What happened
Expensify (EXFY -0.61%) stock took a big hit on Wednesday as shares declined 30% while the wider market was flat. That drop added to a tough year for shareholders. The payments app specialist is down over 50% so far in 2023 even as the S&P 500 has gained 17%.
Wednesday's drop came in response to the company's Q2 earnings announcement that showed declining sales and expanding net losses.
So what
Expensify endured a 10% sales decline in the period, which ran through late June, as revenue fell to $39 million. The company's pool of paying members shrank 2% as well. By comparison, sales fell 1% in the prior quarter and Expensify grew its paying customer base by 6%.
Executives said competition has intensified, making it harder to grow in the expense management industry. This pressure also resulted in an operating loss for the period, and net losses expanded to $11 million from $8 million a year ago.
Now what
CEO David Barrett focused his comments on Expensify's preparations to expand beyond the crowded industry niche into much larger fintech markets. This move hasn't occurred quickly enough to protect shareholders from sharp sales declines, though. "Building this vision has admittedly taken longer than we estimated, giving more oxygen to our competition that we would have liked," Barrett said.
Investors will remain focused on key engagement metrics over the next few quarters, especially Expensify's paying user base. It will be hard to stem its revenue declines without a rebound in its core business, at least until it launches a concrete push into new markets made accessible through chat-first payments processing.
The impact of that move remains unclear today, but there's no ambiguity about Expensify's deteriorating sales and earnings picture in 2023. The stock is unlikely to see a sharp rebound until those metrics stabilize.
