Expensify's Q2: AI Workflow Automation and a Free Cash Flow Inflection
New Expensify crosses 50% of users, FCF guidance raised, but revenue still shrinking.
EXFY · Earnings Call · 2026-08-06
The Product Story: AI Agents and the Long Tail of Migration
Expensify’s Q2 2026 earnings call was less about the top-line decline and more about the shape of what comes next. The company is now positioning itself as an AI-first expense management platform, with AI agents doing the routable work of expense approvals. Founder David Barrett told the story of a customer who set up an agent rule to automatically clear any expense in policy. “That’s the whole thesis in one sentence. Most approval work isn’t judgment. It’s routing,” he said. The product now supports what he calls Level 3 (agent rules) and Level 4 (custom agents), and the Expensify MCP live this quarter lets third-party AI assistants like ChatGPT and Claude tap into expense data directly.
Expense approvals used to sit in my inbox for days, waiting for me to eyeball a $40 lunch receipt. That’s not judgment. That’s just routing. I set up an agent rule that clears anything in policy on its own. I got back hours a week I didn’t even know I was losing.
This is the clearest articulation yet of how Expensify plans to win a market that has largely ignored traditional expense tools. The company still guides that less than 1% of global businesses want the classic experience. New Expensify is designed to attack the other 99% via email, chat, and now agentic workflows. The migration from Classic has entered its “long tail,” with more than half of users now on New Expensify. CFO Ryan Schaffer noted, “We have crossed more people use New Expensify than Classic now. That’s a pretty major milestone that we hit this quarter.” The Classic customers remain a cash cow, but the future is clearly in the AI-native product.
The Financial Inflection: Free Cash Flow Raised
The headline number was the free cash flow guide. Management raised full-year 2026 free cash flow from $6–9 million to $12–14 million, citing better-than-expected cost discipline and the resolution of a class-action lawsuit. Q2 free cash flow was $6.4 million, up 162% quarter-over-quarter. The FCF trajectory is the clearest signal that the cost restructuring is working, even as revenue remains under pressure. Revenue was $33.9 million, down 6% year-over-year, but the mix is shifting: net new revenue from New Expensify (customers who never used Classic) grew more than 250% year-over-year to over $10 million in ARR. Ryan Schaffer explained the raise: “We are deploying our sales and marketing dollars that has started. We have some more coming later this year. Also, we are currently in a, I think, a place a lot of companies are where our AI spend is scaling, but we’re also now looking at it and trying to cut it back.” The company is using its own spend management software to optimize AI costs, a nice proof point for the product.
“Given that trajectory, we’re raising our full year 2026 free cash flow guidance from $6 million to $9 million up to $12 million to $14 million.” — Ryan Schaffer, Chief Financial Officer · 2026-08-06 That is a 55% midpoint raise, a meaningful vote of confidence from the finance team.
The Twin-Engine Strategy and the Intersection Point
CEO David Barrett and CFO Ryan Schaffer spent a good portion of the Q&A explaining the two-cohort model. Classic is the steady profit engine; New is the growth engine. Barrett likened the transition to his own first Tesla experience – the difference is jarring but ultimately better. He said, “If this company were exclusively New Expensify, we would all be high-fiving each other as the hottest startup in the space by far. And also we have this Classic product, which has been around forever, which is producing a tremendous amount of cash that we’ve used to fund and build this startup.” The key question is when the two lines cross. Ryan Schaffer painted the picture: “We have our large Classic cohort, which is slowly decreasing. And then we have the New Expensify cohort, which is small but growing rapidly. Eventually, those 2 lines intersect and then we’re just in a growth mode again.” That intersection was the goal management referenced in the prior quarter. “We’re at the tail end of that. We’ve been migrating users over. And I think we’re just extremely pleased with the reaction we’re getting.” — David Barrett, Founder and CEO · 2026-05-09 The prior quarter’s warning of monetization opportunities is now being actualized: the company is launching features like Consolidated Travel Billing and considering usage-based AI pricing. “It’s less than 50% of revenue. So we’re not over the 50% hump in terms of revenue yet, but that’s the huge priority right now is moving people over.” — Ryan Schaffer, Chief Financial Officer · 2025-11-07 That statement from November 2025 puts the current user milestone in context – users are ahead of revenue, but the line is moving.
Valuation and Market Signal
The market is starting to pay attention. Expensify shares have rallied 238% in the last 90 days (from April 10 to August 21, 2026) after a long, brutal drawdown. The full-history series shows a stock that is still down 94.6% from its November 2021 peak, but the recent tape is a sharp reversal. The valuation has re-rated from a near-death 0.5x revenue to still-compressed levels, reflecting cautious optimism. The stock’s move is notable because it is tied to a concrete fundamental inflection – FCF positivity and ARR growth from New Expensify – not just a thematic wave. The company’s own commentary is consistent: they are managing for long-term value creation over near-term growth. As David Barrett said, “We’re a long-term business. We’ve always said that. And I think we just feel very excited and have a lot of conviction in that long-term strategy.” The market is finally listening, and for the first time in years, the numbers support the narrative.
The Q2 report is a genuine inflection point. Revenue is still declining, but the company has crossed the critical user milestone on its AI platform, is generating free cash flow, and is returning capital via buybacks. The biggest risk remains the pace of migration and whether New Expensify can accelerate net-new customer acquisition before Classic churn eats into the base. But the direction is clear, and for the first time since the IPO, the story is not just about promise but about proof.