Always confuse your enemies. If they can never be sure who you are or what you want, they have no way of knowing what you might do next. —George RR Martin
Today, we dive for the first time look at Expensed (NASDAQ: EXFY). The company made its debut in the fourth quarter of 2021, and the stock quickly found itself in a deep “IPO failed‘ Territory. A “safe-haven” market bore the brunt of the decline. Can the stock price rebound? We attempt to answer this question through the following analysis.
Expensify is located in Portland, Oregon. The company has developed and provided cloud-based expense management software platforms to individuals, small businesses, and corporations. The platform offers features to help companies manage corporate cards, pay bills, scan receipts, generate invoices, collect payments and book travel. The stock is currently trading at about $16.50 per share and has a market capitalization of about $1.5 billion.
Fourth quarter results:
The company reported fourth-quarter numbers at the end of March. They were very disappointed. Expensify posted a GAAP loss of 82 cents per share, well ahead of expectations for a loss of 8 cents per share. Total net loss for the quarter was $21.9 million. It is important to note two things. First, the figure includes a one-time bonus payout of $14.2 million related to the IPO. Another $12.1 million was in stock-based compensation. Second, even taking that into account, the GAAP losses were significantly larger than the consensus, even though management intends to focus on positive EBITDA, if you just take out those two items.
The company did see revenue rise 56% year over year to $40.4 million, slightly above consensus estimates. In fiscal 2021, revenue increased 62% over fiscal 2020 to $142.8 million. The company provided the following guidance for the first quarter of the new fiscal year.
Analyst Comments and Balance Sheet:
Four analysts, including Piper Sandler and JP Morgan, have reiterated their buy ratings on the stock since the fourth-quarter results. However, two of them lowered their target prices. Price targets now range from $25 to $47 per share. Bank of America ($22 price target) and Loop Capital Management ($17, down from $22 previously) both maintain hold ratings on the stock.
The company ended fiscal 2021 with just under $100 million in cash and marketable securities on its balance sheet and just over $50 million in long-term debt. Just over 12% of shares outstanding are currently short. There has been no insider activity (neither buying nor selling) on the stock through 2022.
The current analyst consensus is for Expensify to earn about 30 cents a share in fiscal 2022, with revenue expected to rise 25% to just under $180 million. That puts the company’s sale price at just over seven times the projected cash on the balance sheet in fiscal 2022. Expensive, but certainly less than the 14-15x revenue that Expensify made when it first went public less than a year ago.
Expensify is turning profitable, and if one believes that sales will grow at a CAGR of 25% to 35% over the next few years as company management is currently doing, then paying that premium might be justified.
Although Expensify is targeting a huge addressable market, I haven’t quite gotten there yet. If the market conditions so far in 2022 weren’t so dismal, I might start a small “watch project” holding in that name. As such, Expensify is worth watching, but we don’t have an investment recommendation on the stock at this time. Maybe when companies start reporting quarterly profits (without adjustments) and/or insiders start buying the dips, we’ll revisit Expensify at that time and do a status check.
Everyone deserves to lose a battle when he’s young, so he doesn’t lose a war when he’s old. “—George RR Martin
Bret Jensen is the founder and author of Biotech Forum, Busted IPO Forum and Insiders Forum