Executive Summary / Key Takeaways

• Flywire is a differentiated payments enablement and software company leveraging a unique combination of vertical-specific software, a proprietary global payment network, and a next-gen payments platform to address complex payment workflows in Education, Travel, Healthcare, and B2B.
• Despite facing significant macroeconomic and regulatory headwinds, particularly impacting its Education vertical in Canada and Australia, Flywire demonstrated resilience with Q1 2025 revenue less ancillary services growth of 16.8% FX-neutral and strong Adjusted EBITDA performance, reflecting operational efficiency and cost discipline.
• Strategic acquisitions like Sertifi (Travel) and Invoiced (B2B) are accelerating expansion into new sub-segments and adding critical software capabilities, positioning Flywire for future growth and enhanced Net Revenue Retention (NRR) opportunities by monetizing additional payment volumes and enabling cross-selling.
• The company is actively investing in technology, including AI and automation, to improve operational efficiency, enhance the platform, and deepen its competitive moat, while an ongoing operational and portfolio review aims to streamline the business and optimize capital allocation.
• Flywire maintains a strong balance sheet and is committed to disciplined capital allocation, including organic investment, strategic M&A, and opportunistic share repurchases, signaling confidence in its long-term value creation potential despite near-term market uncertainties reflected in its FY 2025 guidance (10-14% FX-neutral growth ex-Sertifi, 17-23% incl. Sertifi, with 100-300 bps Adjusted EBITDA margin expansion).

Powering Vertical Ecosystems: Flywire's Differentiated Approach

Flywire Corporation's journey began in 2009 as peerTransfer, initially focused on simplifying cross-border payments for international students. Over more than a decade, the company meticulously built a proprietary global payment network, a foundational asset that distinguishes it in the crowded payments landscape. This network, combined with a next-generation payments platform and deep vertical-specific software expertise, forms the "Flywire Advantage" – a core differentiator enabling the company to address the complex payment workflows unique to industries like Education, Healthcare, Travel, and B2B.

Unlike horizontal payment processors or legacy systems, Flywire's approach is deeply embedded within its clients' operations, automating accounts receivable functions and providing tailored invoicing, flexible payment options, and a highly personalized customer experience. This integration is not merely transactional; it leverages software to solve specific operational pain points for clients, such as automating reconciliation, managing payment plans, and streamlining collections. This software-driven layer is critical to Flywire's value proposition and helps it stand out from competitors like PayPal (PYPL) or Block (SQ), which offer broader, less specialized payment solutions. While large players like Fiserv (FI) and Adyen (ADYEY) compete in global payments, Flywire's strength lies in its vertical focus and the ability to handle complex, high-value transactions with specific compliance and workflow requirements.

Flywire's technological differentiation provides tangible benefits. Its proprietary global payment network supports diverse payment methods in over 140 currencies across more than 240 countries and territories, enabling efficient cross-border transactions. The in-house currency hedging algorithms, in use since 2014, help mitigate foreign exchange volatility. The vertical-specific software integrates seamlessly with client ERP systems (like Ellucian, Epic, Rezdy, Oracle EBS), automating data synchronization and reducing manual effort. For instance, in Education, this integration can lead to faster reconciliation and improved operational efficiency compared to generic payment tools. In Healthcare, the ability to integrate financing, engagement, and payments into a single offering differentiates Flywire from competitors who may specialize in only one area. The company is also investing in AI and automation to streamline processes like onboarding, support, and KYC, aiming to drive further operational efficiencies.

The competitive landscape is intense, with rivals ranging from traditional banks and payment processors to fintechs and specialized software providers. While larger competitors like PYPL and FI boast greater scale and broader market share, Flywire's vertical specialization allows it to command higher gross margins (TTM Gross Profit Margin of 55.80% as of Q1 2025, compared to PYPL's 46% and FI's 61% in their latest reported annual periods, though direct TTM comparisons are challenging across all competitors). This margin profile reflects the value derived from its software and network, which often enables a more efficient and compliant payment experience for clients and their customers. However, Flywire's smaller scale relative to giants like PYPL and FI can lead to higher customer acquisition costs in certain segments. The company strategically addresses this by focusing on high-LTV clients within its target verticals and leveraging channel partnerships (like with Bank of America (BAC) or Fiserv) to expand its reach.

Performance Amidst External Pressures

Flywire's recent financial performance reflects a business executing its strategy while contending with significant external challenges. For the first quarter of 2025, the company reported revenue of $133.5 million, a 17.0% increase compared to $114.1 million in Q1 2024. Revenue less ancillary services, a key non-GAAP metric, grew 16.8% year-over-year (18.6% FX-neutral) to $128.7 million. This growth was primarily fueled by a 28% increase in transaction payment volumes, driven by both existing and new clients, particularly in Education (excluding Canada) and Travel. Platform and other revenues also saw a substantial 32.3% increase to $25.0 million, boosted by contributions from recent acquisitions, Sertifi and Invoiced, and growth in healthcare platform products.

Despite the top-line growth, Flywire reported a GAAP net loss of $4.2 million in Q1 2025, an improvement from a $6.2 million net loss in Q1 2024. This loss was impacted by $7.3 million in restructuring charges and $2.5 million in acquisition-related expenses. Adjusted EBITDA, a key profitability metric for the company, grew to $21.6 million in Q1 2025, up significantly from $13.2 million in Q1 2024, demonstrating meaningful operating leverage. Adjusted EBITDA margin expanded to 16.2% (16.8% using revenue less ancillary services), reflecting disciplined expense management.

The increase in payment processing services costs (up 21.3% to $50.6 million) was correlated with the higher transaction volume. Technology and development expenses saw a modest 1.2% increase to $16.9 million, reflecting continued investment in the platform and personnel, partially offset by software tool optimization. Selling and marketing expenses rose 21.6% to $36.6 million, driven by personnel, stock-based compensation, professional fees (commissions), and amortization of acquired intangibles from recent deals. General and administrative expenses increased 4.7% to $33.1 million, primarily due to acquisition costs and changes in contingent consideration fair value, partially offset by lower bonus expense.

Liquidity remains robust, with $190.5 million in cash and cash equivalents and $64.8 million in short-term investments as of March 31, 2025. The company also has access to a $125 million revolving credit facility, with $60 million drawn for the Sertifi acquisition, leaving $65 million available. Net cash used in operating activities was $78.9 million in Q1 2025, primarily due to changes in operating assets and liabilities timing. Net cash used in investing activities was $237.9 million, driven by the Sertifi acquisition and investment purchases. Net cash provided by financing activities was $11.6 million, reflecting credit facility activity and share repurchases ($48.4 million in Q1 2025). Approximately $57 million remains available under the $150 million share repurchase program announced in August 2024. Management believes existing liquidity is sufficient for at least the next 12 months, supporting operations, potential future M&A, and buybacks.

Strategic Responses and Outlook

Flywire's strategic initiatives are directly aimed at mitigating external pressures and capitalizing on growth opportunities. The company is actively addressing the significant headwinds in its Education vertical stemming from government policy changes. Canada's international student permit caps and the elimination of the SDS fast-track program have reduced payment flows, adversely impacting Q1 2025 results and expected to continue impacting revenue in 2025. Similarly, Australia's tightening visa rules are anticipated to impact revenues. In the U.S., shifting visa trends are leading to cautious growth assumptions.

In response, Flywire is leveraging its diversified global footprint. While traditional markets face challenges, management notes emerging growth in international education in countries like Germany, France, Japan, and Singapore, where Flywire is making strategic investments in local payment capabilities and sales efforts. The company is also deepening its agent and banking network to capture a greater share of student flows regardless of destination. Product expansion, such as the global rollout of the StudyLink agent platform and increased adoption of the Student Financial Software (SFS) suite in markets like the U.K. and U.S., is crucial for driving growth within existing clients and winning new ones, particularly by capturing domestic payment volumes and offering solutions like payment plans and collections management.

The Travel and B2B verticals represent key diversification engines. Travel became the second-largest vertical in 2024, growing organically over 50% in the first half of the year. The Sertifi acquisition is expected to be transformative, adding hospitality-specific software integrations and unlocking billions in potential monetizable payment volume across over 20,000 hotel locations globally. This acquisition provides significant geographic reach and product depth, positioning Flywire for substantial growth in the travel sector. The B2B vertical, the fastest-growing segment, is seeing momentum driven by the Invoiced acquisition, which adds accounts receivable automation software to Flywire's payment capabilities, creating a differentiated invoice-to-cash solution. Healthcare is also expected to return to higher single-digit growth in FY 2025, bolstered by a landmark eight-figure client win and robust EHR integrations.

An ongoing operational and portfolio review is focused on driving productivity and optimizing investments. This includes streamlining organizational structure, investing in procurement and vendor management for cost optimization, refining pricing strategies, and enhancing digital transformation efforts leveraging data and AI. The restructuring announced in February 2025, expected to incur $7.3 million to $9.0 million in charges, is part of this effort to improve operational efficiencies and align resources with strategic priorities.

For the full year 2025, Flywire is maintaining its guidance for FX-neutral revenue less ancillary services growth in the range of 10% to 14% excluding Sertifi, and 17% to 23% including Sertifi (with Sertifi revenue expected between $35 million and $40 million). This guidance incorporates cautious assumptions for U.S. Education (low single-digit growth) and significant year-over-year declines for Canada and Australia Education (down in the high 20%). Healthcare is expected to grow in the high single-digits, with other parts of the business growing above the average. The company expects a negative 1% FX impact on full-year revenue. Adjusted EBITDA margin expansion is targeted at 100 to 300 basis points for the full year, reflecting continued operating leverage and cost discipline, even with planned reinvestment of restructuring savings into high-priority areas like product and AI. For Q2 2025, FX-neutral revenue growth (ex-Sertifi) is guided at 7% to 11%, with 17% to 23% growth including Sertifi ($10 million to $12 million revenue contribution), and Adjusted EBITDA margin improvement of 150 to 350 basis points.

Risks and Challenges

Despite its differentiated model and strategic initiatives, Flywire faces notable risks. The most immediate are the regulatory and macroeconomic headwinds impacting international student mobility, particularly the unpredictable nature and duration of visa policy restrictions in key markets like Canada, Australia, and the U.S. Geopolitical instability, including ongoing conflicts and trade tensions, could further dampen cross-border activity across all verticals. Fluctuations in foreign currency exchange rates can also impact reported results, although the company uses hedging strategies.

Competition remains intense across all verticals, with larger, more resourced players and agile fintechs vying for market share. Flywire's reliance on its network of global banking and payment partners exposes it to risks related to their stability, regulatory compliance, and potential changes in terms or services, which could impact operations and liquidity. Operational risks include the ability to scale infrastructure and support effectively with growth, potential errors in processing large transaction volumes, and cybersecurity threats, which could damage reputation and lead to financial losses or regulatory scrutiny. The integration of acquired businesses like Sertifi and Invoiced also carries execution risk, including the ability to realize expected synergies and successfully integrate technology platforms and teams. While the operational and portfolio review aims to enhance efficiency, it also involves potential disruption and execution risk.

Conclusion

Flywire's Q1 2025 results underscore the resilience of its differentiated software and payments model amidst a challenging external environment. The company's core investment thesis rests on its ability to leverage its proprietary global payment network and vertical-specific software to address complex payment workflows more effectively than horizontal competitors or legacy systems. This unique positioning drives strong client retention, opportunities for expansion within existing accounts, and attractive gross margins.

While significant headwinds in the Education vertical, particularly due to visa policy changes in Canada and Australia, are expected to pressure revenue growth in 2025, Flywire is strategically responding by diversifying its business through rapid growth in Travel and B2B, supported by value-enhancing acquisitions like Sertifi and Invoiced. Continued investment in technology, operational efficiency initiatives, and a disciplined approach to capital allocation position the company to emerge stronger from the current macro cycle. Investors should monitor the trajectory of international student mobility policies, the successful integration and monetization of recent acquisitions, and the company's ability to sustain operating leverage and achieve its profitability targets as key indicators of its long-term value creation potential.