Flywire Corp Q4 FY2024 earnings call

Management Statement and Operational Highlights

• Key Milestones in 2024: Revenue less ancillary services grew 24%, adjusted EBITDA margins up 540bps despite macro headwinds. Signed over 180 new clients in Q4, finishing with over 800 new clients in the year. Travel became second largest vertical. Education strengthened UK market. Acquired Invoiced in B2B.
• Acquisition of Sertifi: Sertifi helps 20,000+ hotel locations automate workflows, provides hospitality-specific integrations, and enables monetization of $billions of payment volume. Funded with cash and debt, preserving liquidity for other purposes.
• Operational Review and Restructuring: Affects ~10% of workforce, with $7M-$9M in charges for severance and related costs. Focus on efficiency, cost reduction, and investing in high traction areas like product, data, automation, and AI.
• Vertical Performance Details: Education EMEA and UK strong, but Canada, Australia, and U.S. faced visa challenges with opportunities for new client expansion and upselling. Travel growth driven by new client signings and Sertifi acquisition. Healthcare and B2B have growth initiatives.

Segment Performance

• Education: EMEA and UK education business saw over 50% year-over-year revenue growth. However, faced headwinds in Canada (Q4 $3M revenue shortfall due to visa policy change), Australia (policy impacting student volumes), and U.S. (slower growth due to visa trends). Revenue contribution not explicitly stated as a percentage but is a key vertical.
• Travel: Grew organically over 50% in 2024, becoming the second largest vertical, making up 13% of total revenue. Acquisition of Sertifi is transformative, enabling access to new travel subsegments and monetization of payment volume.
• Healthcare: Secured a landmark eight-figure relationship with a major hospital system; expected to return to growth once the new client is live (likely Q3 2025).
• B2B: Fastest growing vertical, partnered with Cvent, empowering Cvent to offer diverse local payment options to clients, with expectations of continued strong growth.

Guidance

• 2025 Outlook: FX neutral revenue growth excluding Sertifi is 10%-14% with ~3% FX headwind. Adjusted EBITDA margin target 200-400bps expansion excluding Sertifi. Sertifi expected to add $35M-$40M revenue in 2025.
• Q1 2025: FX neutral revenue growth expected 11%-14% year-over-year (with ~250bps FX headwind at current spot rates). Adjusted EBITDA margins expected to expand 300-600bps year-over-year excluding Sertifi. Sertifi expected to add $3M-$4M in revenue in Q1 with flat to slightly positive EBITDA.

Risks

• Macro Revenue Headwinds: Student visa policy changes in Canada, Australia, and U.S. causing revenue shortfalls and demand destruction in key education markets.
• Visa Policy Uncertainty: Ongoing uncertainty in visa policies affecting student volumes, which could impact revenue growth.
• Restructuring Execution Risks: Potential challenges in executing the restructuring plan, including workforce adjustments and cost savings targets.

Question and Answer

Q: Can you talk a little bit about the NRR?

A: Cosmin Pitigoi states NRR was 114% in 2024, expecting a downtick in 2025 due to visa dynamics in Canada and Australia, primarily impacted by those markets.

Q: Maybe just start off in the portfolio review, maybe just why now obviously policy related impacts you're seeing show up in the financials, but maybe you could touch on perhaps other reasons for the timing.

A: Mike Massaro mentions focusing on what can be controlled amidst regulatory and macro headwinds, leading to an internal review of verticals, geographies, products, and cost structure.

Q: Hey, thanks so much. Just a follow-up on Andrew's question on the portfolio review. Mike, are you trying to solve for efficiency or is it a look at the overall sort of coverage that you have?

A: Mike Massaro explains the review is to optimize investment in high traction areas, ensure right focus and skill sets, and control decisions to help the company come out stronger.

Q: Hey guys. Is it possible just given the noise in the outlook and the numbers around the different geographies, maybe just give us a little bit more granular expectation per segment growth rates for the year?

A: Cosmin Pitigoi unpacks growth expectations, noting Canada and Australia down ~30%, healthcare below average growth initially, U.S. cautious, and EMEA, travel, B2B growing above average.

Q: Hi, guys. I just wanted to follow-up on the U.S. and that top of funnel comment you made, Rob, and you also made the comments on the demand destruction in Canada. So just wanted to tie those two together with what's going on in the U.S.

A: Rob Orgel mentions the U.S. is a destination of choice, but visa trends impact, with the team focusing on client execution and new client acquisition to offset impacts.

Q: Hey, thanks for taking the question. I guess I just wanted to not to belabor the point, but looking at the U.S. education market in 2024, the growth being below companywide average at, I believe, 13% here. Was that in line with what you were previously anticipating for 2024?

A: Cosmin Pitigoi explains visa trends in the U.S. exiting the year led to cautious outlook, but the business has momentum with domestic strategy and product innovation.

Q: Hey, thanks for taking the question. I guess I just wanted to not to belabor the point, but looking at the U.S. education market in 2024, the growth being below companywide average at, I believe, 13% here. Was that in line with what you were previously anticipating for 2024?

A: Cosmin Pitigoi explains visa trends in the U.S. exiting the year led to cautious outlook, but the business has momentum with domestic strategy and product innovation.

Q: Hey, thanks for taking the question. I guess I just wanted to not to belabor the point, but looking at the U.S. education market in 2024, the growth being below companywide average at, I believe, 13% here. Was that in line with what you were previously anticipating for 2024?

A: Cosmin Pitigoi explains visa trends in the U.S. exiting the year led to cautious outlook, but the business has momentum with domestic strategy and product innovation.

Q: Hey, thanks for taking the question. I guess I just wanted to not to belabor the point, but looking at the U.S. education market in 2024, the growth being below companywide average at, I believe, 13% here. Was that in line with what you were previously anticipating for 2024?

A: Cosmin Pitigoi explains visa trends in the U.S. exiting the year led to cautious outlook, but the business has momentum with domestic strategy and product innovation.

Q: Hey, guys. I just wanted to follow-up on the capital allocation and really the rationale around the recent deal. Is there any way that you can provide us a path to when this could start to be accretive?

A: Mike Massaro and Cosmin Pitigoi discuss the acquisition of Sertifi's synergies in faster monetization of payments and international expansion, with positive EBITDA and long-term accretive potential.