Flywire Corporation (NASDAQ:FLYW): Powering Payments Across Key Verticals with Resilient Growth

Published on September 24, 2024 | Ticker: FLYW

Flywire Corporation (NASDAQ:FLYW) is a global payments enablement and software company that is delivering impressive results amidst a dynamic macroeconomic environment. The company's unique combination of a proprietary global payments network, next-gen payments platform, and vertical-specific software has enabled it to become a trusted partner for over 4,000 clients worldwide.

In the fiscal year 2023, Flywire generated revenue of $403.1 million and incurred a net loss of $8.6 million. Despite the net loss, the company's operating cash flow reached $80.6 million, and free cash flow was $74.6 million, showcasing its ability to generate substantial cash flow.

For the first quarter of 2024, Flywire reported strong financial performance. Revenue Less Ancillary Services, a key metric for the company, grew 24% year-over-year to $110.2 million. Adjusted gross profit increased 20% to $71.9 million, with an adjusted gross margin of 65.2%. Adjusted EBITDA for the quarter was $13.2 million, nearly double the $7.0 million generated in the same period last year.

Flywire's success is underpinned by its diversified business model, with no single client accounting for more than 2% of fiscal year 2023 Revenue Less Ancillary Services, and the top 10 clients representing less than 13% of this metric. The company's global footprint, with the ability to process payments in over 140 currencies across more than 240 countries and territories, provides significant geographic diversification.

Business Overview

Flywire's core offering combines its proprietary global payments network, next-gen payments platform, and vertical-specific software to deliver tailored solutions for its clients across the education, healthcare, travel, and B2B industries. The company's deep industry expertise and integration with leading ERP systems allow it to seamlessly embed its solutions within the existing workflows of its clients, optimizing the payment experience for their customers while eliminating operational challenges.

In the education vertical, which represents a significant portion of Flywire's business, the company serves over 2,850 institutions globally. The company's solutions enable international students to make tuition payments in their local currency, while also providing clients with tools to streamline accounts receivable and enhance the overall payment experience.

Flywire's healthcare vertical serves over 90 healthcare systems, including four of the top 10 healthcare systems in the United States. The company's platform helps healthcare providers improve their revenue lifecycle management, increase patient engagement, and enhance the overall payment experience.

The travel vertical, which has seen a strong recovery in the post-pandemic environment, is another area of focus for Flywire. The company's solutions cater to the unique payment needs of the travel industry, enabling clients to offer a seamless and localized payment experience to their customers.

Flywire's B2B vertical, while still relatively new, has been gaining traction, with the company signing a growing number of manufacturing and distribution clients that require sophisticated and integrated accounts receivable solutions.

Navigating Macroeconomic Challenges

Flywire has demonstrated its ability to navigate the evolving macroeconomic landscape, including the impact of changes in international student visa policies in certain markets. In the first quarter of 2024, the company's education business in Canada was impacted by a mid-to-high single-digit million-dollar revenue headwind due to changes in student visa policies. However, Flywire's diversified business model and global footprint have allowed it to offset these challenges.

For example, the company's education business in the United Kingdom outperformed, growing well above the company average, driven by both new client wins and strong net revenue retention. Similarly, the company's education business in Australia saw strong growth during the quarter.

Looking ahead, Flywire expects the impact from the changes in Canadian student visa policies to result in a mid-teens million-dollar revenue headwind for the full year 2024. However, the company also anticipates a mid-single-digit million-dollar revenue contribution from the recapture of international students in other markets, partially offsetting the impact.

Guidance and Outlook

For the full year 2024, Flywire expects Revenue Less Ancillary Services to be in the range of $478 million to $498 million, representing a year-over-year growth rate of 28% at the midpoint. This guidance reflects the impact of foreign exchange rate changes, which the company estimates to be an $8 million reduction at the midpoint compared to its previous projections.

Flywire also expects to deliver full-year 2024 adjusted EBITDA in the range of $64 million to $75 million, in line with its prior guidance and representing approximately 320 basis points of adjusted EBITDA margin improvement.

For the second quarter of 2024, the company expects Revenue Less Ancillary Services to be in the range of $96 million to $104 million, with adjusted EBITDA expected to be between $1 million and $4 million, reflecting the typical seasonality of the business.

Liquidity and Financial Position

As of March 31, 2024, Flywire had $619 million in cash and cash equivalents and no long-term debt, providing ample liquidity to support its growth initiatives and strategic priorities. The company's strong cash flow generation, with $80.6 million in operating cash flow and $74.6 million in free cash flow in fiscal year 2023, further strengthens its financial position.

Flywire's balance sheet and liquidity profile, combined with its diversified business model and resilient growth, position the company well to navigate the evolving macroeconomic landscape and continue executing on its strategic objectives.

Conclusion

Flywire's first-quarter 2024 results demonstrate the strength and resilience of its business model, as the company navigates macroeconomic challenges while delivering strong financial performance. The company's diversified client base, global footprint, and innovative solutions across key verticals have been instrumental in driving its success.

Looking ahead, Flywire's guidance for fiscal year 2024 reflects its confidence in the long-term growth potential of its business, despite the near-term headwinds in certain markets. The company's strong liquidity position and cash flow generation further underscore its ability to invest in strategic initiatives and capitalize on the significant opportunities within its target industries.

As Flywire continues to execute on its growth strategy, investors can expect the company to leverage its unique Flywire Advantage to drive sustainable long-term value creation.

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