactive on performance management. So we don't just like wait for a few years and then lay off like 30% of the company. It says like, if you're laying off 30% of the company, you f***** up somehow pretty bad in your performance management. It's like how did you get to that point. So we just don't get to that point. So we're always cutting as we go, we're always hiring very slowly, and it's like a bulk sonic. They like slowly ages over and boils off over time. And so the team is a very unique team. It's a very powerful cross-functional generalist team, and no one's job scales with revenue. So I think with our current team at 140 people, I think that we can 10x revenue in a very real sense. It sounds wild, but WhatsApp got to 1 billion users with 79 employees. And so we've got 140 like I think we can probably get to 2.

Thank you, David. You get the award for the longest answer for my second question. You will win that award.

I saw an opening, and I went for it.

Next question, kind of comp structure, plays into the unique structure of your business. Big topic of debate within the investment community right now currently, is this kind of mix between cash and stock comp. So how do you guys think about that given your unique structure, too?

So in case you guys didn't notice, we went public very recently. As part of going public, what we did was we talked a whole lot about retention of our existing customer base. Because to piggyback on what David said, if we can retain our existing team, we can get to 10x revenue. So retaining the existing team is very much our priority. Setting that aside for a second, you've probably also read about or are familiar with our dual-class structure. So what we do is have this employee class common share structure, which is something we call the LT shares. And what LT shares are, are higher vote shares, but they also come with a holding period. So if you have LT10s or 50s, you get 10 to 50x the voting right, but you also have to hold them for 10 to 50 months. And the reason we have that is because we want our existing employees focused on the long-term consequences of decisions we make today as opposed to short-term consequences of the decisions we make today, which means they're in the market to sell and they have a shorter-term thinking, which is something we want to avoid. So we did this huge grant of LT50s for our existing employee base with this in mind because, a, it has an 8-year vesting period. It's a significant grant, so it's going to create a lot of loyalty in terms of staying with the company, but it's also LT50s, so you're going to think about the long-term consequences of decisions you make because you're going to be rich in 8 years, plus 8 years. So the short-term benefit of whatever you do is just irrelevant to you. And that's probably going to influence our stock-based compensation line for the next 8 years. Apart from that, we also have a very competitive ESPP plan. And what we're going to do is allow employees to choose any amount of their compensation that they want to put into it. And we bonus for electing into the ESPP plan. We also bonus for holding your ESPP shares. And that's really our plan for retention, using equity as our tool.

Got it. Got it.

Yes. And then build on top of that, I'd say like this LT program, this LT, this long-term share class program is not just for a new grant that we gave during IPO. But actually, when we're going public, we offered all employees is like you can choose to keep common shares or to convert any of your common shares into LT10 or LT50 shares. And to Anu's point, they aren't in liquid forever until you give notice and then you have to wait an additional 10 or 50 months in order to get that share. And so you might want to like why would anyone in the right mind just give up liquidity basically for nothing. It's because we've built basically into this idea of the LT share class program like this LTIP that basically is saying it's like, "Hey, if you give up liquidity to sort of power this high voting share class of this voting trust that we have that we use to manage the company. As a reward, we're basically going to pay you rent on the LT shares over time." And they're like exactly when, how, we're going to figure out those details out. And so we've used a variety of techniques to get people focused in the long run. And I think we're very pro equity compensation because we say, "We're going to change everyone's life here, like where your retirement plan, but your retirement plan is going -- it has to be sound. It has to be compelling today for you to actually stick it out to see it." And so everyone in the company is thinking about the performance from like 10 to 14 years in the future, not just today.

Got it. Got it. Very, very unique structure there. Thank you so much for that. I wanted to ask you a kind of a product question. So expense management, T&E, not a new category, well understood out there. But you guys have a lot of subs. I mean, just thinking about the product from a user perspective, what is it about the product that is really drawing the subscribers to it?

Sure. I guess I would say -- so yes, as mentioned, you can't run a business without doing something to keep tracking receipts. Or like your expenses, you just have to do it. And I can talk about how awesome our product is. Our design is super sick. We got this like amazing Super Bowl ad with 2 Chainz, which is super fun. And it's like we got the best technology and all this stuff. And so I can rave about the product all day long, but it also doesn't actually matter. The reason people come to us is because they literally haven't heard of anyone else. Our business model, again, sells into the other 99% of the market that was never in markets. The vast majority of our customers never thought of us or any of our competition until one of their employees, they said like, "F*** this Excel spreadsheet. I'm so done with this. Can we do something else?" And so the download our app for free, heard from a friend, they just start using it. The boss who was never in market for expense management, didn't even think about it. He was like, "Yes, I know our expenses suck, but like, I got a lot of things in my plate right now and today is just not the day." And the employee is like, "Well, it is today because I'm submitting expense reports through it. Are you going to say no? It's free." And the boss is like, "Fine, whatever. Sure. I guess we use Expensify now." Press a button, boom, now my whole company does. No one is paying anything. And then we say like, "All right. Do you want to pay back your employees?" They're like, "Sure, whatever it's free." So they connect their bank account. And then without even asking their permission or telling them, we also qualify them for a corporate card. It is not an option. It's not a choice. You just have to do it. So we go back to the same employees, we're like, "Hey, your company is activated toward Expensify card. What do you want your credit limit to be?" And the employee is like, "Oh, I don't know, $10,000 sounds nice to be." Like, "Cool. What are you going to do with that $10,000?" They wrote a message. We take it to their boss and they say, "Great, press this button. You want to approve this person's $10,000 corporate card request." And again, corporate cards were definitely not on the radar for this boss. He's like, "What? I don't -- do we have corporate cards now or something?" And like, "I guess so, and they're free. So are you going to give it to me?" And they're like, "Actually, it's kind of nice. I wasn't thinking about it today." Today wasn't going to be the day, but it became the day sort of thing. And at no point were they thinking about buying, were they looking researching alternatives, they couldn't even name any of our competition. And so the reason people use us is because they literally have never heard of anything else. Now granted, we're also the best and a million other things on this. But that's not what makes us powerful. Like having the best products is not enough to take the market. You have to get to everyone else before anyone else can.

So when you think about the competitive landscape, there are other players out there. There is Concur on the enterprise side. But on the SMB side, where you guys operate, who do you think about as kind of the key competition? Or who are you seeing out there?

This might be a hot take, but I don't think we have any competitors really. And I'll explain what I mean by that. Let's just take some example. So let's take the piece of the market that is out there looking for a corporate card solution. It's a sliver. Then let's take the piece of the market that is out there looking for an expense solution. It's a slightly bigger sliver, but it's still a sliver of the market. And then let's take the rest of the market. It's a huge, huge ocean of small businesses, hundreds of millions of small businesses that aren't using any solution and to David's earlier point, are not looking for any given solution. They're not in the market. They're not considering adopting a platform, and that's who we target. And we target them by selling -- or rather by offering because we are free, offering a product to their employees to solve a very real pain point in their lives and then turning that employee into our champion at the company. So then when you come circle back to your question about who's the competition, inherently, all the neo card players are going after that first tiny sliver of companies that are out there looking for a corporate card solution because they are going after the market using a direct sales team that will call on the CFO and try to sell them a card. And it's really hard to sell a card to a company that isn't looking for anything. Then next is Concur and others like Concur, who are using the same direct sales model, direct sales approach, 2 companies looking for an expense solution. And again, you can only go after the silver that is looking for this. You can't go after a huge range of companies that don't even think they have a problem because they're just very busy solving very real business problems. So taking all this into consideration and time and again, we've seen this in the market, most of the companies that adopt us don't even know of anybody else because they were never out there in the first place looking for a solution, which is why I'd say we don't really have any real competition. If someone decides to go after the huge pool of small businesses that are not looking for a solution, they cannot do that profitably using a direct sales team. They need a model that looks like us, which they simply don't have.

Okay. So no competition kind of on the low end, but you guys have customers that have thousands of employees in the tech world. You've grown with them over time. And I'm sure they're having some of the competition from the enterprise side now calling in on them. So how are you guys now able to retain those customers as they grow pretty big?

Sure. And I think that -- so maybe to kind of think of the market, there's this very wide base of very small businesses, then there's -- but the bulk of our revenue actually comes from companies between like 10 and 500 employees. The second group is 500 to 1,000. The third group is 1,000-plus. And most of those larger customers started off as smaller customers. They basically came in, "Well, like we were the first in the door, then you can't outgrow us." We're not like Intuit. Like Intuit has churn on both sides. The worst customers die. Their best customers upgrade to something else. And so Expensify's design is you can never outgrow us. We'll be the best for you when you're a sole proprietor. We'll be the best for you when you adopt QuickBooks Online or get to 0. We'll still be the best for you when you're like NetSuite or Intact, we'll be best for you if you're like Oracle and SAP, whatever it is. You can't outgrow us. And so our large enterprise customers are typically customers that started much smaller and then grew with us forever. And they're believers. They like really drank the Kool-Aid on our design and everything else. And so the question is, if you're going to switch, like what would be the message of switches. Look, we are the best products. We have the best accounting integrations, which are especially important as you go up. We have the widest group of corporate card support, which is important. We're the most internationalized. Our price is the best. Like everything is the best. And so like even or if it's not the best in any particular part you'd have to be significantly better than us in some material way because it's lodges. And no one is significantly better than us in basically any dimension. So I'd say, by and large, once we get a customer, we kind of hold on to them forever. Not to say the churn doesn't happen at all. The #1 source of churn is this business failure. That's by far, or the second one be they got acquired by someone else that just has basically is trying to pull us into a different system and whatever that is. And so I'd say, by and large, even at the high end, yes, there's competitors there, but they're not super material to our business model. It's not like we care a whole lot about them. We care about like Excel and e-mail. That's the real competition. If we're getting a customer, we're taking them off Excel. If they're not going to adopt, it's not like they go to someone else, they just stick on Excel.

Got it. Got it. Got it. That's super helpful. I want to take a big step back. And we've been talking about the value proposition, kind of the go-to-market, the corporate structure. But one thing that we didn't touch upon is kind of your infrastructure. One thing that stood out to me during the IPO process last year is you guys are a blockchain company. I think you're the first software blockchain company to go public.

Well, that would be weird.

I think so. So let's talk about the blockchain. What is it about the blockchain? Why did you choose blockchain from the beginning? Is it a competitive differentiator and all those types of questions?

Okay. Okay. Cool. So yes, okay. So blockchain, may have heard of it. So my background is in peer-to-peer programming. And so the very first thing I did when starting this company was I built a new database that had to basically have replication across multiple data centers. And I was just an individual person, I had no money. The only thing that did that was Oracle, which they wouldn't even talk to me. So I'm like, "Screw it, I'm just going to build my own thing." And so back in like 2007, I built this technology, which later became blockchain basically like. And so it's been running in production since before Satoshi published his paper on bitcoin. So that's right. You're looking at the inventor of blockchain here and by and large, blockchain is b*******. Every part of like crypto is just dumb as f***. But whatever. We're not in that world. We use the technology for replication and back-end databases. And what's powerful about it is blockchain is a great way to replicate an incredibly high volume over low latency connections across the Internet. And so this means that our technology back-end is incredibly powerful and different than anyone else in our market because everyone else uses like AWS or some sort of like small -- it's a whole bunch of very small databases and you split your customers up between these small databases, which works -- it's great, it's simple and easy, but it also means that you can't link customers across different databases. It means every customer is a different island. And if you want employees and different customers talk to each other, they kind of can't because they're in a different data pool, if you will. Our design is that we have this very large blockchain synchronized database where all customers are in the same data place. And that's why I say we're designed much more like a LinkedIn or a Salesforce -- more like a LinkedIn than a Salesforce in the sense that every individual employee owns their own account, both like from a legal perspective. When you leave a company, you take your account with you to the next company. Actually, the natural flow of employees being companies is a huge lead generator for us. And so when you're joining a company in Expensify, is like joining a group in LinkedIn, join one group, join 10 groups, make your own group, whatever. And so as such, it's a completely different technology architecture that drives our bottom-up adoption model because every individual employee can use Expensify at their company. They can start up another policy or workspace for their side hustle. They can use us to turn around and request reimbursement from the roommate, and it's all the same app, it's all on the same platform. And this allows us to kind of like triple dip from a value perspective. It's like, yes, we'll get you to pay subscriptions, we get to give us transaction revenues from the card but also you just pay us through word of mouth and the viral lead generation of all your activity. And all of that comes down to this very unique technology advantage based upon our blockchain database.

Got it. Got it. Got it.

The one thing to add to that, David touched a lot on the benefits of the infrastructure from a user acquisition and product standpoint. But it's also financially a much more cost-effective strategy because we basically own all of our infrastructure. We've homegrown everything that we've built our product on, and it's all skilled for 10x the volume that we have today. So we could keep growing on this infrastructure and not spend an incremental dollar, and our existing infrastructure would support all that, which, as investors, I assume you guys are interested in.

Got it. Got it. So I'm going to ask you one more question, and then I want to open it up to the floor to see if there's any questions from the audience out there. But it's kind of about the growth drivers. You guys are subscription-based business. You guys got a couple of different products out there, but the core being T&E. So how do you guys think about the key levers for growth over the next 12 to 18 months?

Well, I would say that our approach -- so we're very -- you've heard us say the word long term a lot because we think about this -- we're all in on this huge opportunity. And so we think about viral when we think about acquiring, how do you acquire like 100 million businesses. And you can't do that with enterprise sales model. There's not enough salespeople out there. And so when we think about like in our materials, we talk about this idea of we want to be 1 billion user platform, which is easy to kind of disregard than roll your eyes at. But I would say like there are 1 billion user platforms out there. There's a lot of them. But they're based upon a completely different way to acquire those customers. In our view, as I mentioned, every payment is a conversation between 2 or more people. And that conversation already exists in this world. Now if Instagram can link 1 billion people by talking about photography, we think someone inevitably will link 1 billion people talking about money. [indiscernible] these conversations are already happening, they're just fragmented across a whole bunch of different tools. Like historically, like, we look at expense management, payroll, invoicing, bill processing, corporate cards, corporate travel, consumer trial, every one of these is viewed as a completely different industry, a whole different vertical. But under the hood, in our perspective is they're the exact same thing. Everything is a list of expenses that you give to someone and they pay you in return. And everything else is just details. Paycheck is just an expense report submitted twice a month automatically with some tax chunk. An invoice is an expense report with simplified approval structure. A bill is the recipient side of an invoice. Then those style payments, that's just invoicing simplified down for the individual. WhatsApp style chat is just invoicing without the money. And so we've built a single, universal payments engine that's designed to combine all of these different use cases together onto a single platform. And we believe that it's inevitable that someone is going to link all these use cases together and link these billion people together. Now how long is it going to take? Like I mean, does anyone here in this room think in 1,000 years that there's not going to be a single platform for all this. Someone's going to be doing invoicing and bill processing in 1,000 years, Absolutely. But is it going to be like on 50 different kind of identical companies that like all connect your bank account and accounting system independently, like that doesn't make any sense. [indiscernible] 1,000 years, this consolidation to happen? Is it going to take 100 years? Probably not. Is it going to take 10 years? Maybe, maybe not even that. And so in a 10-year time frame, who else is even trying to do this? Like -- that's why we say we don't really have any competition. We feel that we're the only ones even gunning for 1 billion user financial platform opportunity out there. No one else has the technology, the team, the business model, the brand and everything aligned behind it. Now will we pull it up? I don't know. Maybe we'll only get to 100 million. But that's still pretty good. And so I think that an investment into Expensify is an investment to believe that this consolidation of financial use cases is inevitable and they went in on it. And I'd say, if you want in on that future vision, we're a pretty good bet.

Got it. Any questions from the audience? I think there's a microphone. We got one right here.

It sounds like the end market and demand is not a problem at all for you all, but addressing it all is a gate. You'd like to scale. You'd like to be 10x versus where you are today. What about taking the playbook and aligning yourselves with partners that either have an embedded community or can get you to market faster? And specifically, I'm thinking of like what bill.com does with cpa.com and the big banks of the world or in the newer realm, the blocks of the world with Cash App or the Revolut, there is neobanks, where you have a best-in-class tool and you can bring real value, and they can bring scaled network to help you address your goal to scale.

Yes, it's a good question. So to clarify, we currently do that. One of the biggest partner channels for Expensify is the accounting channel. Like we are, I believe, the most referred app by NetSuite reps. We partner with every other well-known accounting company. We also have a huge base of accounting companies that have what is called a client advisory practice, and they refer clients over to us at one point -- and this is not up-to-date numbers, but at one point, 10% of our revenue came from this what we call approved accounting channel. And everywhere that there's a strategic reason to partner with an existing channel to grow our customer base, we absolutely will. But because the core word-of-mouth business model grows and scales so cost effectively and so consistently, that part of our business just dwarfs any partner channel we've ever gone after. So it's a good question, good proposal. We do it today. We'll probably continue doing it, but we do anticipate that our existing word-of-mouth channel will probably continue to be the main driver of business growth.

You nailed it. Yes. I mean I think as it's like we're the top partner for NetSuite, but they don't matter to us, and we don't matter to them. It's like I think partners are just kind of a little overrated in the sense that everyone thinks there's some silver bullet to get to the market. But like, at some point, you just got to do the work. And so we just have a business model that acquires directly, and it's just always blown up every single partner we were trying.

We like to control things.

Yes.

Any other questions from the audience?

Maybe one thing that wasn't raised. So I think you mentioned so we're like a profitable tech company, which is just the weirdest thing ever. And -- but that shouldn't be mistaken to think that we're not investing in growth. Like we didn't actually -- for the 14 years of history, like the first 12 of them we're like this perfectly smooth curve of like 2% to 3% month-to-month growth every month, just like rain or shine. I mean COVID kind of f**** it up a little bit. Now we think we're back to that sort of smooth curve growth. And so that's the long-term guidance we've given. It's like 2, 3 months month-to-month. The first 10 of that, we actually didn't do any advertising at all. Our very first advertising is in 2019 when we did Super Bowl ad. And then we're just ramping up for a bunch of advertising, then COVID hit, pulled everything back. And so now basically in 2021 going forward, we've like dialed up our advertising again. But you shouldn't mistake that to being -- the advertising is not what's driving our growth as we have no CAC to LTV ratio. That's not how the business model works. The business model is an organic viral growth business model, overwhelmingly powered by this expansion of our existing customers, and all of our advertising is gravy on top of that. And we are a major advertiser. We're one of the top out-of-home advertisers in the nation. You've probably seen our ads, almost like oppressively everywhere. We buy every single keyword that you can get. And we do it because our core business model is just so much -- so profitable. It gives so much cash. So you got to do something with it. At some point, just putting money in the bank is not driving business growth. And so yes, we kind of spend a wild abandon on growth. And yet, despite all of that, we're still putting money in the bank. And so it's just, I think, a sort of a testimony for how different the business model is that we don't feel that you have to sacrifice profit to get growth. The greatest businesses in the world are very high growth and also super high profit. But it feels like Silicon Valley kind of like forgot about that or just missed the memo or something like this. Like it is possible that if you have a good business model that people like and they pay for a high scale, you can make a s*** ton of money. You don't have to give it up. And so I think we think that we want to have the combination of those 2.

I wanted to ask you a question kind of on the free-to-paid conversion. You guys drive a lot of adoption, viral adoption of the platform. You do a lot of advertising, people adopt the platform for free. I mean what is the catalyst that kind of makes that conversion from free to paid?

Yes. So maybe a good way to step back and answer that question would be to talk about the life cycle of any business. Generally, somebody starts a business as nothing but a hobby. So they're just kind of tooling around with an idea. So I say that's the first stage. Then it grows a little bit. Maybe they have a partner or maybe they have 1 or 2 people. They turn it into a side hustle. Then maybe they prove it out and have some revenue, hire more people. Now I guess we can call them a start-up. Grow a little bit further, become a midsized company and then the lucky few who turn into an enterprise company with a lot of employees. So as you think about the needs from an expense tracking and management standpoint, when you're a hobby or a side hustle, you have very simple needs. You just want to keep track of your expenses. You don't really need to control or monitor how the other person or other persons that are working with you are spending their money. You certainly don't need to do any complex accounting because you're probably just filing personal taxes at that point. And then as you grow into a start-up midsized company and so on, you hire more and more people, enter into a lower-trust, so to speak, environment, you have some accounting needs. And then at the very top, you have very complex accounting needs, maybe you have subsidiaries that you're managing, and you have some compliance needs now as you go public, et cetera. So this is how we think of the life cycle of a company. Now before we launched the Free Plan, most of our customer base was kind of at that start-up and higher life cycle. And the product is actually -- especially the paid product is sort of built to serve the needs of a company in that life cycle. We launched a free plan to go down market further. So we want to acquire companies when they are in the hobby and side hustle stage, and we want to acquire them early and we want them to grow with us on the platform so that we have sort of a base of free users that just continue to grow and upgrade. So as they enter into that start-up life cycle, that's generally where we see them upgrade for a paid plan because that's where they have these needs to like control approvals of expenses or linked to an accounting integration and export expenses to their accounting platform and so on. And it's still very early days, and we'll talk a lot more about how that conversion is panning out. But just from a product perspective, that's how it's designed.

We got about 2 minutes left. So last question, kind of a big picture question where, sure, it feels like we're, hopefully, post COVID on the way towards there. So how do you guys think about that? Business travel is clearly coming back. We're all here today in San Francisco, but maybe it doesn't come back the way it was in 2019 or maybe it does. So from your lens, how do you guys think about the SMB world, T&E spend post COVID?

I mean, I guess I would say we think it's largely the same as pre-COVID. I mean I think I'm still a big believer in business travel and like the value in-person conversations. But most of our expenses are not travel-related. Like our most popular receipt is Home Depot. Like business travel to like a whole bunch of our customers is, I get half my truck, I go pick up some job site materials, I go and do some work, maybe like drop off some things and come home, track the miles like that's a business trip -- that's a real world business trip for us. And so I think that it's a very humble business. And I think we're very much more -- we're more of a main street in the Wall Street business. Our customers are super diverse across all industries. We're already -- it's not like there's a future international opportunity. We're already a global player. We've got customers all over the world. Basically, our business model doesn't require boots on the ground to sell. We just grow wherever people go. And we're very strong in English-speaking nations all over the world. And so I would say the way that we view it is the SMB is the bulk of the industry. It is the untapped opportunity. It is the highest margin highest velocity, simplest part of the market. and there's no competition, so there's no margin erosion. The SMB is not just our presence, but it's still the largely untapped future of the entire world.

So however businesses change in terms of what they spend on, I think the fact that they need to spend and they need to pay back their employees, and they need to track that spend and sort of do their books and close their books, there's always going to be a reality. And the platform is just built to do that. So we are kind of category of spend-agnostic. So our outlook is unchanged by whatever happens to business travel, like the app will just adapt to serve your business needs.

Yes.

Got it. We are all out of time. David, Anu, thank you so much. Appreciate the time.

Thanks, everyone.

Thank you.