Expensify (EXFY) Q2 2026 earnings review
Core Revenue Contracts, but FCF Profile and Buybacks Paint a Bullish Picture
Expensify is managing a difficult balancing act: intentionally draining its legacy 'Classic' platform while trying to rapidly scale 'New Expensify.' This dynamic kept total Q2 revenue in contraction (-5% YoY). However, underlying fundamentals are reversing positively. Paid members grew sequentially (632K to 640K), Card interchange revenue accelerated to +12% YoY, and the company generated a robust $6.4M in Free Cash Flow. Management signaled immense confidence by retiring ~7% of outstanding shares in a single quarter and drastically raising FY26 FCF guidance from $6-9M to $12-14M.
🐂 Bull Case
Net-new customers on the New Expensify platform grew revenue >250% YoY, surpassing $10M in ARR across 10,000+ accounts. This proves the product can win outside the legacy 'Classic' base.
Repurchasing 6.8 million shares (~7% of the company) in one quarter at heavily depressed prices is highly accretive to remaining shareholders and signals extreme management confidence in the cash-flow trajectory.
🐻 Bear Case
The core business is still shrinking. Total revenue was down 5% YoY to $33.9M, as churn from the legacy Expensify Classic platform outpaces the absolute dollar additions from New Expensify.
AI is lowering the barrier to entry for workflow software. Competitors like Ramp and Brex are aggressively targeting the same SMBs. Expensify's margin expansion must not come at the cost of essential R&D.
⚖️ Verdict: 🟢
Bullish. Top-line contraction is a known strategic side-effect of the platform transition. The sequential recovery in paid users, re-acceleration in Card revenue, 7% share reduction, and massive FCF guidance hike tell a story of a turnaround taking root.
Key Themes
New Expensify Reaches Material Scale
Management revealed that 'New Expensify'—exclusive of migrated legacy users—has crossed $10M in ARR from over 10,000 new customers, representing >250% YoY growth. This demonstrates that the redesigned, chat-centric interface is successfully acquiring customers in a broader market, validating the CEO's 'big swing' strategy.
Interchange Revenue Re-accelerating
Interchange revenue from the Expensify Card is accelerating, growing 12% YoY to $5.9M (up from 10% YoY in Q1). This continues to be a high-margin bright spot that offsets software subscription weakness and benefits directly from increasing platform engagement.
Classic Churn vs New Growth Timeline
The company operates two interwoven businesses. Expensify Classic is a 'fixed pool' that management admits will 'naturally drain' via churn. While New Expensify is growing at 250%+, total revenue remains in a stable but negative contraction (-5%). The critical unknown is exactly when the absolute dollar growth of New Expensify will eclipse the absolute dollar churn of Classic.
Aggressive Capital Allocation
Expensify attempted a $25M modified Dutch auction tender offer. While undersubscribed, they still repurchased 6.1M shares at $1.20, plus another 712K on the open market, totaling 6.8M shares (a massive ~7% of outstanding stock). This aggressive buyback, executed near all-time low valuations, mechanically boosts future per-share metrics.
AI Integration Evolving to Workflow Agents
Expensify launched the Expensify MCP, connecting its ecosystem to prominent AI assistants like ChatGPT, Claude, and Cursor. Furthermore, AI-powered workflow agents are entering beta. By enabling natural-language access to expense data, the company is attempting to build a defensive moat against AI commoditization.
Other KPIs
Reversing. Adjusted EBITDA printed a 19% margin this quarter, a dramatic reversal from the negative 4% margin (-$1.4M) in the same period last year. This highlights immense cost discipline and the high incremental margin profile of the legacy Classic base.
Reversing. After four consecutive quarters of sequential decline (from 658K in 25Q1 down to 632K in 26Q1), paid members bounced back to 640K. This is the clearest 'green shoot' that the New Expensify transition is beginning to outpace legacy churn.
Stable. Up slightly from $6.3M in the prior year period, representing a healthy 19% margin. Cash flow continues to comfortably fund software development and aggressive share repurchases.
Guidance
Accelerating. Management sharply raised full-year guidance from the previous estimate of $6.0 - $9.0 million. This implies a significant improvement in H2 operating leverage and indicates that the heavy transition investments (which weighed on early FY26 estimates) are easing.
Stable. SBC is expected to remain relatively flat quarter-over-quarter. Driven primarily by pre-IPO RSU grants, this non-cash expense remains a heavy anchor on GAAP net income but is manageable given the strong operating cash flows.
Key Questions
The Revenue Crossing Point
With New Expensify crossing $10M in ARR and Classic naturally draining, at what point in FY27 do you model New Expensify's dollar growth fully offsetting Classic's churn to return the top line to positive YoY growth?
Tender Offer Dynamics
The $25M tender offer was substantially undersubscribed, resulting in only ~$8.5M deployed. Does management interpret this as shareholders believing the $1.20 price was too low, and will you re-deploy the remaining authorized capital into open-market repurchases?
Performance for Large Customers
In Q1, you explicitly noted that New Expensify's performance was 'not fast enough for the larger customers.' Have the 30+ product updates in Q2 resolved these latency issues, allowing you to migrate the remaining 40% of the Classic base?