Q1 FY24 revenue less ancillary services was $110.2 million, a 24% increase year-over-year.
Adjusted gross profit for the quarter was $71.9 million, up 20% year-over-year.
Adjusted EBITDA for the quarter was $13.2 million, a $6.2 million increase year-over-year.
Business Growth and Strategy
Flywire exceeded 4,000 clients, nearly doubling since their IPO in 2021.
The company has clients in over 50 countries and processes payments in over 140 currencies.
Revenue diversification is strong, with no single client generating over 2% of FY23 revenue.
Flywire plans to increase investment in sales and relationship managers by over 15% across verticals and geographies in 2024.
Market Dynamics and Operational Highlights
Flywire has shown resilience in navigating changing student visa policies in key education markets.
The company nearly doubled higher education revenue in the UK in the quarter.
In Canada, Flywire’s education clients are seeing better-than-expected government study permit allocations.
Added over 200 new clients in Q1, with significant growth in the travel vertical.
Expects continued revenue momentum and adjusted EBITDA margin expansion in line with prior guidance.
Financial Performance and Guidance
Payment volumes during Q1 were $7 billion, a 23% increase year-over-year.
Full-year 2024 revenue less ancillary services is expected to be in the range of $478 million to $498 million.
Adjusted EBITDA for full-year 2024 is expected to be between $64 million and $75 million.
Q2 2024 revenue less ancillary services is expected to be between $96 million and $104 million.
Strategic Initiatives and Long-term Growth
Flywire’s strategic growth pillars include growing with existing clients, adding new clients, and expanding ecosystems through partnerships.
The company sees a low single-digit penetration in its target verticals and believes it is uniquely positioned to capture more market share.
Flywire is focused on driving internal and external transparency in executing its growth strategy.
Continues to evaluate strategic value-enhancing acquisitions as part of its growth algorithm.
Question and Answer
Comfort with Canadian Market Trends and Visibility
Question
How comfortable are you with the trends in the Canadian market, particularly regarding student visas and immigration controls, and what visibility do you have into the second-half recovery and recapture rates?
Answer
There is now considerably more clarity in the Canadian market, with schools having a better understanding of their permit allocations and the process for admitting students.
The actual results are expected to be less extreme and more manageable than initially feared, providing more comfort for moving forward.
The company’s guidance is based on a bottoms-up model, taking into account school-by-school perspectives and recapture assumptions for international students going to countries outside of Canada.
Impact of FX on Full-Year Guidance
Question
Can you provide more information on the impact of foreign exchange rates on the full-year revenue guidance and any considerations for presenting FX-neutral guidance in the future?
Answer
The full-year guidance is based on constant currency, with the main driver being foreign exchange fluctuations.
The company is exploring the possibility of presenting FX-neutral or constant currency growth rates in the future to provide a clearer view of the underlying business performance.
The company experienced a $1.2 million FX headwind in Q1 due to gradual strengthening of the dollar, and this headwind is expected to increase in subsequent quarters if current exchange rates persist.
Impact of Current FX Rates on Full-Year Guidance
Question
Given the recent movements in foreign exchange rates, what would be the incremental impact on the full-year revenue guidance if current FX rates were used instead of rates at the end of the first quarter?
Answer
Using current FX rates, the incremental impact on the full-year revenue guidance would be minimal, estimated to be less than $1 million and spread somewhat evenly across the quarters.
Total Addressable Market (TAM) Growth and Drivers
Question
Can you provide more details on the high single to low double-digit TAM growth expectations, including the contribution of pricing, tuition increases, and the growth in the number of international students across different geographies?
Answer
The company expects low to mid-single-digit growth in international student numbers over time, with factors such as tuition increases and average transaction size contributing to TAM expansion.
The company also sees a significant opportunity in the land-and-expand strategy within the education vertical, as well as a tailwind from increased adoption of automated payment solutions across various industries.
Components of Full-Year Guidance and Reacceleration
Question
Is the full-year guidance change solely attributed to FX and Canada, or are there other factors at play? Can you provide more details on the components of the reacceleration in the second half of the year, including the implied growth rates and the impact of the healthcare business?
Answer
The full-year guidance change is primarily driven by the impact of FX and the Canada market, but there are other puts and takes across the portfolio, with softness in the healthcare business also contributing to the reacceleration in the second half.
The reacceleration in the second half is expected to be driven by a mid-single-digit acceleration from the first half, with a significant portion attributed to Canada and the healthcare business recovering.
The healthcare business is expected to benefit from good go-lives of clients in the second half and a push from the first half due to delays in patient billing following a cyber incident involving Change Healthcare.
New Customer Additions and Business Performance
Question
Can you provide more information on the strength in new customer additions, including the distribution across segments and any additional color on the drivers of this performance?
Answer
The company saw strong new customer additions across various segments, with travel leading in terms of the most count but education also performing well.
Impact of Q1 Performance on Full-Year Guidance
Question
Can you clarify the reasons for the change in the full-year guidance for Canada, considering the less extreme impact of permit issuances than originally feared? Is the change primarily due to Q1 performance or are there other factors at play?
Answer
The change in the full-year guidance is primarily due to Q1 performance, with the company experiencing a slightly greater impact than initially expected.
The less extreme impact of permit issuances in Canada has provided more confidence in the market, but the expansion of the guidance range is a result of Q1 performance and the need to ramp back operations for the rest of the year.
Factors Contributing to Q2 Guidance Range
Question
What factors beyond FX and Canada are contributing to the wider range in the Q2 guidance compared to previous quarters, and what visibility do you have into the remaining two months of the quarter?
Answer
The wider range in the Q2 guidance is due to factors such as the rolling ramp in Canada and the need to capture a range of potential scenarios.
The company is monitoring various trends in the business but acknowledges that there is still more time in the quarter to observe performance.
The guidance range also accounts for the potential of a snapback in Canada, which has not been observed, and aims to provide a comprehensive view of potential outcomes.
Modeling and Recapture Assumptions
Question
How was the mid-single-digit recapture assumption for international students in countries outside of Canada determined, and are there any areas outside of Canada where similar situations are developing? How confident are you in the expectation of international student numbers increasing over the medium to long term?
Answer
The mid-single-digit recapture assumption is based on the company’s experience and conversations with agents and partners about how they are planning to assist students in finding alternative study destinations.
The company feels confident in this assumption and believes it is well-captured within the range of guidance for the year.
While there are headlines about potential regulatory changes in other markets, the company has seen strength and confidence in various areas, such as the U.K., Australia, the U.S., and China.
