Guys, thank you again. If everyone could take their seats, we're gonna kick it off with Flywire. So guys, Flywire is a company that we focused a lot on over the last few years and really enjoyed actually participating in their IPO. In fact, I said this once before, I think with Rob last year, but you know, when we did our series of IPOs in, I think it was 2021, was it, or?
May 26th.
We did a ton of due diligence and customer diligence calls across the space. I would easily say this was the best set of customer diligence calls I did across any of our IPOs. Your customers love you, which is obviously a testament to the service you provide, and I even remember universities telling me they wish they could invest in Flywire themselves. Maybe they could, but either way, it was really what got us excited, is hearing the feedback. So with that said, obviously, we're happy to have you here, and thanks-
Thanks, Brian.
Thanks for joining us, Mike.
Thanks for having me. It's been a great couple of days.
Look, it's... I was just saying to Mike a second ago, I mean, there's not that many, you know, small- cap, mid-cap growth stocks that, you know, you really feel confidence is showing the margin expansion at the same time as having structural sustainability, right? So maybe we start there. I mean, you guys reported fourth quarter that beat expectations. You had a guide that was really, I think, what investors were hoping for with that 30% growth profile, right?
Yep.
Maybe before we dig into the crux of the conversation, let's just start with earnings. What were some of the key takeaways in your mind coming out of the quarter that, you know, you really want to make sure investors realized?
Yeah, I mean, I think the quarter capped off a pretty great year. I mean, 43% growth in 2023. You know, 550 basis points EBITDA margin expansion for the year. You know, 700 new clients added. We have a growth algorithm that really starts with a number, NRR, net revenue retention, which is pretty much, think of it as retaining of clients. Layer on top of that, the additional revenue growth we're seeing at existing accounts, and on top of that, you've got full year effect of clients that launched in the prior year, and then you have new client adds in a given year, all layering on top of that NRR. And so that's what gives us confidence in the growth algorithm.
The number was 125 last year, which was up a bit. That's 6 years now, effectively, of reporting that number. We give a 3-year average at IPO, plus roughly 3 years since going public. So people have seen that number for 6 years now, being that kind of mid-120s. And it also is driven by a lot of factors. There's not one thing driving our NRR. So anyway, feel really good, you know, where we are with the team. We've got 4 industries, education, healthcare, travel, and B2B, and we also noted the travel and B2B, which at the time of IPO, were emerging verticals for us-
Yeah
...really have accelerated their growth and are quite meaningful now for us.
Yeah.
So.
The mix has actually changed-
Yeah
... quite a bit-
Quite a bit.
... from the IPO till now in only a few years, right?
Yep, completely.
All right. Well, before we get into that, you know, you also obviously had a big move from a management standpoint, right?
Right.
So you hired Cosmin as the CFO, previously at PayPal, and, you know, I've heard really good things, obviously, as I was just telling you a second ago, from colleagues of mine at PayPal. But love to hear the thought process-
Yeah
... between, you know, behind why, A, why him?
Yep.
B, a little more on, you know, why this is the right time for that.
Yeah, for sure. So we announced the CFO search. We've had an amazing CFO, Mike Ellis, who's been with us, sub $5 million of revenue all the way 9 years, all the way through IPO. And you know, what we were looking for when we set out to find a new CFO is someone who had seen that next level of scale, right? The company's 1,200 people. You know, we think we have a clear path to $1 billion+ in revenue, in the foreseeable future, kind of our next kind of major milestone we look out for, and we wanted someone that had seen that next level of growth and scale. We also wanted someone that had balanced growth and cost savings. You know, we think that fits our persona.
The numbers we've kind of put up is: how do we efficiently scale this business while also delivering great growth? And so, you know, did quite an elaborate search and ended up finding Cosmin, who has had 20 years of PayPal, has done everything from investor relations to ops, to pricing, to leading a 400-person finance function over there. And I think really puts us in a great position to just take the next step as a company. So started last week, excited to have him. You'll see him at these events soon. And just a pleasure to work with so far.
Yeah. Let's go to customer adds. I mean, again, you've had now two quarters in a row between 170 and 180 new customers added. Just remind us, the base is total of what again?
Yeah, 3,800 total now, with the 700 added last year.
Yeah. So, I mean, that's an extremely impressive add per quarter on that base.
Yep.
We're not talking about small businesses. I mean, these are many of these, some of them could be travel-centric, but some of them are pretty, pretty sizable, even universities, right?
Yep.
What do you think is really driving that? Where are you seeing the most attraction to your assets and your offerings?
Yeah, you know, we've, since IPO, have talked about the areas in which we're gonna invest as a company. Go-to-market is one of the top, top areas of investment, product and tech innovation, and our payment network innovation is the second. And so our go-to-market investments have been pretty consistent. You know, we kind of spiked a bit in 2022, of saying like: Hey, we're making a big push coming out of COVID to really make up for some of the investments where everybody was being a little more cautious in the pandemic. And I think you're really seeing the results of that continued investment in go-to-market, not only in the dollars put in, but also just in the efficiency gains. We mentioned a 15% increase in ramp time for our reps.
There's a whole series of just the, the engine that we have behind it, filling top of funnel, seeing more efficiency, going after more geographies with a broader team, more industries, more subsegments, and that's all leading to client adds. You haven't seen one vertical dominating it either. Like, you've had travel, kind of have some great quarters, but education actually beat out travel last, last quarter in the number of net new client adds, which is great.
I was just gonna ask you that, yeah.
you know, customer size is roughly consistent in that pipeline adds. I mean, Flywire generally has clients driving somewhere between five-figure, six-figure, seven-figure ARRs on an annualized basis, and that's the demographic of customers we're bringing on. So no big shift in the size of customer either.
Yeah, and you, like you just said, education was actually higher than-
Yeah
I think, travel, which had been the leading-
Completely
vertical in terms of adding customers, right?
Yep.
It's still pretty broad-based, you know?
Completely.
Um-
Geographically broad, too. I mean, we have clients in 40+ countries, so for a company our size and scale, we've already gone after the global total addressable market and proven our ability to add clients all around the world, which gives us a ton of confidence, too.
That's, that's customer adds. Just remind us again, your go-to-market approach for customer adds, maybe it's different by vertical, but-
Yeah. You know, relatively consistent. We organize our teams with GM vertical heads, and those GMs pretty much own and control sales and client service for their vertical. They're typically 10- or 20-year veterans of the industries that they're serving. And then they have heavy partnership with marketing for obviously spend for top of funnel and product and tech for direction of the product and tech platform that's specific to their vertical. I would say the vast majority of our client adds are direct. We have a bit of a sell with kind of partnership ecosystem. One example is Bank of America, where we have a referral model with Bank of America for their businesses that have global invoicing challenges. Another good example is, you know, more of a tech partner.
So, like, you'll find us having done tech partnerships with folks like Ellucian or Oracle within the industries that we serve, and that also helps bring top of funnel, but vast majority of our acquisition is direct.
Yeah. Speaking of direct, I remember even you, you told me you were traveling with your family, I think, right?
Iceland, yeah.
You convinced one of the travel providers-
Yeah. Yeah, I convinced a seven-figure travel client to come on over to us, and, I never-
So your family loved waiting for you while you were convincing this one?
Yeah. Yeah. I used the pictures from the trip to try to sell-
That's right
... my experience, but didn't take commission. Didn't take commission.
That's great.
I remind the team all the time.
I mean, listen, customer adds has been strong, and it sounds like you see visibility of that continuing, right?
Yeah.
NRR has obviously been also... You mentioned it before.
Mm-hmm.
I mean, 125, 126%, right? Maybe just touch first high level of what's driving all of that strength-
Yeah
... in terms of year-over-year on a same-store sales basis.
Yeah, for sure. So, most companies, when they look at NRR, they're kind of looking at, "Hey, what customer percentage did we retain?" And maybe it's a decent amount. For Flywire, it's, you know, high 90 percentile retention rate, right? So you're starting at a pretty great historic average of what you're able to retain as customers. That obviously helps. And then there's multiple factors for driving NRR with us. Most companies have kind of like product upsell or price, and that's pretty much it. Flywire has proven multiple ways to drive NRR. So give you some tangible examples. You could be at a medical hospital, for instance, and you could be helping them with the patient payments related to oncology.
Well, they may have an ambulatory service, and they may be saying: Okay, like, go deploy the same product you deployed over here, go deploy it over there. So it's a new use case, same product. That's often an expansion opportunity. You then have geographic expansion. So, you know, in our travel business, we do Hilton Grand Vacations, their global invoicing. We actually started with just the European and U.K. properties, and that project was so successful, combined, us and them, won an industry award for it in the efficiency, and then we got a rest of world deal for Hilton Grand Vacations. We got the other properties. And so there's another thing adding to NRR, which is a geographic expansion into a new region or new area for a client.
You could get a university where you did the undergrad tuition, but you didn't get the grad school, or you didn't get the law school, the medical program. And so, again, you can see kind of these departmental, geographic, functional expansion opportunities. You then have new products, right? You layer in a new product. You take someone who's using us for cross-border payments, like Stanford was for education, and you layer in domestic payments. And so Flywire is the way to pay for all tuition at Stanford, UVA, Texas A&M, as examples. So adding more product capabilities, again, has an opportunity to drive NRR. Even the payment network that we have, which is our own way to move the money all around the world, that actually can lead to NRR.
So, like at IPO, three years ago, we didn't have a bank transfer option in Vietnam. And you may sit there and say: "Well, like Vietnam, how many payments come from Vietnam?" If you look across education, healthcare, and business and travel, like, you end up having something like that benefit all those different sectors and industries.
Right.
That can be a multimillion-dollar revenue stream by getting a new bank account in Vietnam that you're helping to process bank transfers in and out of that country. Again, that's layering on top of NRR, right? Because those clients who had those payments, we weren't monetizing that as well as we could have, and now we have a new payment method in that country. Those are just Flywire's drivers to NRR. Those don't talk about industry trends. They don't talk about tuition rates usually go up.
Mm-hmm.
They don't go down much. If you have kids, you know that. And so you'll see those industry trends too, that as our clients' business grows, as the transaction sizes grow, Flywire also benefits in NRR.
I mean, this may be putting you on the spot a little bit. If you could sort of rank order the land and expand or the NRR drivers-
Yeah
... I'd be curious to hear what are the top couple, because you mentioned a lot right there.
Yeah, there's a lot there. You know, I would say, so for us, the first seven years of our company in education, we were mostly focused on cross-border payments. And so by far, one of the biggest drivers for us is our ability to take the U.S. education market and upsell all the tuition payments, upsell domestic and cross-border together at what is over 1,000 universities in the United States. So that opportunity is significant for us to be able to drive. We actually put out a stat that over 3x... If we never signed another client, we could 3x our revenue as a business if we could just get all clients to deploy us and use all our capabilities.
Wow!
That's a huge indicator as to how much potential is there in continuing to drive it.
Sure. Why don't we go into the verticals for a moment?
Mm-hmm.
I mean, education obviously is one that we just talked about when I mentioned all the customer diligence calls I did. But, you know, considering how big of a deal that is and the growth still being very strong even after a few years of strength-
Sure.
I think it'd just be helpful to maybe start off with what's underpinning your ability to drive market share there. What is super differentiated about it? 'Cause we've heard, you know, there's been some reports saying there's more competition. Just touch on that for a little bit.
Sure.
The differentiation for us would be a good place to start.
Yeah, so, you know, Flywire obviously started in education in the cross-border sector.
Just, if you don't mind, maybe for the audience, give everybody a, like, a little bit of an understanding or example of what is a good example of what you do for the-
Yeah.
International students.
So, you know, a client like an NYU, obviously in town.
Yeah
... one of the largest schools in the United States for international students. You know, they probably have over 13,000 international students studying at NYU in any given year. And prior to Flywire, they were pretty much putting their bank account number and routing number on invoices that went out to international families and saying, "Good luck, wire us money." And the bills would go out, wires would come in, some would be hard to track, lots of manual work on the back end.
Right.
High cost of bank fee to actually take that international wire. Remember, 13,000 or so international wires, 2-3 a year.
From some esoteric markets.
Yeah, you know, you'd have delays. You'd have some students who the payment obviously came from a parent account. It doesn't match the student name. Whose money is it? Like, that would sit for days and days and days, maybe weeks even, till it's reconciled. And so huge back office issue, huge cost issue.
Mm-hmm
... huge, very poor experience issue. Maybe the first interaction with a new family, and their experience is $60,000-$70,000 went missing for two weeks while you figured out where it was.
Yeah.
And so what we do - what we did is we deployed software. Think of it as like a pay button for international students initially, which brought them through an entire experience that said: "Hey, you owe NYU $70,000. Where are you paying from?" They pick a certain country, they get a real-time currency quote, they get all the payment methods that make sense in that country. It could be bank transfer in China, it could be a China UnionPay, WeChat, Alipay, same from India or, you know, Korea, Europe, whatever, all the different methods that matter in the countries. And then we're fully hooked into the back-end system of record of the university.
So when the payment comes in, say, it originates for us in Singapore or China, we actually notify the university immediately when we get the money within our payment network, and then we're settling disbursements every single day, which could be 50, 100 tuition payments, all from all over the world, into NYU, fully reconciled every day, so that they don't have to manually reconcile anything. We're also wrapping that with kind of a white glove service, so in case the payer has a question or the university's finance team has a question, there's a 24/7, you know-
That's a helpful-
... round-the-clock Flywire team there to help support and streamline that process. So when we went into domestic payments as an option, our clients said: "Hey, you're great at international. Why don't you just do my domestic?" And so that got us into just pretty much helping our clients get paid anywhere in the world, including domestic and cross-border. So that's really what we do. When it comes to cross-border, we've always had competition. We've competed for years with a business unit that used to be called Western Union Business Solutions. It was part of Western Union, then it got spun out into private equity. And then there's always been domestic software providers inside higher education.
Mm-hmm.
So what we're really doing is really bringing that together, and we're one of the only companies that has both that cross-border solution and the domestic software, and obviously have deployed it, over 40 countries around the world.
Yeah, that's a great overview. I mean, when you think about the actual, like, the land and expand and the domestic side, and I mean, it just seems incredibly like a, like a big opportunity still when we think about... I remember your investor day talking about, I think it was 1% or 2% of total students that you've addressed out of an addressable market that's obviously notably, notably larger.
Huge.
7%, if I remember, of the number of universities.
7, 8%-
Am I that right?
... of the universities, yeah.
You still have a huge addressable TAM to go after, right?
completely.
All right. So when we think about the nuances of that, last quarter, it was still a strong, you know, strong growth. There were some questions over some of the geographies, right? And just remind us, what - from an international standpoint, what's your, what's your geography split again?
Yeah, so you get a mix of 40 markets where you have clients, and those are the—think of those as the billers, and that, again, is universities, travel companies, businesses. And then you have payer markets, and you have over 100 different payer markets coming, right? Vast majority, largest spot on the education side is India. India is the largest population of students studying outside their home country. The total world population is around 7 million students studying outside their home country. India makes up the largest. China, Korea is in that mix as well, as number 3. And it will vary by country, right? Like, you'll see a place like Vietnam is not important in the grand scheme. It's in the long tail of the United States students.
But in a place like Australia, the universities get, you know, mid-high single-digit % of their students come from Vietnam.
Huh.
So it will-
Interesting
... vary a bit depending on which destination country you're talking about.
Right, and after a couple of deals, you have a big presence in the UK now-
Completely
... in terms of the universities themselves, right?
Yeah, yeah.
Australia, obviously.
Yep.
and the U.S., right?
Yep.
And those are really the more of the receiving markets-
Yep
... I guess you'd say. Correct?
Yeah, Canada, too. Yep.
And Canada, right.
Yeah.
Speaking of Canada.
Yeah, yeah.
So I mean, look, last quarter, you obviously underscored how there were some nuances in terms of timing on expectations, right? In last quarter and now this quarter. But maybe just help explain what's going on with permit allowances.
Yeah.
And I don't think a lot of us here probably understand the legal dynamic of it in Canada.
Sure.
Maybe explain what's the backdrop.
Yeah, not everybody follows international student visa trends as closely as we do. So you see these issues happen somewhat often, right? You'll often see headlines grabbing of like, "Hey, you know, we're gonna increase the number of visas. We're not gonna increase the number of visas." You see different kinda immigration trends happening in certain countries. So we've seen that a lot in the last, you know, 10, 12 years of running the company. What happened in Canada is somewhat unique in that they went from fifth or sixth of the top destination countries to number two. So they've more than doubled the number of international students in about two and a half years.
Hmm.
So it was a big initiative to get more students studying in Canada. Big driver to GDP, big driver for their economy, you know, typically, it's a high-quality workforce kind of coming out of that, that wants to stay and work in the country.
Those are high tuition-paying student usually, right?
It's also. Yeah, it's driving a lot of tuition into the, not only tuition spend, but just GDP spend-
Right, right, right
... outside of tuition into-
Right
... into Canada. And so having doubled that population, one thing they started to see in major markets, and you've probably read about it a little bit, is housing boom in places like Vancouver and Toronto up in Canada. You know, you have an affluent group of U.S. people coming into the country, the rental market, the ownership market goes up quite significantly, and that's a dynamic that Canada didn't quite understand when they increased those student numbers so high. And so now they're trying to put a limit on the number of student applications that they allow for any given year into Canada to try and keep the housing market in check in those areas. So they've announced that publicly.
That obviously, you know, we're not at full penetration in Canada, so we can still add universities and grow, but it does shrink the number of likely students coming and paying in 2024 and 2025. It's a two-year program.
Right.
And so what they're trying to do is redistribute students, those study permits, in different parts of Canada. Think less Vancouver, less Toronto likely, and more places like Montreal, right? Which may be less of a top destination originally. And so they'll try and diversify some of the student visas to different universities. And then the other thing that we're obviously tracking on our end is we have universities in 40 other countries, right? 40-plus countries. So, if students don't end up in Canada because of the visa application limitations, you know, there's a very high likelihood they're still gonna study abroad. They're just gonna do so in Australia or the U.K. or Europe or the U.S. And so those are both different aspects of how we model the year and how we expect to address it.
Even just yesterday, you saw, you know, further clarity. The government keeps releasing more clarity as to this policy.
Yeah.
And so it's one of those things that's kind of moving dynamic for us in the year, but trying to make sure everyone understands it, talk about it, talk about the impacts pretty directly to-
Yeah. I mean, it wasn't that material of an impact, but it did have some element of an impact embedded in your growth.
Yep.
And yet, you know, I think the permit reduction was supposed to be 35%, but you're not actually seeing all that in your numbers, given what you just said, right?
Yeah, I mean, you know, the stuff that's even coming out yesterday, I mean, like, they're talking about which groups of students it will still apply to. So, you know, what you've seen is clearly an impact in Q1, which we've talked about. And then in addition, we've talked about a, you know, mid-teens impact for us for the year in revenue. So still putting up pretty good growth.
Specific to Canada revenue, right?
Specific to Canada revenue.
Yeah.
It's still, you know, really good growth. You know, like you said, 33%, you know, plus growth, even with pretty significant headwind expected in Canada.
Right. Although Canada's how big as a percentage of your business again, about?
It's about 14%, yeah-
Right
... of the business, yeah.
Right. So that impact is, you know, felt, but only on a – not small, but on a piece of the business. Okay, so that's that. I think we understand that. India was another area that obviously we had a lot of questions on, really from two quarters ago, right?
Yep.
Where there was a discussion over students, you know, seemingly using just dollars more to spend on tuition rather than local currencies. Obviously, you make more money on FX, right? And so it's a little hard to... I was saying this on the earnings call, I mean, there's a seasonality to the business, right?
Completely.
You have a lot of students that'll come to the U.S. in probably, you know, third quarter-
Yep
... right ahead of the school year.
August, September, yep.
They'll come in maybe sometimes also in December or so. How do we think about how you are thinking about, I guess you could say, the impact from India going forward this year? I know last year, it caught - not caught you off guard, but it wasn't what we were expecting.
Yeah, I mean, India went through huge growth. I mentioned earlier, it overtook China, right? So when you see a huge growth in a student population like that, sometimes you can see different dynamics or shifts, right? Flywire never forces anyone to pay with a given method or within a given currency, right? We're kind of putting out all the options to pay and letting the payer pick whatever options they, you know, they want. You know, I often say, it would surprise many of you in the room how many people pull out a Black or Platinum Amex card to pay a tuition bill of $60,000-$70,000, but not the most cost-effective way to maybe do it, but, it's something that people do often, way more than you would actually-
Right
... probably guess. Either they want the points or, you know, the first-class airline ticket to Europe or whatever they want, right? So that dynamic exists with pretty much every currency pair in every country, right? We're doing our best to forecast what volume will go to one method versus another method in any given quarter. And with the growth we saw in student population in India, we saw a couple of trends. We saw the U.S. dollar strengthening, and therefore, we saw people aware of that before they had to make a payment for a student studying in the U.S. That gave them an opportunity to buy dollars or acquire dollars and maybe save on that conversion rate as the dollar was strengthening. We saw that happen before our big peak season.
Then we saw the growth in international students lead to a growth in lending for student tuition, right? When a student would take out a loan, oftentimes you'd see more loan volume, which to us came through in U.S. dollars than it did in local currency. Still saw great growth in India, still saw great growth in volume, still make money on even every U.S. dollar transaction that you get.
Yeah.
You just, to your point, don't make as much as you do when you're converting the currency. And so obviously, adjusting the forecasting models to try and make sure we understand that shift that happened in India, and also working with the banks, which we announced a huge partnership with, the State Bank of India, one of the largest banks in India, to help digitize their payment flow, and working on these partnerships to help, just connect more of the ecosystem to Flywire and drive more of the FX volume in our system.
I was just gonna ask you that. I mean, do you think these initiatives will move the needle to some degree in terms of ... you know, convincing your, your customers and students actually? I mean, is there any?
Yeah, I mean, our goal is really to connect, right? Think about it. If your bank is fully integrated into a payment experience and you have to make a large transaction, it's a very easy way where you have to enter less data. It's a compliant way. If there's local regulation you have to comply with, that's all integrated, it's all solved, so you're not having to file different paperwork, which you historically had to do in many of these countries. And so it's a streamlined way for the user. It's a way that the bank will actually promote this payment method as the best way to pay for studying abroad or paying payments abroad. And so that combination, I think, is it will inevitably make the modernization of the trends-
And to be clear, did your guidance incorporate some element of just uncertainty around this, or?
You know, one thing you'll notice in our guide, we increased our guide range a little bit, right? And so when you look at Canada, when you look at just the dynamic of trying to get India right, you know, we increased our range of our guide a little bit to just cover a bit of that uncertainty-
Yeah
... for that reason.
Okay, good. You know, when you guys went public, I mean, B2B was, as we talked about earlier, pretty-
Yeah
... pretty small.
Yeah.
And travel also was just starting, right? And so today, I think it's the same size as healthcare, if not bigger even, right? When you combine the two-
Yeah
... of them together.
Yeah, yeah.
Um-
Even many people will call out, you know, travel at its. You know, if you look at the historic disclosures, there's a good chance travel by revenue, it's a pretty fair assumption, is even bigger than healthcare.
Yeah. So let's just start there. Let's start on travel. I mean-
Yeah
... you know, you guys are a cross-border-centric business, but, you know, help us understand a little bit more of what you're actually doing in the travel industry that's differentiated?
Yeah. So, we focus on an area of travel. We're not kinda doing small dollar e-commerce. Like, you're not gonna see Flywire compete for, you know, credit card processing on an airline's website. Like, that's not our business. We've 3, now 4 sub-sectors inside travel. So you have accommodations. Think of this as luxury rentals. There's certain types of for-profit student-related housing as well around the world-
Mm-hmm
... that's in there. You've got multi-day tours, so think of this as a you could be going on a heli-skiing trip with, you know, five friends. That's gonna likely be a $2,000 average transaction size, all bundled together, could be a $10,000, $20,000 transaction. It may have to be split amongst five or 10 people. You know, you're gonna have lots of people coming from different parts of the world. Like, that's a great example of a client that works with Flywire. Luxury African safari trip, family trip to Italy, and have it kind of multi-day tour, kinda configured around that. All of that is like perfect examples of Flywire clients.
We announced just on the last call that we also just opened up ocean experiences, so think of that as kinda small boat cruises, which are quite popular high-end travel.
Right.
also, yacht luxury yacht rentals, which again, all of that money flew over bank wires in a pretty manual way. And so we're going into a travel company, we're saying there's better ways to get paid, high-ticket, often cross-border volume, and we're saying we have all the payment methods. We have bank transfers, cards, third-party ways to pay-
Mm-hmm.
and we help digitize the whole payment process, we help support the payer when they have questions, and we're typically automating it so that the travel company can go out and focus on travelers and not on payments.
It's interesting. It sounds similar to-
Sure
... education in a way, right? Where it's, you know, high ticket, high value transactions that sometimes it was being paid with pretty cumbersome ways.
Yep.
You're offering a much easier and better and sleek solution.
Yep.
You're also obviously offering probably better customer service than some of the others out there that have tried, right?
For sure. Well, and you need a bit of software, right? Like, I think the other thing, when people are trying to figure out how are you different from a straight acquirer, right? Like, the acquirer is typically there to process a card-only payment-
Right
... mostly, and they're trying to do so for, you know, large volume. You know, they don't really look at a high transaction size, right? Usually, they're going for volume and, and getting a little bit of that transaction. What you're seeing with Flywire, when you look at, you know, even just that profit line, gross profit line for us, like, you're seeing us get way more value in the transactional economics because of the software that we're using to help streamline that whole interaction. It's way more than just a credit card capture form, right? It's all that banking infrastructure. Typically, it's invoice presentment, it's that whole support process all rolled through the software.
Is there some, I mean, higher risk in this category?
You know, again, our clients have oftentimes been around quite a long time in travel, right? These are not... Again, you know, like, oftentimes, the risk associated with travel is typically either smaller vendors or things like airlines that could have a financial-
Yeah
... problem. That's typically where risk has come in. We're all in a good funds model, right? We're moving money associated to money we've already received from the payer-
Okay, that's fair.
... and delivering to the client.
That makes sense. How about B2B?
Yeah. It's a sector, you know, has a whole series of sub-sectors we've talked about publicly, but in the broadest sense, think about any business that has a global invoicing challenge as being a perfect client for Flywire, right? They're the modern way to send invoices internationally is to, like, send a PDF with an account number and a routing number on it in email, and that experience is pretty poor, right? If you're a manufacturer of a product in the U.S., selling your product throughout Asia or throughout Europe, you're often even sending an invoice in dollars, right? And so that business has to go figure out how to manage that risk associated to that foreign exchange payment.
They're typically gonna have to pay a high foreign exchange rate to make that payment, and what we're doing is we're going in and digitizing from that invoice generation all the way to the experience of that payer, which can be another business or a consumer in different parts of the world, and we're showing it in local currency. We're giving them the local methods to pay, and we're giving full visibility on both sides of that transaction. So instead of a business that wants to grow globally, having to go set up corporate entities all around the world, get finance functions, get a bank account in that part of the world, get a finance function, they're reconciling payments. Flywire is digitizing all of that without them having to go through all that pain of growing their business globally.
And so in what you see, is there, excuse me, is there sustainability in these segments? I mean, there's enough.
Yeah.
Plenty of room to run?
Yeah, I mean, no matter which way you cut, you can look at the $24 trillion total addressable market. We talk about a $10+ trillion market that's directly addressable by Flywire. Visa threw out a $200 trillion number around B2B payment opportunity.
Yeah, B2B is obviously-
Right. So it's a massive opportunity, and we're on the accounts receivable side, right? We're always helping our clients get paid, and so a lot of the innovation, when you hear B2B payments, you've got innovation happening on the accounts payable side.
Yep.
Right? Companies trying to help businesses pay differently or pay easier, and then you have companies like us helping on the accounts receivable side, near the invoice, which we think is a strategic location. But the digitization of B2B payments is gonna really be a blend of those two things happening, I think, over the next decade.
In the interest of time, can you just remind us of your stated goals on profitability, which has been something that I've been very proud of-
Yeah
... with you guys seeing 300-600 bps of-
Yeah.
You know. But what's-
So-
What's this year's goal and...?
Yeah, so, you know, we've said, expect us to be at the 30% growth number for revenue and 300-600 basis points EBITDA margin expansion a year. And, you know, last year we started in the lower end of the range, and then we moved it up throughout the year, and we finished at 550 basis points. This year, we started in that 320. I was looking at Akil, make sure I get the number right. 320 basis points in our guide, and then again, as you see potential outperformance, we have the opportunity as to how much of that we want to invest, how much of that we want to flow through into, into EBITDA.
Yeah. Last one for me is just on the, the M&A side, your balance sheet. You have a lot of cash, right?
Yeah.
What is it? $600, $650 million, more or less.
Yep.
You know, when you think about what you can or want to do, more importantly, you know, and you raised, you raised capital pretty recently also.
We did, yep.
So, you know, just help us understand what you're looking at. What, what, what do you need or want?
Yeah. So, we've done a couple of deals, three deals as a public company. I'd say all relatively small, all sub-$100 million, you know, $75 million and lower deal sizes. And we have $560 million or so, if you take out client cash.
Mm
... of capital, and-
Right
... a pretty strong EBITDA guide for the year.
No debt, right?
No debt and strong EBITDA guide for the year, too. So we're gonna be adding to that, obviously, cash pile. So we feel like we're in a good spot to do, inorganic moves, as well as continue to invest in the business organically. We look for deals that help us accelerate, industry or geography we're already in, some new product capability that allows us to upsell clients and drive further NRR. And the third pillar we often use for M&A is, does it let us enter a new geography or a new region that we're not in today? So those are the three things we look for. We then, of course, have to measure against financial goals and metrics. You know, we have a pretty strong growth rate, we have a pretty good profitability numbers.
There's a lot of companies out there that would take us off those two courses, right? And so we're very cautious of anything that takes us off our growth rate.
Good.
We're very cautious on anything that is burning a lot of money and would take us off our EBITDA generation. So you got that, you got culture and tech that we also look at when we do deals. But we feel like we're pretty good at it. We've done it, we've been very transparent in the deals we've done and excited for the year.
Good. Thank you. All right, guys, anyone have any questions for Mike? I see one from, on the right.
Hi, Mike. Could you talk about your business in the context of a U.S. election this year? How either outcome may impact positive or negatively? Thanks.
Yeah. We've obviously seen there's—I think there's something like 40 elections happening around the world or some huge number. So it's a big election year. You know, we've seen things in the prior elections too, where people thought there were certain types of immigration restrictions. I think in general, most governments around the world, even though they go for headlines or campaigns even, go for certain headlines, what you often see happen when it comes to higher ed, in particular, is people look at those students, and they look at the influx and the importance to higher educational institutions of that revenue stream and the impact to the local economy of that revenue stream. So I think that helps, you know, reduce that risk of any major change.
I also think the geographic footprint of our business, right? You really have to believe international students will stay home, versus won't end up somewhere, right? It may be less originating from one country, less going to a certain country, and that has always changed in the last 14+ years of running the company. But if you look at the 30-year trend of international students, it goes up 3%-5% typically every year. And there's a great source called Open Doors, you can Google, that has published the last 20-30 years of student numbers. And so you'll see different origination countries, just different destination. But I don't know if it's the effectiveness or ineffectiveness sometimes of governments, but usually what the headlines say and what the actual impact is, is a bit different from our experience.
All right. Any other quick questions, guys? Let's take one more.
I was wondering if you could help us understand the nuances, if there are any, around being a payment service provider versus a money services business, and what that would give you if you had either license.
Yeah, so there's different regulations. For those unaware, there's different regulations that you need in different countries around the world. And so some are, two of those, money services business, PSPs, money transmitter. There's different terminology used in different countries. Flywire has the regulations in all the different markets in which we need it, although we're also oftentimes looking at where we're gonna take the business in the future and making sure we're getting those licenses, those licenses done. So, in general, it's usually a country designation. Sometimes it varies by where you're, if you're helping someone pay or if you're helping someone receive money, believe it or not. Sounds like it should be the same thing, but there are actually different regulations that govern each of those things.
And then there's a lot of regulations that change once you hold funds, right? And so as you're a processor versus, like in Europe and the UK, there's, like, E-money license, where if you're actually gonna hold funds or hold balances, you also need that licensing. And so for us, you know, we have the ability to do domestic with our licensing structure, cross-border. We have the ability to act on the receive or the send side in our major markets, and so we feel like we've done a good job building that infrastructure. It's also a competitive differentiator and a bit of a moat. You know, this is something that takes, you know, a decade plus to build those regulatory relationships. And one thing we've noticed, too, oddly, in our education business, our product's used by a lot of regulators around the world.
A lot of regulators end up sending their kids abroad to study, and so we're one of the products that, like, they actually know well, and actually often use, which I think is a good thing.
It's a nice side effect.
Yeah, it's a nice thing.
All right, Mike, thank you very much.
Yeah.
Great to have you here.
Thanks for having me.
If I could invite Mastercard up to the stage for the next session in a couple of minutes with Craig.
Awesome.
Mike, great seeing you.
Good to see you.
Thanks. Thanks again. Safe travels.