All right. We are going to kick off the next session. Up next, we have CFO of Flywire, Cosmin. Cosmin, you have been here for the last couple of years. We are very happy to have you back.
Awesome. Yeah, thanks, Will. Glad to be here.
I thought we would open this up high level, kind of the headline from the Q2 call. You laid out the ambition for $1 billion of revenue and 30% adjusted EBITDA margins over the next few years. Starting with the revenue number, when you build up to that number bottoms up, what are the two or three largest building blocks? And maybe just talk about the decision to put those targets out, at this time, given all the volatility we have seen, in some of your largest verticals.
Awesome. Two-part question, my favorite kind. Let me start with the first one. First, in terms of the building blocks, and how we thought about it. Listen, the $1 billion and 30%, it is an organic target and it is our usual approach of being prudent and data-dependent overall. As you think about the building blocks, I would start with the enterprise client and the fact that a large majority of our both education and travel clients are those clients that we call enterprise, which is above $100,000 in revenue per year. And those clients stay with us. They see the high ROI of our software and the combination of capabilities that we provide. And as you have heard us say, they are lower than 1% churn, so very high retention of those clients. So that creates a sustainable base on which to build.
And so that is sort of part one. Then, you go to our still our biggest vertical, education. Strong growth there but increasingly diversified components of that growth and the growth algorithm as we will talk about it later. Seeing that cross-sell on the domestic side, that is driving a lot of the growth there too. That is the second piece. Now look, travel is now in its own right bigger than the U.S., nearing the size of the U.K. kind of education business. It is big TAM, the clients see the ROI there, and we have the breadth of clients now with smaller and larger, and also just the depth of product.
Which we did not have before the Sertifi acquisition, so that is great. Then lastly, B2B healthcare. Healthcare, both big growth drivers this year and continuing to deliver. So kind of firing on all engines. Those are the building blocks. Then to your second point, why now? Look, it is aligned with my, and our guidance principles, which is you start with transparency. As we are doing our normal medium-term kind of planning, those numbers are starting to come into focus, and they do not require macro to get better. We actually assumed in that a very prudent kind of macro environment from our perspective. As we think about that billion dollars and the 30%, felt that it is coming into focus, so helping folks kind of plan around that. Second, it is data dependent.
We will see how things play out and we will let you all know. But third, I think notice the balance. We have always talked about revenue. Revenue is still obviously a huge focus for us and growth, but now we have free cash flow, we have margins, and certainly GAAP profitability as we are pivoting this year. So those are also important balancing aspects. I wanted to bring that in. But listen, I will just finish with this financial framework was built to withstand a tough macro. It was not built to assume it gets better.
Right.
We have tried to kind of balance that expectation externally.
Great, and the other half of that equation is the expense base. You said transformation investment will peak in 2027, and beyond that, you expect operating costs to stay relatively flat while still funding a lot of your strategic priorities. How do you get the confidence to manage OpEx for a company that's still growing in that way?
I would think of it as sort of structural. It's not a cost-cutting exercise. It's already happening. If you look back, if I start just go back a few years, as you know, we've grown and scaled, we've invested. We've kind of gone through a large investment scale kind of cycle. Since IPO, that's both organically and inorganically. If you look, then zoom in the last couple of years, even in 2025 and 2026, obviously Sertifi was our big acquisition last year, but if you adjust for that, to some extent, you look organic OpEx, it's actually not growing that much. It's probably single-digit growth.
Even before kind of doing the transformation, we're already growing at scale on a much smaller kind of OpEx level of growth because of that early investment. Today, we're in the middle of the transformation that we announced, which has become kind of our mindset internally at the company. That allows us to drive growth at lower cost to some extent. The way to think about the drivers there are across a few different areas. One, it's the G&A or functions that we talked about is about a third of the costs. Those are opportunities for us to simplify a lot of the systems, and we'll talk about kind of the transformation project itself. Able to simplify that, reduce a lot of those manual costs.
Second, you have kind of the R&D and engineering areas, which, again, we can do a lot more in those areas with a lot less. Third, one that we talked about it, but not as much, is the enterprise versus non-enterprise client approach. How you tier support and how you look at enterprise clients, given that we're so focused on that, and that's one of the big drivers of growth even in the future. You can obviously change your client support models internally. That makes your sales and marketing, kind of the other component, also pretty manageable. As we look ahead, feel pretty comfortable that OpEx, as I said, will be kind of growing a little bit into next year as you kind of peek through this transformation investment phase.
But then managing the growth, again, in line with the organic kind of assumptions on the revenue side, which have been, again, pretty prudent.
Talk a little bit more about the digital transformation initiative, Project ADAPT. You talked about kind of bottoms-up redesign of processes, systems, data structure. Where are you in that journey today, and what have you found to be some of the biggest unlocks so far?
I would think of us as being sort of right in the middle of it. We still have about 18 months ahead of us, so we're not sort of done per se, but if I look back, we sort of started a little bit last year. I think the important part is to think about when you do one of these large transformations, you can say you're replacing systems and things like that, but that's not the hardest part. The hardest part is org and process changes. That's kind of where we started, brought in the right talent, a lot of folks with that transformational mindset, having seen it at scale. Again, one of the reasons even I joined is to bring that scale mindset and how do you scale.
Brought in a lot of the talent, and you've seen us do some of the org changes that we've done, but then also just redesign processes, which is usually the hardest part of any transformation, if you talk through. That's been kind of the journey so far. Now we've started to. We're in the middle of sort of the systems consolidation, so the same as many of our clients. We're looking at how do you consolidate 20, 30, 40 different systems into a lot fewer. That reduces cost, reduces complexity, reduces kind of handoffs between different departments.
And so that is kind of where we are. The data side of it is the other aspect where, again, the opportunity to do so much more with data. We all talk about AI, but at the end of the day, I'm a data person. I'm a machine learning guy as we talk about it, and so for me it's easy to put a wrapper of AI on top. It's the substance underneath that then gives you more value out of any kind of AI capability. So, that's where we're spending a lot of time now. You'll see us obviously continue to get benefits from this, but I would say, over the next 18 months, you'll see more of it, and so it'll be kind of showing up in all these different areas.
And look, the way to think about productivity from this and just in general is in sort of 3 tiers. AI is a big component of it. If you were to do nothing and you just handed everyone some of the most recent AI models, the most advanced models, I know I'm certainly a lot more productive than I was to, I think, the disappointment of my team who is now realizing that every time they send me something, it comes back in about 5 seconds later with an answer. You start to skip levels in terms of how you make decisions, and how fast you can move through things that you never thought were possible. So that was just a sort of individual level productivity, but then you have functional level and enterprise level productivity. For those, you actually do need to invest in transformation.
Right.
If you're going to make the IR function more productive, it does need a bit more work and so forth. So that's what we're working on. But anyone sort of wondering, should you aim to be 20%-30% more productive as an organization? I think it is, with the tools and capabilities, that if you're working on the substance and underneath the foundational area like we are, I think that should be definitely achievable.
Yeah. No, that makes sense. Let's talk about business diversification. You mentioned it in the upfront question. 5 years ago, Flywire was largely a cross-border education story. Today, you've got a large domestic education business. Travel, as you mentioned, is now a very large business in its own right, and B2B healthcare, still smaller, but still growing. How would you frame the growth rates across the different verticals? And where do you think that mix settles out as you approach the billion-dollar milestone?
Yeah. If you look back at IPO, I think most still thought of us as a cross-border, probably mostly kind of in the large big four markets kind of player. Now I think hopefully everyone's seen that this is quite a very different business, certainly this year and going forward. A lot of it has just been diversification into the other verticals. So travel, B2B healthcare now kind of adding. Even within education, you now have the domestic SFS cross-sell, which is driving growth that is above the company average. As I think about where we are today and how to think about the billion dollars even in the future, it's growth from these other verticals. So it's growth from travel, it's growth from, again, B2B, but also domestic EDU growing faster.
Those will become a larger share of the business and key growth drivers. That to us is kind of obviously good. Still cross-border will still be an important component.
We still see that as a key underlying sort of feature of the platform that enables you to cross-sell into some of these other areas. But the others are, in their own right, strong contributors. I would say those assume they grow faster than the company average, which by definition, if you look at the mix last year, it'll shift towards, i f you just look at cross-border, which is mostly basically out portion of the U.S. Mostly outside the U.S., then that becomes a smaller portion, while the rest becomes a much larger portion over time.
Yeah. Makes sense. Sticking with the cross-border business. We are sitting here in August, right in the heart of U.S. enrollment peak. What are you seeing in your own data? Maybe help clear up the always headlines on the status of getting visas in any given market. What are you seeing on the ground?
Yeah. We are now pretty much past the U.S. peak, getting into September. We have seen most of it, and so far it has played out okay for us. I would summarize it, but to give you some components, we look at external and internal data, as you know. Externally, the data, we have gotten our data through February, and it is trending more negative, but we have assumed 30% already negative in our numbers, and we are not seeing that level of decline in our own first payer data. Some of that is just if you look at a couple of things. One is the selective institutions. So those schools that are higher ranked or able to be more selective are able to do quite well. So the headline usually is student can make it into whatever the school may be.
I think if you double-click into that, usually it is a graduate student. Sometimes it is a less selective institution. So we have seen that mix of quality for us, and more selective institutions, along with where tend to lean more undergraduate. Those are still doing pretty well. So if you look at the 30% decline, we still feel pretty good that we have captured that. The channel that remains negative, we talked about it, you see it in the visa data, is the incoming from India in particular.
Even with that, again, we've taken a pretty prudent approach. If I was to then step back and summarize what we've seen so far for the U.S. is, we guided the full year U.S. growing in the low single digits with the assumption of a 30% decline in visas. So far, for the peak at least, we've done in line or better than that.
Yep.
Modestly better than that. So we're comfortable as far as the U.S. performance within that. For peak and again, more to go in the year, but feel pretty good so far about the U.S.
Yeah. No, great. Okay, the other one was the U.K. I think this quarter you flagged higher rejection rates on visas. I think you took a more conservative stance on that market.
Yeah.
What do you think is causing that, and how do you think about the range of outcomes in the U.K.?
Yeah, I think there's similarities there, too. The headlines tend to be a bit more negative than the reality on the ground, and certainly for us. If I was to separate the headlines versus what we see. In the headlines, again, there's very specific corridors, where compliance is forcing some higher rejection rates. We're seeing that. Again, when you look at it's mostly the graduate, the one-year, these specific programs. It is not our higher quality undergraduate, kind of programs that we tend to be in the U.K. Again, a little bit different. Even if you look at the external data, what we're seeing there is very choppy. I think it was in the first quarter, it was something like 30%+ down. But then in July, I think it was down maybe 11%.
Now, we're not going to take, again, that's my approach, is I'm not going to take one data point and say, "Oh, now it's gotten better," or something.
Yep.
We're remaining prudent. As you saw, and as you pointed out, we've taken a usual prudent approach, assumed second half decelerates in the U.K. That's baked in. We're going to continue watching. We're early in the U.K. cycle. The U.K. goes through the end of this quarter and into October.
It's one of the things we talked about on the earnings call, just around that timing, where you can have just even before a holiday season or a holiday timing in China can move one or two points around because of that.
Yeah.
But that aside, which again, we've tried to capture quite clearly. We'll continue watching it. And it's less. Listen, we've been very prudent around this on purpose. And it is with a view to this year. And these things tend to play out over academic years. Everyone tends to look at what did this month do, this other month do? These things tend to play out over academic years.
Right.
What we're seeing in the U.K. is political change, but the general focus remains on high-quality students, being something that every large market will want to try to remain, continue attracting.
Yeah, that makes sense. So sticking with the U.K., how do you think about the growth algorithm there, and specifically in SFS? So how much of the U.K. growth outlook is now SFS driven versus being more cross-border?
Yeah. The U.K. has gotten itself through an evolution, I would say. And I think the SFS definition is important, because if we define SFS as just the latest integration that we started piloting last year, that's not a huge driver. But what we've seen the U.K. is transform itself from, I think if you look several years back, it was again mostly cross-border. It's transaction based. Then, what it's shifted to is a combination of new logos, but then integration based cross-sell on the domestic side.
Yeah.
So whether that was the You saw the WPM acquisition enabled Unit4 type integrations. Now we've got, sorry, Tribal, and then we got Unit4 Agresso as part of SFS. As we expand the number of integrations that are available, and that captures more of the market, we're able to increase utilization. So the growth algo of the U.K. becomes less of just new logos, which now we're quite penetrated, and it's more about utilization. And there, we've given you this metric of our aim is to process at least 90% of student payment volumes. And I think we gave a number last year, it was around 12. This year is about 20 that we do that for. But there's a number of schools where we can continue to grow that level of penetration and utilization.
And so the way we do that is through having more of those integrations, which then embed us deeper into the school's ecosystem. And that's where you have that stability and long-term client retention from that. So again, much more diversified in terms of the growth outlook for the U.K. It's more growing that utilization, so the cross-sell internally. You still have some new logo growth, but I would say that's a lower component of the growth. It's more just utilization that's driving it.
Got it. Okay. Sticking with domestic education and SFS. In Q2, you signed three new U.S. SFS deals. You said it was double the ARR of the same quarter in 2025. And I think the attach rate's still only 10%. So has there been a change on the competitive side that's allowing you to accelerate the momentum there? Is it just getting the word out? What's leading to the acceleration in domestic wins in the U.S., and then how are you thinking about the trajectory from here?
Yeah, in general, we're seeing win rates go up, and I think there's a few things happening. One, I think, yes, the perception of us as just cross-border has shifted to, okay, well, we are actually domestic and cross-border, so we can help you with all your back office and operational complexity issues, especially as schools now are struggling financially in many cases. One of the ways, as I talked to you about ourselves, is how do you consolidate vendors and simplify your back office? We bring those capabilities through the software that we sell. That is one part of it. Then you have reference clients. To some extent, Penn State and others and many other names that you've heard us talk about become those reference clients for us that others look to.
Mostly now we talk to the CFO usually, and not just the back office bursar folks, but now we're talking a different level. That's because you have enterprise sales folks. That's the other component that we've talked about with the U.S. SFS, is just having the right enterprise sales talent enables you to have those relationships and those conversations at a different level. Then the last thing, and actually maybe it's the most important one, is that we increasingly do full suite sales. It's not just you go in and you sell just the collections capability or just the payment plans or something. It is now full suite, so you have collections, you have payment plans, you have the actual domestic tuition payment processing.
Yeah.
So 529, again, all the innovation that we build into our product suite now. That becomes a much larger dollar value that then is built behind that increase in ARR. Again, really excited, obviously durable growth and that consistency of some of these larger deals and the sustainability of it over the long term is quite exciting. So we see that domestic part of the, about a third or so of the U.S. business that should continue to grow above company average for a while.
That's great. Maybe we could talk about just the student life cycle that uses Flywire. It's a question we've gotten asked a lot. I think when a student pays year one, it's often before they have local connectivity, local bank accounts, utilization tends to be higher. How does retention trend thereafter? How has that trend of seeing lower retention in subsequent years changed or improved over time?
Yeah.
It's a three-dimensional question.
Where to start? I think maybe just framing it for those who don't know is our U.S. education business, I think of it in three different components, all about a third each. Which is a third is sort of the domestic business that we talk about now that it's growing faster than we just talked about. The other two thirds is about half and half. About a third of it is first years, and about a third of it is existing, the rest of the cohorts of students. If you look at that first year payers dynamic, what we see there is, think of it as international student comes to the U.S., usually the parents are paying. We provide convenience, trust, and just the knowledge that you can pay with your own known instrument and funding instrument connected into your bank.
Many times also just the documents that are required to move over $10,000 out of certain markets. There's actually a number of things which, by the way, we've automated with AI, is to make it easier to make those payments. Because people think, "Oh, it's easy to send $10,000 out of one of these countries," and it's usually, it's actually not.
Yeah.
It is one of the reasons it is complex. We provide that safety and comfort. That makes it easy, and then we have a high percent of those first year payers that use us. I think the opportunity and sort of the other third and the existing, once they go into second, third year, yes, some of them open up local bank accounts, then they shift to those payment methods. I do not see that as leakage. Especially coming from my background, I look at payers as a huge opportunity for us in that side of the equation. We talk always about clients. We do not talk quite as much about the payer side of this equation.
Here, I think it is three things which you have heard us talk about is how do you improve that retention in the second, third, fourth year and so on. First, it is SFS, the more SFS you have, the more we then capture even the domestic, if they would become a domestic payer. You have that second and third year kind of effect. We see cross-border go up also as SFS comes in. Second is the checkout experience. You can improve that to make sure that parents see the value of, oh, I can keep using that bank account, or I can keep using the instruments that I have used before. Third is from a, it is that local partnership in the countries, the source markets, where we are unique in those partnerships.
You hear us talk about all the time about being connected into the top banks in India, the banks in China and other areas. That is a unique aspect of our business and the payment platform we provide, which enables us to then give comfort to a parent or anybody paying that then there is an opportunity for them. Listen, stepping back, not even in our algorithm, is the opportunity to engage all of our payers in a much more direct way, and some of that is data. Again, as the data guy, I am very much looking at that as an opportunity to better understand payer behavior.
How it can, that is not just the students, actually. Travel, same thing. There is a lot of value in understanding the traveler behavior and helping and connecting the dots between your payers and the clients that they are paying, I think is a unique opportunity.
Right. Okay. Another theme recently in the education business has been an increasing amount of new logos coming from outside of your big four markets. How do you frame where you are in that diversification process, and how large do you think that opportunity is relative to some of the top markets?
Yeah. We talk a lot about the big four, where again, there's visa challenges and those kind of choppy markets there, and yet we still are growing even in the big four, and we're gaining share. I think one of the things that if you look at all of the visa trends, we do better than those, whether you look on a revenue basis or volume basis because again, different mix and the levers that we have. So even in the big four, we have growth. Outside the big four, you could say some of the negatives there are actually helping us expand our global footprint even faster. So in a way, not that it's great to look at it necessarily that way, maybe glass half full kind of approach, but it is accelerating. Our agents are telling us that students are applying to more destinations.
What you're seeing outside the big four is a lot of these countries are now digitizing their institutions, education institutions. They're having to digitize for the first time because maybe they had two or three international students, suddenly now they have 20 or 30.
Right.
If you had one person in the back office who was trying to reconcile all these wires or whatever methods of payment, suddenly, I think it makes sense to digitize your accounts receivable. The second thing outside the big four in EDU is the competition's kind of fragmented.
Yep.
So we are the scale player there, so we're unique in that perspective. And so, that's the other component that's helping drive that. Again, in terms of numbers, we've said the non-big four EDU is sort of share of total revenues, around low teens last year. Expect to continue to grow its share because I expect that to continue growing kind of faster than the company average. I think in the first half, we said it was growing over 30%.
Right.
And again, it works well in our favor as students diversify their destinations.
Yep. No, diversification, certainly a theme here. And speaking of, maybe we can talk about the travel vertical. It's basically your second-largest vertical now. It's balanced between kind of luxury and experiential travel and hospitality, which was augmented by the Sertifi acquisition. Where do you see yourself as being most penetrated today across those different sub-verticals, and where do you think you have more room to push ahead on penetration and drive durable growth?
Yeah. So on the experiential or kind of our legacy travel business, think of it as multi-day bespoke travel, which nowadays I think it's fortunately an area of growth that we've seen and interest. So we started with destination management companies and tour operators. So things like safaris. Started there, but now, as you said, we've sort of expanded both geographically, but also in subverticals. So geographically, we see a lot of growth in Asia, and Europe, increasingly, so in parts of Asia, so Indonesia, Thailand, or Japan. So seeing a lot of growth there. And then in subverticals, think of it as kind of high touch and high cost type of, without saying luxury, but it's sort of high cost and those kind of more extended opportunities for when you take a kind of a curated experience.
And so a lot of those can be hiking experience, cycling, biking, all sorts of fun activities that I think increasingly require somebody to help you manage that trip. And so we, of course, have the ROI that is well-proven with these clients. And now, again, we have the name that's kind of getting out there, so it's easier for us to make those cross-sell, and those guys all talk to each other. If you get one heli-skiing company there, the others are going to follow. So, same thing we're seeing elsewhere.
Yeah. So maybe you can touch on Sertifi a bit, largest deal ever in the company's history. I think you've consistently said that deal's running ahead of plan. Where is that outperformance coming from, and then where does the focus sit over the next 12- 18 months?
Yeah. So initially, we talked about Sertifi as the opportunity being to, again, expand into larger clients, as we started into smaller clients, allowing us to go into larger clients. And then depth of product. The payment monetization is the biggest outperformance we've seen, and that's one of the reasons we've talked about it, kind of ties into the gross margin story a little bit for this year into next year. And we see that as continuing to be a big opportunity. So we said $3 billion of payment monetization at acquisition, and at the time, I think we said the mix, it was about 70% software, 30% payments. We've made some dent into that and still have about $2.5 billion to go. So we see that as continuing to be a big driver of growth in the future.
But increasingly, going global is a big component of that. I think we've seen about 42 or so, I think, international locations for us with Sertifi. So we're starting to kind of pick up more on the international side. Again, I think it's an opportunity for us to cross-sell this kind of capability. Then lastly, I think once you integrate the two platforms, you can imagine the strength of what we provided before, which was that cross-border capability in these international markets, with the document signing and workflow digitization that Sertifi brings in.
So we see a lot of opportunity in that cross-sell, but that's sort of the third piece over the next 12- 18 months, and as part of the billion dollars, we see that opportunity. We see, again, sort of travel growing faster overall between those.
Yeah. Okay. We've got a minute or two left here. I want to maybe squeeze in one on healthcare. So Cleveland Clinic was just a marquee win, reinvigorated the healthcare business this past year. I think you made the comment, there's only so many Cleveland Clinics out there, and you'll be lapping that next year. How do you think about the organic growth rate of that business, kind of ex-Cleveland? Then, what is the pipeline and what kind of opportunities does a large win open up for that business?
Yeah, Cleveland Clinic was certainly, and is a marquee name that has opened up a lot of conversations with larger enterprise-size kind of clients. I would say, though, keep in mind that, as we talked about, Cleveland Clinic ramps this year. As we get into second half, you kind of sunset that ramp. So as you get into next year, I would think of, just again, to take a prudent approach, I would think of healthcare as growing below the company average over time. But it can be very choppy, because if you do get another large enterprise, that could change the trajectory.
These are long enterprise sales. As you can imagine, if you think education is slow, healthcare is even slower in terms of making these big decisions. Once you are in, again, you are in for the long haul. We feel good that at least healthcare is now returned to growth scalable, with a great marquee client behind us.
Got it. Will, in the last couple seconds here, any final thoughts you would leave the group with?
Look, I think we are going to continue growing the top line as you have seen us lean into that, but also don't forget the free cash flow profitability and the durability of the model in terms of the consistent cash flow per share, and the focus on dilution and the other parts of the P&L that matter to the balanced valuation. The things that we control, and that is what we are going to focus on, is the stuff we control and execute, and I think that is what we have done, and we will continue doing it.
Great. All right. Cosmin, thanks for joining us. Glad to have you again.
Thanks a lot.