Business Overview and History

Flywire Corporation (NASDAQ:FLYW) is a global payments enablement and software company that has carved out a unique niche in the financial technology (fintech) landscape. Founded in 2009 as peerTransfer Corporation, the company rebranded to Flywire in 2016 and has since established itself as a leading provider of cross-border and domestic payment solutions for various industries, including education, healthcare, travel, and business-to-business (B2B).

Flywire's journey began over a decade ago when the founders recognized the challenges associated with international tuition payments. The company's initial focus was on developing innovative solutions to streamline the process for educational institutions and their students. Over the years, Flywire has expanded its reach and capabilities, leveraging its expertise in complex payments to serve clients across multiple verticals.

Since its inception, Flywire has invested significant resources to build a global network of bank, payment, and technology partners, enabling end-to-end connectivity between its clients and their customers in over 240 countries and territories. The company has engineered its software-driven payments technology stack to meet enterprise-level standards and functionality while delivering simplicity, convenience, and ease of use for its clients and their customers.

Flywire has faced various challenges throughout its history, including the need to continuously improve and upgrade its solutions to keep pace with technological and regulatory changes, as well as intense competition in the payments and software industries. Despite these challenges, the company has experienced significant growth, serving approximately 4,500 clients around the world as of December 2024, up from its initial client base.

In recent years, Flywire has pursued a strategy of strategic acquisitions to expand its capabilities and reach. In 2022, the company acquired Cohort Go, an Australian-based education payments provider, to accelerate the growth of its agent-related revenue and contribute to its global expansion. In 2023, Flywire acquired StudyLink, an Australian-based SaaS education company, to accelerate its growth in the Australian higher education market and enhance its value proposition to payers, universities, and agents in the higher education ecosystem. Most recently, in 2024, Flywire acquired Invoiced, a U.S.-based SaaS B2B company, to accelerate its global expansion in the B2B vertical.

One of Flywire's key strengths is its proprietary global payment network, which encompasses partnerships with global, regional, and local banks, as well as technology and payment providers. This extensive network allows the company to offer clients a diverse range of payment methods, currencies, and settlement options, catering to their specific needs. Additionally, Flywire's vertical-specific software solutions, backed by deep industry expertise, have enabled it to tailor its offerings to the unique requirements of each sector it serves.

Financial Performance and Ratios

Flywire has experienced impressive growth in recent years, with revenue increasing from $289.4 million in 2022 to $403.1 million in 2023, representing a year-over-year growth of 39.3%. This trend continued in 2024, with revenue reaching $492.1 million, a 22.1% increase compared to the prior year.

The company's gross profit margin has remained strong, hovering around 60-62% in the past three years. However, Flywire's net income performance has been more volatile, with a net loss of $39.3 million in 2022, a net loss of $8.6 million in 2023, and a net income of $2.9 million in 2024.

In the most recent quarter (Q4 2024), Flywire reported revenue of $117.55 million, representing a year-over-year growth of 17.0%. However, the company experienced a net loss of $15.9 million in Q4 2024, primarily due to a one-time non-cash foreign exchange loss of $14 million on intercompany loans.

Liquidity

Flywire's liquidity position appears robust, with a current ratio of 2.63 and a quick ratio of 2.63 as of December 31, 2024. The company's cash and cash equivalents, including short-term investments, amounted to $611.1 million at the end of 2024, providing ample resources to fund its operations and growth initiatives. Specifically, Flywire reported cash and cash equivalents of $495.24 million as of December 31, 2024.

The company's debt-to-equity ratio stood at 0.0021 as of December 31, 2024, indicating a low level of leverage. Additionally, Flywire has access to a $125 million credit line under its 2024 Revolving Credit Facility, further enhancing its financial flexibility.

Operational Highlights and Challenges

Flywire's growth in recent years has been driven by its successful expansion into new verticals, such as healthcare and B2B payments, in addition to its core education segment. The company's travel vertical has also emerged as a significant contributor, accounting for 13% of total revenue in 2024, up from 7% two years ago.

Flywire's business is organized into two primary segments: Transaction Revenue and Platform and Other Revenues. The Transaction Revenue segment, which is the company's core business, accounted for 83.4% of total revenue in 2024. This segment generates fees from payment processing services provided to Flywire's clients, which include educational institutions, healthcare entities, and other commercial enterprises. Transaction revenue increased 24.4% year-over-year to $410.2 million in 2024.

The Platform and Other Revenues segment accounted for 16.6% of Flywire's total revenue in 2024. This segment includes fees earned from software subscription and usage-based services, payment plan establishment fees, printing and mailing services, and commissions from insurance providers. Platform and other revenues grew 11.6% year-over-year to $81.9 million in 2024, benefiting from the acquisitions of Invoiced and StudyLink, which expanded Flywire's software capabilities.

However, Flywire has faced some headwinds in its education segment, particularly in its key markets of Canada and Australia. Changes in student visa policies in these countries have led to a decline in international student enrollment, which has impacted Flywire's revenue growth. The company has also experienced slower growth in its U.S. education market due to similar visa-related trends.

To address these challenges, Flywire has implemented a restructuring plan that includes a 10% reduction in its workforce. The company is also undertaking a comprehensive operational and portfolio review to optimize its resources, streamline costs, and realign its strategic priorities.

Despite these near-term hurdles, Flywire remains focused on driving innovation, expanding its global footprint, and capitalizing on opportunities in its core verticals. The company's recent acquisition of Sertifi, a provider of hospitality-specific payments and software solutions, is expected to strengthen its presence in the travel industry and unlock new revenue streams.

Guidance and Outlook

For the first quarter of 2025, Flywire expects revenue growth of 11-14% on a constant-currency basis, excluding the impact of the Sertifi acquisition. The company anticipates an FX headwind of approximately 250 basis points in Q1. Sertifi is expected to add approximately $3-4 million of revenue and have flat to slightly positive EBITDA in Q1 2025. Flywire also anticipates adjusted EBITDA margin expansion of 300-600 basis points year-over-year in the first quarter.

Looking ahead to the full year 2025, Flywire is guiding for 10-14% FX-neutral revenue growth, excluding the contribution from Sertifi. The company expects approximately 3 percentage points of FX headwind throughout the year. Flywire anticipates the Sertifi acquisition to contribute approximately $35-40 million in revenue for the year. The company aims to achieve 200-400 basis points of adjusted EBITDA margin expansion in 2025, excluding the impact of Sertifi. It's worth noting that while Sertifi is expected to have a positive EBITDA dollar impact, it will likely have a lower EBITDA margin compared to Flywire's overall company adjusted EBITDA margin.

Flywire faces significant challenges in its Education business, especially in Canada and Australia, where the company expects revenue to be down over 30% year-over-year. To address these headwinds, Flywire is taking steps to optimize its business, including the aforementioned restructuring and a comprehensive business portfolio review.

Conclusion

Flywire's journey in the fintech space has been marked by both impressive growth and navigating complex industry headwinds. The company's unique positioning in cross-border and domestic payments, coupled with its vertical-specific software solutions, has allowed it to establish a strong foothold in its target markets.

While the challenges in Flywire's education segment have impacted its recent financial performance, the company's diversification efforts, strategic acquisitions, and operational optimization initiatives suggest a path forward. Flywire's ability to surpass its 2023 new client adds by signing over 800 new clients in 2024 demonstrates the continued demand for its services.

As Flywire continues to innovate, expand its global reach, and capitalize on emerging opportunities, investors will closely watch the company's ability to deliver sustainable growth and profitability in the years ahead. The company's focus on driving productivity, product innovation, and building a high-performance culture will be crucial in navigating the challenges and seizing the opportunities in the rapidly growing global payments enablement and software industry.