All right, thanks everyone for joining us, both in person and online. My name is Chris Kennedy. I'm the research analyst at William Blair that covers the financial technology and payment space. For a complete list of research disclosures and/or potential conflicts of interest, please visit our website at williamblair.com. Next up is Flywire. From the company, we have the CEO, Mike Massaro. The CFO, Cosmin Pitigoi, is in the audience. Flywire was founded in 2009. They came public in 2021. The company combines payments with vertical-specific software to solve pain points across several different industries. We were comparing our 2023 actual results relative to our initial estimates following the IPO. Revenue was $130 million above our initial estimate. EBITDA was $40 million above our estimates, so the financial results here have been solid.
With that, let me pass it over to Mike.
Chris, thanks very much. Appreciate everybody coming and, spending some time, learning a bit more about the company. I'll walk you through a series of slides. I'm sure we'll do some Q&A, and then hopefully open it up to the audience if there are questions in the audience. I think I'll move the slide forward. Green button. Yep, no worries. Oh, there we go. That one worked, perfect. Legal disclosures, flash this for a second. There we go. For those that are unaware of Flywire, Flywire's focus is on large and complex what we often refer to as the most important payments.
So if you know payments well, you know that things like point-of-sale payments, when you're in a store purchasing something, you know, e-commerce payments, those things have digitized over the last 20 or 30 years, quite notably. Flywire focuses on other areas of the global economy that have yet to digitize. So when you get into large and complex payments in certain industries, you're really kinda going back 20, 30 years in the type of technology that's being used there, to digitize payment experiences. And so, in short, we help our clients get paid, and help them deliver great solutions so that their customers can pay them from all over the world. And that's the core fundamental part of Flywire.
We're always on the accounts Receivable side, helping our clients get paid, and we're set up to help them not only get paid domestically, but all around the world. Just by some numbers, you see some numbers from last year's performance. You'll see $24 billion of Total Payment Volume. Nearly 4,000 clients have crossed over that now in 2024. You'll see a note at the bottom here of the currencies and the countries that we accept payments in and from. And then you'll see something in the bottom right corner, 10 years to build a payment network. And so we'll talk about the payment network a bit. But Flywire own and controls its own infrastructure to move the money. So we're a combination of software and payment infrastructure, which makes us quite unique.
It took over 10 years to build that network. It's quite a differentiator for us in the sector. Then another notable number you'll see, and we'll talk a bit about it as we talk about cohort performance over time, is our ability to grow our existing customer base. So that 125% average of NRR, net revenue retention, that's our core component of our growth algorithm. And so not only are we have very exceptional logo retention, but that number shows our ability to drive additional revenue and growth at existing clients and do so with a six-year number that we've shared three years since being prior to being public, and obviously, the last three years of being public.
So in short, Flywire's strategy to date, we have a core North Star thesis, which is software drives value in payments. And what we mean by that is, we have software that's deployed in the accounts receivable process of our clients, and it's industry-specific software that's targeting the use cases and the needs of the industries that we serve, which we'll talk about. And from that software, we're delivering rich payment experiences. Think of this as, kinda like e-commerce checkout experiences, but for complex bill payment. And we're interfacing our software consistently in the same location of our clients' infrastructure across industry. So we'll talk about our education business as an example.
If anybody's paid a tuition bill, our software is sitting between our client's system of record, the university's student information system, their billing platform, and you as the parent or the student as the payer, and it's interfacing between those two components. So we're pulling data from the system of record. We're delivering updates back to that system of record, and we're doing that across education, our healthcare sector, our travel industry, and our business payments industry. But it's always a different system of record by industry, but we're performing the same function every single time. And the other part that we would highlight is that Flywire has what is called the Flywire Advantage, which is that verticalized software that sits on top of a horizontal tech platform. Think of that as a shared set of services.
So you may have a concept like payment plans, which is a thing in education, where you may have multiple installments that you're making a payment for a kid who is enrolled in school. That same concept exists inside our healthcare business, where you may have a bill that you're not expecting to afford, and you may need to pay that in multiple installments. That same component is built at a platform level from our technology stack, and it's exposed inside the vertical software. And so whether it's making a currency conversion, sending an email or text notification, any of these shared services are inside our payment platform and our technology platform. It's a horizontal function across verticals. So vertical software, horizontal tech platform of shared capabilities, and then a third component that differentiates us is our own payment infrastructure.
And that is literally Flywire-owned and controlled bank accounts, credit card processing agreements, third-party payment processing relationships, all owned and controlled by Flywire. So that's the three things that differentiate us. So if you're sitting in the audience and saying: "How are they different from any traditional credit card processing company?" Our payment infrastructure is broader than card. 80% of our volume is bank transfer, for instance. And you have those three components where we're not just a credit card capture form, you've got bank transfers, and you have software that's actually delivering the full experience, not just capturing the payment credentials. And then if you look on the right, what we pair this software with, and this platform, and this network, is also go-to-market expertise in the verticals.
So as we go to market, we're not sending generic sales teams into industry-specific sales. We're actually targeting experts in these industries, people who have spent 10, 15, 20 years in selling education-based solutions or healthcare-based solutions, and that's our go-to-market function. So it's industry-specific with tailored software and a set of unique capabilities at the technical level. If you look at the markets we address, I mentioned education, healthcare, travel, and B2B payments. They're massive, total addressable markets. You can look at the strong, supported industry-based growth in these industries as well. You can look at the size of the target customer bases across these industries or scope of the industry. And at the bottom, you'll actually see the penetration level of Flywire across these industries of our existing total addressable market.
So you can see high single-digit % penetrated in massive total addressable markets, even at our size and scale. There's huge opportunity to continue to grow this business. One thing that's also important to highlight is, within these industries... Remember, you've got what differentiates Flywire, the software, the platform, and the network. You've got industry-specific teams and vertical expertise, and then there's a whole series of additional capabilities we've been adding to the business as we grow. We see these industries as almost ecosystems. To give you a really tangible example, inside travel, we're helping some of the top luxury brands in the world collect travel payments from around the world, but they also have other payment-related challenges. They have certain types of commission payments that they owe to be paid all around the world, that are linked to receivables.
So we're building out other capabilities around our software suite to drive additional value for our clients within the industries that they serve. Talk a little bit about the payment platform 'cause it's a really important component. Remember, software, payments platform, network. And so when you look at the network, it's a whole series of existing relationships that we've built inside Flywire. And so if you think of maybe 10 or 15 years ago, 20 years ago, buying enterprise-grade software, you'd buy the software. You would then figure out which bank is gonna process payments. If you wanted to accept credit cards, you had to figure out who was gonna process the credit cards. If you wanted to accept American Express, you had to go negotiate an agreement with American Express.
If you wanted to maybe accept third-party payment methods, PayPal, Venmo, maybe it was China UnionPay or Alipay, any of those kind of country-specific payment alternatives, you had to go build all those relationships as a business, yourself. And so what Flywire has done is we've built industry-leading software, and then we've already brought all those payment capabilities together in one place. And so our clients effectively can almost outsource out all of that complexity around payments. They don't have to be experts in payment economics. They don't have to be experts in acceptance criteria or different rules in different countries around the world in relation to payments. All of that comes with us when we deliver our software to our client. They sign one agreement with Flywire, they get the software deployed, and all the payment complexity disappears for the client.
It's a very big shift from where things used to be in purchasing software and manually configuring all the payment interactions and managing themselves as a business, versus just signing one agreement with Flywire, getting great software, and not having to worry anymore about the payment nuances. And you can see just global geographic coverage is quite significant. Again, this is a infrastructure that took us over a decade to build. It has a whole inherent built amount of redundancy built into the system as well. So that, again, fail-safes, you know, credit card processing not working in a country.
We have multiple leading providers like First Data, Fiserv, Worldpay, Adyen behind us, and we have full control of those credit card processing relationships so that we can have full control over where money or different types of payment methods get routed over time, so that our clients don't have to worry about things like redundancy or annual negotiations around payment economics, et cetera. To spend one minute on the growth algorithm, we talked earlier of our net revenue retention number. Our growth algorithm at Flywire is quite simple. You've got, obviously, prior year revenue. You add on top of that a strong NRR number that is driven by our ability to drive additional business, deploy more software, get that software deployed more broadly at our existing client base. Again, that's a six-year average in the north of 120%.
That's about as equivalent to same-store sales as you can have. For us, we do not put in that NRR number, the ramp of existing clients from prior year. So think of a client that goes live for Flywire in June, maybe it's a major university. We know that next year that we're gonna get January through June volume from that client, 'cause again, we're tied to an invoice, an existing billing volume. So you're gonna then add that to that additional NRR number, and then you're gonna sign up new clients in a given year, right? And those new clients in that given year are gonna go live, and they're gonna generate some revenue. And so that's how the growth algorithm is built. On top of that, I mentioned the ecosystems. We're providing additional solutions.
We have a whole series of payer-related services that add additional growth on top of that. So growth algorithm, quite simple. It's what gives us confidence in that multiyear, high growth number that we've been talking about. And, it's really based on those three or four components.... We often get asked about cohorts. This is a slide from a recent supplement, and we oftentimes put it in our earnings supplement. You'll see a whole series of cohorts here, even dating back to pre-2018 cohorts. And you'll see pretty exceptional growth across these cohorts over time. Even some of our earliest cohorts continue to grow quite well for the business.
And again, this is because we're not only able to help our clients with more additional software, we're typically adding that software in new areas of their business and/or geographies to help expand the value we're driving for them and obviously drive additional revenue for Flywire. Looking at just the history of performance, financial performance for the company, you see payment volume growth, you see revenue, less ancillary services, Adjusted Gross Profit and Adjusted EBITDA. 2022, for anyone asking, is a, was a big investment year for the company. So we highlighted some investments in go-to-market and product, and tech innovation in particular. And then here's our outlook for 2024, which we continue to think is pretty exceptional performance, up from the numbers you saw earlier.
Not only showing growth in this instance in the high 20s, but additional Adjusted EBITDA generation of 320 basis points EBITDA margin expansion. So if you before we open up for questions, if there's anything to take away from Flywire, and you're getting to know the company, remember, we have a unique set of assets, a platform, a network, and vertical software that differentiates us from traditional payment processors. We've been trusted by nearly 4,000 clients around the world to handle their most complex payments that are poorly digitized. We play in massive industries that have yet to be digitized and have a huge total addressable market opportunity, and we're early in the penetration of that. And we have a great set of unit economics and a track record of financial performance.
With that, I think we're done.
All right.
All right.
Thanks, Mike. So we will take questions from the audience. Maybe I'll just kick it off here. So you do have in the education vertical, you have kind of an international business and a domestic business. The international business, there's some regulatory issues going on in Canada. Can you just talk about that?
Sure.
Kind of where we are in that.
Yeah. So, Flywire processes not only domestic, but cross-border tuition payments. So anyone that knows, most of the universities around the world have a mix of domestic students and students that come in from overseas. And one of the things that's underway in Canada, and there's been some headlines in different markets around the world, is certain governments are looking at certain types of visa restrictions associated to student visas. And so Canada, in particular, has a bit of a housing crisis. The number of international students has grown sizably in Canada in the last couple of years. And anybody from Canada knows, Vancouver and Toronto have huge rental and real estate cost challenges in those markets.
So the government has put a cap on the number of students able to come in and study in Canada, and they're intending to keep that number flat for two years, since it's grown nearly tripled in the last. It's grown two and a half times in the last three years. So that's the regulatory framework. We've to adjust to that, not only did we navigate a $ high single-digit million headwind in Q1, still beat our revenue goal for the quarter, still beat our EBITDA goal for the quarter. We've distributed some revenue from Q2 into the second half of the year as those student visa policies have, I would say, lightened in the last few weeks and have started to roll again.
And so we expect that remaining guide for the year to continue to be on track to see that rolling recovery of student visas issued in Canada.
You mentioned, you alluded to it, but U.K. and Australia, similar type of headlines. What, what are you guys seeing over there?
Yeah, so the concept is similar, where governments look, and they try and tweak policy for immigration policy. For anyone also watching this, probably the largest number of global elections happening this year, so there's all types of headlines, many of them focus on immigration. But when it comes to student visas, it's usually for different purposes. So the headlines in Australia that you mentioned are focused on, I would say, much more, lower-tier educational programs, where people are using those lower-tier educational programs to get a visa to enter a country, and then they're typically staying and not really, for education purposes. That's not really Flywire's clientele. So the headlines you see in a place like Australia doesn't have material impact to our business.
In the U.K., we actually just saw some negative headlines, and then we saw some positive headlines, where they were evaluating the graduate program visas and whether those visas for folks seeking PhDs and master's degrees inside the U.K., whether they would be able to bring families with them while they studied. And they evaluated whether that was something they wanted to change, and they decided not to change the policy. So that's another example where you see headlines, but oftentimes, you can understand where are those headlines coming from and have they chose to make changes or, you know, just have some political headlines that are out there in the news cycle.
Sure. And you've navigated regulatory changes in the past, so it's not new to your business.
For sure. If you look at the last, you know, 12+ years of the company, you've seen certain types of dynamics between send countries and receive countries. You know, Australia, China have had issues previously around Chinese students studying in Australia. There was a lot of headlines that centered around the first Trump presidency and his negotiations that were happening with China. Those headlines never really ended up coming into impacting the student volumes. And the other thing to highlight is that Flywire is quite diverse, so we've got clients, educational clients in over 40 countries. And so, if you look at the overall trend of international student visas, it's typically grown 3%-4% per year over the last three decades.
So it's less about where those students come from and where they go to, and just more of a belief that that will continue to be a growth lever inside that sector, even if they go from a country, if they change from which countries they come to, to which countries they choose to study in, Flywire still benefits in that use case.
Any questions from the audience? I'll keep going. Let's move to the domestic education business.
Sure.
Talk about the opportunity there in processing domestic payments and kinda where you are at in the U.S.
Yeah. So when we built the company, we first started with the cross-border use case. And as we got a lot of success in the United States with major universities in the United States, we took that international student tuition product around the world. Started signing up universities in Canada, Australia, Southeast Asia, UK, and Europe. And then as we listened to clients, they would often tell us: "Why are you just processing my cross-border payments? Why don't you do all my tuition payments?" And so we initially looked at that and thought, don't you already have that solved? Domestic payments should be way easier than cross-border payments. What we've realized is there was a whole series of incumbent software providers in those industries that really hadn't innovated and delivered more modern solutions for how technology was evolving.
Some of them were even on-premise software vendors that, I would say, migrated and frankly, poorly to the cloud infrastructure. And so as things became more modern, as people were looking for better web and mobile experiences for bill pay, we saw an opportunity to release a domestic product. And we've already had that product at just about a high single-digit % of our U.S. client base already uses a domestic product of Flywire's, and it has great attach. There's actually a stat we publish which if all of our clients just used all the software that we offer, you could 3x-5x the revenue of the entire company without ever bringing on a new client.
And so huge opportunity, huge growth lever for us to continue to roll out domestic capabilities across all our educational institutions, across the United States and around the world.
And then just lastly, on education, the pricing is different, right? From the domestic and the international. Just talk about that, so-
Sure.
Sure.
Yeah, so Flywire has two revenue streams. At the highest level, think of it as, combination of software and transactional-based revenue streams. Kinda mirrors the software component of our business and the payments part of our business. So about 20% of the revenue is kinda platform and software-like revenue, usage-based revenue, and then the other, you know, 80% or so is transactional revenue. And so, what you have when you end up deploying the domestic solution, you end up with more software. You still end up with transactional revenue, but the vast majority of the software comes in that platform and usage category. Whereas if you look at the cross-border product, no software charge for that, and it comes in, transactional fees associated to the transactions.
Move over to the healthcare vertical.
Sure.
And you made an acquisition to get into that. Just talk about how that business has performed. I know there's been some changes-
Yep
... over the last 12 months or so.
Yeah, so Flywire works with 4 of the top 10 largest health systems in the U.S., and the area of healthcare payments that we focus on is out-of-pocket spend. So again, think of your insurance going in for a medical procedure. Maybe it's an emergency room trip. Had many of them, have 4 kids. You end up typically having your insurance get applied, and then there's an out-of-pocket spend component to that trip that you have to pay as an individual consumer. Our software is involved in the communication of that balance to the consumer, driven from the hospital systems, typically their EHR system, which is their patient record system, is where we interface into, and we're the one communicating that bill or that cost to the payer, and then facilitating their payment of that bill.
And so you may have experienced the software, or similar software, if you've had a medical procedure. And that business, you know, is a large health system, which is harder to grow at the company average, 'cause that industry traditionally doesn't grow at the levels of growth that we're seeing at the company level. But very high gross margin, great industry, very complex needs around payments and software, continues to be something that we expect to see great growth from.
Okay, and you've changed the go-to-market a little bit?
Have changed the gr-
Yeah.
Yep.
Yeah.
The go-to-market, again, we've always focused on really large health systems in the United States, and so we've done a few different things. We've reconfigured our sales team to help accelerate growth in that market. We've added additional product capabilities, which are showing good attach rate to our existing client base. And then the third thing we've done is identified other subsectors of growth outside of large health systems in the United States. So think of specialty surgical centers or ortho centers. Those are typically faster at decision-making, faster at time to revenue, and require pretty much the same software we already deploy at the large health systems. So those are the three different strategies for driving growth in healthcare.
Why don't we move to some of the more emerging verticals, travel and B2B payments?
Sure.
Start with travel-
Yeah
... and what you're doing there.
Yeah, travel's, travel's a great business, and hopefully, people can understand, as you see the growth from Flywire in the last three years since going public. If you look at the travel business, the travel business was low single-digit $ millions when, you know, prior to our IPO. And so it was one of our emerging businesses back then. It's now gone into our second largest vertical industry. And what we're doing inside travel is, again, using our same core set of software, helping our clients get paid with large ticket complex payments as the core. And we're interfacing typically into a traveler or a CRM bookings platform that the travel either agency or luxury tour provider provides.
If you've ever gone on a luxury trip, maybe it's an African safari, maybe it's a big family trip to Italy or to Spain or France, those are all areas in which you'd likely see Flywire technology. So again, high-ticket transactions, typically complex in nature. Maybe you would have a deposit that's due to book the trip, then you have a follow-up payment, then you have another payment that is due before your travel. Those are all great examples of how Flywire is helping streamline that payment process. Again, what we are competing with is really homegrown solutions. Typically, you'll have a lot of bank wires being done by those travel companies, and you'll have a simple credit card capture form.
What Flywire has done is we've automated that entire payer engagement, and we've automated the whole back office for our travel provider.
And then B2B payments real quick-
Yep, and rounding out the industries real quick, and we'll open it up for more questions. If you look at business payments, our travel business actually emerged out of our first investment into business-related payments. And we quickly identified, hey, we have a lot of travel companies here. We carved it out into our kind of separate vertical and invested behind that growth. And so we continue to let the business B2B business payments division grow, and you identify more subsegments. And so a few of those subsegments we've talked about publicly, things like manufacturing, software companies, insurance companies, even franchise companies that have franchises operations all around the world.
Anyone that's invoicing from one country to another country, the way in which that has historically been done has been a PDF with an account number and a routing number for wire details on that PDF sent through email. And so what we're doing is really allowing those payments to be more digitized in experience, giving more payment and choice to the payer, whether they're wanting to pay in their local currency or destination currency of that invoice, whether they want to pay via bank transfer or card. And then we're automating, again, everything for the business that's trying to grow their business around the world in different geographies, and doing it without them having to run around the world, set up new entities, set up new bank accounts, stand up finance teams to handle that treasury function.
We're digitizing that for them so that they can go faster.
Any questions from the audience? Yeah.
What do you think is the most misunderstood about Flywire?
Yeah, you know, That's a great question. You know, I think, if you just even look at the three-year performance since IPO, you mentioned some great, great stats, I appreciate that, by the way, of what we've been able to perform since going public. Even if you look at Q1, right, you see a lot of people focused on headlines around Canadian visas, for instance. The company outperformed revenue and significantly outperformed EBITDA generation, even with a high single-digit $ million headwind we didn't know about at the start of Q1, right? And so it shows the multiple growth levers that we have. And I think some people will look at our business and say: "Ha, it's globally diverse. It's exposed to a lot of things.
There's a lot of risk here," but that we also have a lot of growth levers, right? By various products, by various industries, by different geographies. And that, that's kind of a superpower that the business can use to continue to outperform. And I think that's probably the key piece, right? That people don't understand the power of the diversification of our business and, you know, continue to outperform numbers. And that complexity is really a strength as opposed to a weakness.
Then what are you most excited about, over the next few years?
Yeah, you know, obviously, the team continues to do exceptionally well, and execute. I would say it's great to see the company getting to such size and scale, putting up great growth numbers, and having that growth in profitability and being able to do those at the same time. We think that's pretty unique. And then inside the business, what I'd tell you is, things like the travel business, they look like the education business did six, seven years ago. And so to be able to see that and organically replicate a lot of the great success we've had as a business, and to have our team going into different roles and responsibilities inside a growing company is pretty great. Like, it gives you a lot of confidence about the future, for sure.
Just a real quick-
Sure
... quick comment on, I mean, the network that you build-
Yeah.
you talked about it in your presentation, that could be an underappreciated asset, I think, in the market.
Right.
Just talk about...
Yeah. Yeah, I mean, the network, I, you know, tried to highlight, you know, 10+ years to build it. It's part of the reason we also have the strategic relationships that we have. I mentioned some of the credit card processing companies that are partnered with us. Those are the top, you know, credit card processing companies in the world. You know, brands like American Express, China UnionPay, Alipay. When you think even the card schemes, Mastercard, Visa, right? These are companies where Flywire is on their radar because we're actually digitizing payment flows in a way that's unique and they all want to participate in. And so what we've really built is this global receivable network, and we're layering in software because you need that software to actually make the, to actually digitize the payment volume.
And so the power of that network is massive. It's, I believe it's unmatched globally. There isn't even a global bank that has that level of infrastructure, and, and I think that's quite unique. And, and I think we can continue to leverage that infrastructure to keep digitizing flows without having to rebuild it for every new industry, subsegment, use case that we find. It's a huge, powerful asset that drives scale in the business.
All right. With that, we're out of time.
Yeah.
We'll leave it there.
Appreciate you having me.
Thank you.
Yeah.