Flywire(FLYW) - 2022 Q4 - Annual Report

FORM 10-K Filing Information Filing Details This section identifies the document as an Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed by Flywire Corporation, a Delaware-incorporated company with its principal executive offices in Boston, MA. It also confirms the company's status as a well-known seasoned issuer and a large accelerated filer - Flywire Corporation filed its Annual Report on Form 10-K for the fiscal year ended December 31, 2022[2] - The company is incorporated in Delaware, with its principal executive offices in Boston, MA[3] - Flywire is classified as a well-known seasoned issuer and a large accelerated filer[3] Filing Details Metrics | Metric | Value | | :--- | :--- | | Commission File Number | 001-40430 | | Registrant's Telephone Number | (617) 329-4524 | | Voting Common Stock Symbol | FLYW | | Exchange | The Nasdaq Stock Market LLC (Nasdaq Global Select Market) | | Non-Voting Common Stock | None registered pursuant to Section 12(g) | | Well-Known Seasoned Issuer | Yes | | Large Accelerated Filer | Yes | | Market Value of Non-Affiliate Voting/Non-Voting Common Stock (as of June 30, 2022) | $1,078,544,798 | | Voting Common Stock Outstanding (as of March 6, 2023) | 108,144,702 shares | | Non-Voting Common Stock Outstanding (as of March 6, 2023) | 1,873,320 shares | Documents Incorporated by Reference Proxy Statement Incorporation Portions of the registrant's proxy statement for the 2023 annual meeting of stockholders, to be filed within 120 days after the fiscal year end, are incorporated by reference into Part III of this Form 10-K - Portions of the 2023 annual meeting of stockholders' proxy statement will be incorporated by reference into Part III of this Form 10-K[7] Table of Contents Special Note Regarding Forward-Looking Statements Nature of Forward-Looking Statements This section clarifies that the Annual Report on Form 10-K contains forward-looking statements regarding future operations, financial condition, and business strategy, which are subject to substantial risks and uncertainties. Readers are cautioned not to unduly rely on these statements as predictions of future events, and the company undertakes no obligation to update them - The report contains forward-looking statements about future financial performance, business strategy, and management objectives[12][13] - These statements are subject to known and unknown risks, uncertainties, and assumptions, including those detailed in the 'Risk Factors' section[14] - Readers should not rely on forward-looking statements as predictions of future events, and the company does not undertake to publicly update them[15] PART I Business Overview Flywire Corporation is a global payments enablement and software company focused on delivering complex, high-value payments across education, healthcare, travel, and B2B sectors. Its core offering, the 'Flywire Advantage,' combines a next-gen payments platform, a proprietary global payment network, and vertical-specific software, enabling clients to streamline accounts receivable, offer flexible payment options, and enhance customer experience. The company has grown rapidly, serving over 3,100 clients globally and processing significant payment volumes, while also expanding through strategic acquisitions - Flywire's mission is to deliver the most important and complex payments globally[19] - The company's 'Flywire Advantage' consists of a next-gen payments platform, a proprietary global payment network, and vertical-specific software with deep industry expertise[25] - Flywire serves over 3,100 clients worldwide, including 2,300+ education institutions, 80+ healthcare systems, and 600+ clients in travel and B2B[30] Key Financial and Operational Highlights | Metric | Value | | :--- | :--- | | Revenue | $289.4 million | | Net Losses | $39.3 million | | Total Payment Volume | $18.1 billion | | Annual Net Dollar-Based Retention Rate | 124% | | Net Promoter Score (NPS) | 62 | - Recent acquisitions include Cohort Solutions Pty Ltd. (July 2022), WPM Group Ltd. (December 2021), and Simplificare Inc. (February 2020), expanding capabilities in education and healthcare[35] Our Mission Flywire's mission is to deliver the most important and complex payments in an increasingly digital world - Flywire's mission is to deliver the most important and complex payments in an increasingly digital world[19] Our Company Flywire is a leading global payments enablement and software company, offering a next-gen payments platform, proprietary global payment network, and vertical-specific software - Flywire is a leading global payments enablement and software company, offering a next-gen payments platform, proprietary global payment network, and vertical-specific software[20] - The company targets massive sectors like education, healthcare, travel, and B2B, with an estimated annual addressable volume of approximately $11.7 trillion, which are in early stages of digital transformation[21] - Flywire aims to transform clients' accounts receivable functions by automating paper-based processes and creating interactive digital payment experiences[23] Our Flywire Advantage The Flywire Advantage integrates a next-gen payments platform, a proprietary global payment network, and vertical-specific software, creating a flywheel effect that enhances solutions and deepens industry expertise - The Flywire Advantage is built on three core elements: a next-gen payments platform, a proprietary global payment network, and vertical-specific software backed by deep industry expertise[25] - The next-gen payments platform facilitates global payment flows, offering tailored invoicing, settlement, reconciliation, and flexible payment options[27] - The proprietary global payment network enables acceptance and settlement in over 240 countries/territories and 140+ currencies, with direct connections to alternative payment methods[27] - Vertical-specific software integrates seamlessly into client workflows, providing tailored solutions for education, healthcare, travel, and B2B, including interactive dashboards and reporting tools[27][28] - This integrated approach creates a 'flywheel effect,' where client adoption enhances solutions, expands the network, and deepens industry expertise[29] Benefits of the Flywire Advantage to Our Clients and Their Customers The Flywire Advantage offers clients modern payment experiences, simplified complexity, cost savings, and enhanced payment yield, while providing customers with superior, flexible, and secure payment options - For clients, benefits include a modern, customer-focused payment experience, simplified payment complexity, processing cost savings, enhanced payment yield, ease of integration, and a trusted brand[37][38] - For customers, benefits include superior and simple payment experiences, choice of preferred payment methods/currencies, flexible on-demand payment options, and increased confidence in secure, accurate, and timely payments[43] How Our Flywire Advantage Works Flywire's platform supports the entire payment lifecycle with predictive analytics and AI for fraud detection, leveraging a global network for local payments and integrating vertical-specific software with major ERP systems - The next-gen payments platform supports the entire lifecycle of domestic and cross-border transactions across online, mobile, or in-person channels, eliminating the need for multiple vendors[41] - The platform leverages predictive analytics, ML, and AI for fraud detection and risk mitigation, processing approximately $18.1 billion in total payment volume in 2022[42][44] - The proprietary global payment network offers a 'local-in / local-out strategy,' enabling payments in over 240 countries and 140 currencies, with optimized transaction routing and local clearing capabilities[49][50][53] - Vertical-specific software integrates with major ERP systems (e.g., Ellucian, Epic, Rezdy, Oracle) to automate accounts receivable, provide real-time access, and offer predictive analytics for tailored payment options[55][57] Our Industry Key industry trends include globalization, the accelerating shift to software-integrated digital payments, and the limitations of legacy infrastructure, which often lead to high operational costs and inefficiencies - Key industry trends include globalization requiring cross-border and local payment expertise, accelerating shift to software-integrated digital payments, limitations of legacy payment infrastructure, and accelerating digitization of B2B payments[59][60][62][65] - Legacy systems are often paper-based, manual, disparate, and lack functionality, leading to high operational costs and inefficiencies[67] Our Market Opportunity Flywire estimates its addressable market in education, healthcare, and travel to be approximately $1.7 trillion, expanding to over $10 trillion with B2B payments, driven by demand for digital solutions in inefficient markets - Flywire estimates its current addressable market in education, healthcare, and travel to be approximately $1.7 trillion in global payment volume[70] - The B2B payments offering expands the addressable market to over $10 trillion[70] - Inefficiencies in these markets, such as paper-based healthcare payments and budget shortfalls in education, highlight the demand for digital solutions[68] Our Growth Strategy Flywire's growth strategy focuses on expanding with existing clients, acquiring new ones, increasing platform monetization, and broadening its solution portfolio through channel partnerships, new verticals, and strategic acquisitions - Key growth strategies include growing with existing clients (demonstrated by a 121% average annual net dollar-based retention rate over three years), winning new clients, increasing payments platform monetization, and expanding the solution portfolio[73] - The company plans to expand its ecosystem through channel partnerships with financial institutions and enterprise software providers[72] - Flywire aims to expand into new verticals (e.g., real estate, government taxes) and geographic markets, leveraging its existing platform[74] - Strategic and value-enhancing acquisitions are a part of the growth strategy, with a successful record of integrating acquired businesses like Simplee, WPM, and Cohort Go[75] Our Flywire Culture and Team Flywire's culture is built on shared experiences, diverse backgrounds, and core values like global collaboration and ambitious innovation, supported by a diverse team of approximately 1,000 employees providing 24x7 multilingual customer support - Flywire's culture is founded on shared experiences, diverse backgrounds, and a mission to deliver complex payments, guided by values like global collaboration, authenticity, fulfillment, execution, ambitious innovation, and evolved learning[76][80] - The team comprises approximately 1,000 full-time employees and contractors ('FlyMates') representing about 40 nationalities and languages, providing 24x7 multilingual customer support[76] Our Business Model Flywire generates highly recurring revenue from transactions and platform/usage-based fees, reflecting the mission-critical nature of its deeply integrated solutions - Flywire generates revenue from transactions and platform/usage-based fees, which are highly recurring due to the mission-critical nature of its deeply integrated solutions[77][78] An Illustration of Our Solution Flywire simplifies domestic and cross-border payments by providing a single connection for invoicing, global pay-in/pay-out, compliance, and risk management, including currency conversion and payment plans - Flywire simplifies domestic and cross-border payment transactions by providing a single connection for invoicing, global pay-in/pay-out, compliance, and risk management[79] - For international payments, the system handles currency conversion and hedging, while for domestic payments, it facilitates payment plans[81][82] Our Go-To-Market Strategy Flywire employs a direct sales channel supported by regional expertise and relationship management, generating leads through digital marketing and events, and utilizing a 'land-and-expand' strategy with indirect channels like financial institution partnerships - The direct sales channel is core, supported by regional, vertical, and domain expertise, and a relationship management team for cross-sell and up-sell opportunities[85] - Sales leads are generated through inbound digital channels, content marketing, virtual events, and industry trade shows[86] - A 'land-and-expand' strategy is employed, where clients initially adopt solutions and then expand to additional offerings[87] - Indirect channels include partnerships with financial institutions (e.g., Bank of America) and integrations with leading ERP systems (e.g., Oracle, Ellucian, Epic)[88] Our Technology and Architecture Flywire's unified technology stack, built on a microservice architecture, supports Payments-as-a-Service and Software-as-a-Service offerings with features like a proprietary pricing engine, ML fraud/AML risk management, and a public API for scalability - Flywire's unified technology stack, built on a DevOps culture and microservice architecture, supports Payments-as-a-Service and Software-as-a-Service offerings[89][90][92] - The Payments-as-a-Service platform includes payment capture, proprietary pricing engine, foreign currency exchange hedging, ML fraud/AML risk management, and automated transaction routing[95] - Software-as-a-Service provides industry-specific solutions with 'last mile' connectivity to client operating systems, leveraging AI/ML for personalization[92] - A public API enhances scalability and integration for clients, enabling real-time transaction processing[93][94] Our Compliance and Risk Management Foundation Flywire maintains a dedicated compliance and risk management function with robust AML, SARs, and KYC procedures, significant investment in data and cybersecurity, and adherence to global regulatory standards and certifications - Flywire maintains a dedicated compliance and risk management function with robust AML, SARs, and KYC procedures, and significant investment in data and cybersecurity[97] - The company holds key certifications including SOC 1 Type II, SOC 2 Type II, PCI DSS, and ADA compliance, and adheres to GDPR, China's Data Security Law/PIPL, CCPA, FERPA, and HIPAA[97] - Risk management includes local and global regulatory expertise, currency controls, transaction-level risk mitigation (fraud, money laundering, sanctions screening), and a globally dispersed risk and security team[98][99][101] Competition Flywire competes with legacy payment methods, integrated cross-border providers, B2B platforms, and local niche players, believing it competes favorably by addressing friction, network limitations, and unsophisticated fraud prevention - Flywire competes with legacy payment methods (bank wires, remittance companies), integrated cross-border payment providers, B2B payment platforms, and local niche players[102] - The company believes it competes favorably by addressing issues like friction in client/customer experiences, lack of scaled global networks, limited software/payment offerings, inability to adapt to new technology, and unsophisticated fraud prevention[103] Intellectual Property Flywire protects its intellectual property through trademarks, copyrights, trade secret laws, confidentiality procedures, and contractual restrictions, holding 106 registered trademarks and applications as of December 31, 2022 - Flywire protects its intellectual property through trademarks, copyrights, trade secret laws, confidentiality procedures, and contractual restrictions[104] - As of December 31, 2022, the company had 106 registered trademarks and applications, and various U.S. and international domain names[105] Regulation and Industry Standards Flywire operates in a complex and evolving regulatory environment, subject to U.S. and international financial services, consumer protection, and data privacy laws, requiring compliance with various licenses, network rules, and data protection standards - Flywire operates in a rapidly evolving regulatory environment, subject to U.S. federal, state, local, and international regulations, as well as rules from card networks and other authorities[109] - The company is registered as a Money Service Business (MSB) with FinCEN and complies with the Bank Secrecy Act (BSA) and USA PATRIOT Act, implementing AML and CFT programs[110][111] - Flywire holds money transmitter licenses in 41 U.S. jurisdictions and is licensed as Authorized Payments Institutions in the U.K., Lithuania, and has in-principle approval in Singapore[113][115][116] - The company is subject to various consumer finance and protection laws (e.g., TILA, EFTA, TCPA) and card network rules (Visa, Mastercard, American Express, China UnionPay, JCB, NACHA), requiring compliance with data integrity, chargeback standards, and PCI DSS[118][119][120][121][122][124][128][129] - Extensive privacy and data protection laws apply globally, including GDPR, U.K. GDPR, CCPA, CPRA, Virginia CDPA, Colorado CPA, Utah Consumer Privacy Act, Japan's Amended APPI, and China's DSL and PIPL, with increasing penalties for non-compliance[130][131][134][135][136][137][138][139] Human Capital and Employees As of December 31, 2022, Flywire had approximately 1,000 full-time employees, with objectives focused on recruiting, retaining, incentivizing, and integrating its workforce through equity incentive plans - As of December 31, 2022, Flywire had approximately 1,000 full-time employees ('FlyMates'), with no labor union representation or work stoppages[142][143] - Objectives include identifying, recruiting, retaining, incentivizing, and integrating FlyMates, with equity incentive plans used for motivation[144] Our Values Flywire's core values, including Global Collaboration, Authenticity, Fulfillment, Execution, Ambitious Innovation, and Evolved Learning, guide hiring, performance, and daily interactions - Flywire's core values include Global Collaboration, Authenticity, Fulfillment, Execution, Ambitious Innovation, and Evolved Learning, guiding hiring, performance, and daily interactions[145][149] Environmental, Social and Governance (ESG) Report In December 2022, Flywire released its inaugural ESG report, aligning with SASB and GRI standards, detailing investments across affordability, DE&I, career development, social impact, data privacy, governance, and environmental sustainability - In December 2022, Flywire released its inaugural ESG report, aligning with SASB and GRI standards, detailing investments across affordability/accessibility, DE&I, career development, social impact, data privacy/security, governance/ethics, and environmental sustainability[148][149][150] - Recent ESG commitments include codifying ESG as a strategic priority, establishing a DE&I Center of Expertise, enhancing career development, and maximizing social impact through the Charitable Foundation[150][156] Corporate Information Flywire Corporation, initially peerTransfer Corporation, was formed in July 2009 and changed its name in December 2016, with its principal executive offices located in Boston, MA - Flywire Corporation was initially formed as peerTransfer Corporation in July 2009, changing its name in December 2016[151] - The principal executive offices are located at 141 Tremont St., 10, Boston, MA 02111[151] Available Information Flywire makes its SEC filings available free of charge on its website and the SEC's website, announcing material information via SEC filings, investor relations website, blog posts, press releases, and social media - Flywire makes its SEC filings (10-K, 10-Q, 8-K) available free of charge on its website (www.flywire.com) and the SEC's website (www.sec.gov)[153](index=153&type=chunk) - Material information is announced via SEC filings, investor relations website (https://ir.flywire.com), blog posts, press releases, public conference calls, webcasts, and social media channels[154] Risk Factors Investing in Flywire's common stock involves significant risks, including a history of operating losses, a short operating history in a rapidly evolving industry, and potential fluctuations in operating results due to various factors. The company faces challenges in client retention, new client acquisition, sales expansion, and managing revenue mix. Operational risks include scaling issues, financial losses from errors, dependence on banking partners, and cybersecurity threats. Legal and regulatory risks encompass complex financial services regulations, data privacy laws, anti-corruption laws, and the impact of Brexit. As a public company, Flywire incurs increased costs and management attention for compliance, and its stock price may be volatile - Flywire has a history of operating losses and may not achieve or sustain profitability in the future, with net losses of $39.3 million, $28.1 million, and $11.1 million for 2022, 2021, and 2020, respectively[163] - The company operates in a rapidly evolving industry with a short history at its current scale, making future performance difficult to predict[168] - Key risks include inability to retain clients, attract new clients, expand sales, and manage revenue mix, which can affect gross profit and operating results[172][183][184][187] - Operational risks involve scaling the business to meet client growth, potential financial losses from errors in fund transfers (processing over $18.1 billion in 2022), dependence on a proprietary network of banking partners, and adapting to rapidly changing technology and industry standards[196][233][235][262] - Significant legal and regulatory risks stem from complex financial services regulations (MSB, AML, CFT), evolving data privacy laws (GDPR, CCPA, PIPL), anti-corruption laws (FCPA, U.K. Bribery Act), and geopolitical events like the Russia-Ukraine conflict and Brexit[308][314][318][339][357] - As a public company, Flywire incurs increased costs for compliance (e.g., Sarbanes-Oxley Act Section 404) and management time, and its common stock price may be volatile due to various market factors[371][381][382] Risk Factors Summary The summary provides an overview of risks related to business and industry, operations, legal/regulatory/compliance landscape, being a public company, and common stock ownership - The summary provides an overview of risks related to business and industry, operations, legal/regulatory/compliance landscape, being a public company, and common stock ownership[158][159][162][163][164] Risks Related to Our Business and Industry Flywire faces risks from operating losses, an uncertain future due to its short history in a rapidly evolving industry, and challenges in client retention, acquisition, and sales expansion, all of which can be impacted by foreign currency fluctuations and market competition - Flywire has a history of operating losses and may not achieve or sustain profitability in the future, with net losses increasing from $11.1 million in 2020 to $39.3 million in 2022[163] - The company's short operating history at its current scale in a rapidly evolving industry makes future performance uncertain[168] - Risks include inability to retain existing clients, attract new clients, increase customer usage, or sell additional functionality, which could adversely affect revenue growth and operating results[172] - Quarterly operating results and key metrics are subject to fluctuations due to factors like demand, revenue mix, payment methods, seasonality, and global economic conditions[178][179] - Exposure to foreign currency exchange rate fluctuations can materially and adversely affect cash flows and results of operations, as seen by a $14.2 million reduction in reported revenue in 2022 due to a strengthening U.S. Dollar[190][192] - Dependence on a proprietary network of global, regional, and local banking partners and other third-party relationships is critical for business growth and operations[196][200] - The markets are highly competitive, with legacy providers and new entrants, and Flywire's market opportunity estimates may prove inaccurate[201][203] - Specific industry risks include decreases in education enrollment/tuition, rapid evolution and immaturity of the healthcare payment services market, and sensitivity of the travel business to global events like conflicts or pandemics[204][208][216] - Challenges in entering or expanding into new client verticals, such as B2B payments, could adversely affect operating results[221] - Consolidation in the payment processing industry and global economic/political instability (e.g., Russia-Ukraine conflict, inflation) could negatively impact the business[225][226][227][230] Risks Related to Our Operations Operational risks include challenges in scaling the business, potential financial losses from errors in fund transfers, inability to adapt to evolving payment methods and technology, cybersecurity threats, and the failure to effectively manage fraud, all of which could harm Flywire's reputation and financial performance - Inability to scale the business quickly enough to meet a growing client base or efficiently manage growth could harm operating results[233] - The transfer of large sums of funds ($18.1 billion in 2022) exposes Flywire to risks of errors, financial losses, and reputational damage from chargebacks, operational errors, or security breaches[235][236] - Failure to maintain or expand diverse local and international payment methods, or adapt to evolving payment choices, could materially affect the business[239] - Improper or unauthorized use, disclosure, or access to personal or sensitive data could harm Flywire's reputation and business, with threats from human error, fraud, malice, or technological failure[242][247] - Cyberattacks and security vulnerabilities are increasing in sophistication and frequency, posing risks of data breaches, production downtimes, and compromised data[255] - Risk management efforts may not effectively prevent fraudulent activities by customers, employees, or third parties, leading to financial losses and liability[257][260] - Failure to adapt to rapidly changing technology, evolving industry standards, and changing business needs could materially affect the business[262] - Changes to payment card network fees or rules could increase costs, reduce profit margins, or limit the ability to offer certain payment methods[264][266] - Inability to maintain compatibility with evolving client software solutions or interoperability with third-party payment providers and key software vendors could harm the business[267][269][270] - Failure to maintain and enhance the brand could impair client base expansion and harm business, operating results, and financial condition[271] - Loss of key management or inability to attract and retain qualified employees could harm the business and growth prospects[272][275] - Inability to maintain company culture as it grows could negatively affect employee retention and recruitment[276] - Long and variable sales cycles, especially with enterprise clients, can make forecasting complex and uncertain, potentially delaying revenue recognition[277][278][281] - Significant upfront costs in client relationships may not be recovered if relationships do not grow over time, impacting operating results[283] - Failure to offer high-quality client support or if support becomes more expensive than anticipated could harm business and reputation[284] - Need for additional capital to support business growth, which may not be available on acceptable terms, could limit investment in future opportunities[286] - Risks associated with acquisitions, including integration difficulties, failure to achieve expected benefits, and assumption of liabilities, could harm business[289][290] - Systems failures and interruptions in solution availability could harm business, reputation, and lead to financial losses or regulatory scrutiny[292][294] Risks Related to Our Legal, Regulatory and Compliance Landscape Flywire's expanding global operations expose it to increased risks from foreign currency volatility, complex financial services regulations, evolving data protection laws, economic sanctions, anti-corruption laws, and the impact of Brexit, with potential for significant fines and liabilities - Expanding domestic and international operations, particularly cross-border payments from Asia, subjects Flywire to increased risks including foreign currency volatility, government regulation, local licensing, data protection laws, and geopolitical uncertainties[301][302] - Failure to comply with payments and financial services-related regulations (e.g., money transmission, AML, CFT, PCI DSS) could lead to fines, enforcement actions, or loss of key relationships[308][309][310] - The regulatory environment is subject to constant change, and new regulations could make current business aspects impossible or increase costs[313][315] - Non-compliance with economic and trade sanctions (e.g., OFAC) and anti-corruption/anti-bribery laws (FCPA, U.K. Bribery Act) could result in criminal/civil liability and harm business[314][316][339] - Failure to adequately protect proprietary rights (copyrights, trademarks, trade secrets) could impair competitive position and lead to costly litigation[345] - Future intellectual property disputes are costly and may lead to significant liability or increased business costs[351] - Use of 'open source' software could negatively affect the ability to offer solutions and lead to litigation or increased costs[352][353][355] - Indemnity and liability provisions in agreements potentially expose Flywire to substantial liability for intellectual property infringement, data protection, and other losses[356] - The U.K.'s departure from the E.U. (Brexit) could adversely affect economic conditions, travel, and lead to new regulatory costs and complexities for financial services[357][358][359] - New or revised tax regulations, unfavorable resolution of tax contingencies, or changes to enacted tax rates (e.g., Inflation Reduction Act of 2022) could adversely affect tax expense[361][362][363][364] - The ability to use net operating losses (NOLs) to offset future taxable income may be subject to limitations due to ownership changes (e.g., Section 382 of the Code)[366][368][369][370] Risks Related to Being a Public Company As a public company, Flywire is obligated to maintain effective internal control over financial reporting, and failure to do so could impair its ability to produce accurate financial statements, while increased scrutiny and compliance costs divert management resources - As a public company, Flywire is obligated to develop and maintain proper and effective internal control over financial reporting, and failure to do so could impair its ability to produce timely and accurate financial statements[371][373][376][377] - Increased scrutiny from investors and others or changes in regulations regarding ESG responsibilities could result in additional costs, impact reputation, and affect employee retention and business relationships[378][379] - Operating as a public company incurs increased legal, accounting, and compliance costs, diverting management time and resources[381] Risks Related to Ownership of Our Common Stock The price of Flywire's common stock may be volatile or decline, and raising additional capital could cause dilution, while management's discretion in allocating cash and concentrated ownership may limit other stockholders' influence - The price of Flywire's common stock may be volatile or decline regardless of operating performance, and an active or liquid market may not be sustainable[382] - Raising additional capital through equity or convertible debt securities may cause dilution to existing stockholders or restrict operations[387] - Management has broad discretion in allocating cash and cash equivalents, which may not align with stockholder approval or increase investment value[390] - If securities or industry analysts cease coverage or publish inaccurate/unfavorable research, the stock price and trading volume could decline[391] - Sales of substantial amounts of common stock in public markets, particularly by directors, executive officers, and significant stockholders, could cause the market price to decline[392][394] - Concentration of stock ownership by executive officers, directors, and large stockholders may limit other stockholders' ability to influence corporate matters[395] - Flywire does not intend to pay dividends on common stock, so returns depend on stock price appreciation[397] - Delaware law and provisions in the company's certificate of incorporation and bylaws could make a merger, tender offer, or proxy contest difficult, potentially depressing the stock price[398][399][400] - Exclusive forum provisions in the certificate of incorporation could limit stockholders' ability to choose a favorable judicial forum for disputes[402] Unresolved Staff Comments There are no unresolved staff comments to report - No unresolved staff comments were reported[404] Properties Flywire's corporate headquarters are located in Boston, Massachusetts, occupying approximately 16,419 square feet under a lease expiring in March 2024, with other leased locations globally and plans for additional expansion space - Corporate headquarters are in Boston, Massachusetts, occupying 16,419 square feet under a lease expiring March 2024[405] - The company maintains other leased locations in the U.S. and globally, with plans for additional space to accommodate growth[406] Legal Proceedings Flywire is not currently a party to any material legal proceedings or claims, though future litigation, even unsuccessful, could be costly and divert management resources - Flywire is not currently a party to any material legal proceedings or claims[407] - The results of any future litigation are uncertain, but even unsuccessful claims could be costly and divert management resources[407] Mine Safety Disclosures This item is not applicable to Flywire Corporation - Mine Safety Disclosures are not applicable to the registrant[408] PART II Market for Common Equity and Stockholder Matters Flywire's voting common stock trades on the Nasdaq Global Select Market under 'FLYW,' with 49 holders of record as of March 6, 2023, and the company does not intend to pay cash dividends, prioritizing earnings for business development - Flywire's voting common stock trades on the Nasdaq Global Select Market under the symbol 'FLYW'[410] - As of March 6, 2023, there were 49 holders of record for voting common stock and 1 for non-voting common stock[411] - The company has never declared or paid cash dividends and does not intend to in the foreseeable future, prioritizing retention of earnings for business development[412] Securities Authorized for Issuance Under Equity Compensation Plans (as of December 31, 2022) | Plan Category | Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants, and Rights | Weighted Average Exercise Price of Outstanding Options, Warrants, and Rights | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (A)) | | :--- | :--- | :--- | :--- | | Equity compensation plans approved by security holders | 15,095,002 | $6.25 | 14,434,047 | - On January 1, 2023, an additional 5,465,046 shares became available under the 2021 Plan and 1,093,009 shares under the ESPP[416] Reserved This item is reserved and contains no information Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides an overview of Flywire's financial condition and operational results, highlighting its growth as a global payments enablement and software company. The company experienced significant revenue growth (43.9% in 2022) and payment volume increases (37% in 2022), driven by its differentiated platform and go-to-market strategy. Despite continued net losses, Flywire is investing in technology, sales, and marketing to sustain long-term growth. Key factors affecting performance include client utilization, revenue mix, seasonality, economic conditions, and geopolitical events. The discussion also covers recent acquisitions, revenue model, key operating metrics, and critical accounting policies - Flywire is a leading global payments enablement and software company, leveraging its next-gen payments platform, proprietary global payment network, and vertical-specific software[425] - The company's solutions aim to transform clients' accounts receivable functions, leading to increased digital payments, higher payment plan enrollment, and reduced customer support inquiries[426] Revenue and Net Loss Trends | Metric | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Revenue | $289.4 million | $201.1 million | $131.8 million | | Net Loss | $39.3 million | $28.1 million | $11.1 million | - Total payment volume increased by approximately 37% from $13.2 billion in 2021 to $18.1 billion in 2022[431] - The annual net dollar-based retention rate was approximately 124% in 2022, indicating strong client growth and expansion[431] Overview Flywire's core mission is to simplify complex global payments for clients in education, healthcare, travel, and B2B sectors, leveraging its 'Flywire Advantage' to serve over 3,100 clients globally - Flywire's core mission is to simplify complex global payments for clients in education, healthcare, travel, and B2B sectors[425] - The company's 'Flywire Advantage' combines a next-gen payments platform, a proprietary global payment network, and vertical-specific software[426] - Flywire serves over 3,100 clients globally, including 2,300+ education institutions and 80+ healthcare systems[431][432] Key Operating Metrics (2020-2022) | Metric | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Total Payment Volume | $18.1 billion | $13.2 billion | $7.5 billion | | Revenue | $289.4 million | $201.1 million | $131.8 million | | Net Loss | $39.3 million | $28.1 million | $11.1 million | | Annual Net Dollar-Based Retention Rate | 124% | 140% | 100% | | Net Promoter Score (NPS) | 62 | N/A | N/A | Initial Public Offering Flywire completed its IPO on May 28, 2021, issuing 12,006,000 shares of common stock at $24.00 per share, generating $263.8 million in net proceeds - Flywire completed its IPO on May 28, 2021, issuing 12,006,000 shares of common stock at $24.00 per share[436] - The IPO generated $263.8 million in net proceeds after deducting underwriting discounts and offering costs[436] Recent Acquisitions Flywire strategically acquired Cohort Solutions Pty Ltd. in July 2022 for $23.1 million, WPM Group Ltd. in December 2021 for $59.6 million, and Simplificare Inc. in February 2020 for $86.5 million, expanding its capabilities and revenue streams - In July 2022, Flywire acquired Cohort Solutions Pty Ltd. (Cohort Go) for an estimated $23.1 million (net of cash acquired), contributing $9.7 million in revenue in 2022[437][786] - In December 2021, Flywire acquired WPM Group Ltd. (WPM) for $59.6 million, contributing $6.4 million in platform revenue in 2022[438][439][797] - In February 2020, Flywire acquired Simplificare Inc. (Simplee) for $86.5 million, contributing $41.8 million in platform revenue in 2022[441][804] Our Revenue Model Flywire generates revenue from two primary sources: transaction revenue, based on payment value and varying rates, and platform and usage-based fees for cash collection optimization, payment plans, subscriptions, and ancillary services - Revenue is derived from two primary sources: transaction revenue and platform and usage-based fees[442] - Transaction revenue is based on a rate applied to the total payment value, varying by payment method, currency, and geographic region, and includes marketing fees from credit card service providers[443] - Platform and usage-based fee revenue includes fees for cash collection optimization, payment plans, subscriptions, and ancillary services like printing and mailing[444] Revenue Mix by Type (2020-2022) | Revenue Type | 2022 (% of Total Revenue) | 2021 (% of Total Revenue) | 2020 (% of Total Revenue) | | :--- | :--- | :--- | :--- | | Transaction Revenue | 77.5% | 73.6% | 68.0% | | Platform and Usage-Based Fee Revenue | 22.5% | 26.4% | 32.0% | Key Operating Metrics and Non-GAAP Financial Measures Flywire utilizes non-GAAP financial measures such as Revenue Less Ancillary Services, Adjusted Gross Profit, Adjusted Gross Margin, and Adjusted EBITDA to provide a clearer view of operating performance, alongside key operating metrics like total payment volume, which increased by 37% in 2022 to $18.1 billion - Flywire uses non-GAAP financial measures like Revenue Less Ancillary Services, Adjusted Gross Profit, Adjusted Gross Margin, and Adjusted EBITDA to supplement GAAP results and provide a clearer view of operating performance[452][453][454] Key Operating Metrics and Non-GAAP Measures (2020-2022) | Metric | 2022 (in millions) | 2021 (in millions) | 2020 (in millions) | | :--- | :--- | :--- | :--- | | Total Payment Volume | $18,078.5 | $13,201.3 | $7,513.3 | | Revenue | $289.4 | $201.1 | $131.8 | | Revenue Less Ancillary Services | $267.1 | $181.1 | $114.6 | | Gross Profit | $174.9 | $125.2 | $79.5 | | Adjusted Gross Profit | $181.9 | $129.7 | $83.2 | | Gross Margin | 60.4% | 62.3% | 60.3% | | Adjusted Gross Margin | 68.1% | 71.6% | 72.6% | | Net Loss | $(39.3) | $(28.1) | $(11.1) | | Adjusted EBITDA | $14.9 | $22.8 | $6.2 | - Total payment volume increased by 37% in 2022 to $18.1 billion, indicating strong client engagement and transaction value[448][451] Key Factors Affecting Our Performance Flywire's performance is influenced by client utilization, revenue mix, significant investments in technology and marketing, seasonality, macroeconomic conditions, geopolitical events, and the ability to adapt solutions and business continuity measures - Performance is driven by increased client and customer utilization of the payment platform, leading to higher payment volumes and revenue[462][463] - Revenue is affected by the mix of business on the platform, including industry, currency, payment method, and payment plans[464] - Significant investments in technology and development, as well as sales and marketing, are expected to drive long-term growth[465][466] - Operating results are subject to seasonality, with historically strongest revenues in Q1 and Q3 due to education tuition payments[468] - Macroeconomic conditions, including inflation and foreign exchange rate fluctuations, and geopolitical events like the Russia-Ukraine conflict, can impact payment volumes and revenue[469][470][472] - Diversified client mix across education, healthcare, travel, and B2B helps mitigate risks, with education and travel sectors showing recovery post-COVID-19[473] - Dynamic changes to client communication and product solutions, such as streamlined payment capabilities for telehealth, are crucial for client retention and acquisition[475] - Business continuity measures, including remote work capabilities and workforce adjustments, have been implemented in response to global events like COVID-19[476] Components of Results of Operations This section details revenue categorization into Transaction Revenue and Platform and Usage-Based Fee Revenue, outlines costs for payment processing, technology, sales, marketing, and general administration, and explains interest expense, fair value changes, other income, and income tax provisions - Revenue is categorized into Transaction Revenue (fees from payment processing, marketing) and Platform and Usage-Based Fee Revenue (cash collection optimization, payment plans, subscriptions, ancillary services)[477][478][479][480][481] - Payment processing services costs include banking, credit card processing, foreign currency translation, and partner fees, expected to increase with payment volume[483] - Technology and development expenses cover solution development, infrastructure, amortization, and personnel, expected to increase with investment in new functionality[484][485] - Selling and marketing expenses include personnel, commissions, marketing programs, and brand promotion, with spending adjusted based on economic environment[486][487] - General and administrative expenses cover finance, risk, legal, HR, IT, professional services, rent, and insurance, expected to increase with business growth and public company operations[488] - Interest expense relates to the Revolving Credit Facility, which replaced a previous Loan and Security Agreement (LSA)[489][490] - Change in fair value of preferred stock warrant liability is no longer recognized post-IPO, as warrants were exercised or converted[492] - Other income (expense), net, primarily consists of interest income and foreign currency remeasurement gains/losses[493] - Provision for income taxes includes foreign and state income taxes, with a valuation allowance for U.S. deferred tax assets[494][495] Results of Operations Flywire's revenue grew significantly in 2022 (43.9%) and 2021 (52.6%), driven by increased transaction volume and acquisitions, though total costs and operating expenses also rose, leading to increased operating and net losses Consolidated Results of Operations (2022 vs. 2021) | Metric (in millions) | 2022 | 2021 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenue | $289.4 | $201.1 | $88.3 | 43.9% | | Payment processing services costs | $107.9 | $70.2 | $37.7 | 53.7% | | Technology and development | $50.3 | $31.3 | $19.0 | 60.7% | | Selling and marketing | $78.5 | $51.3 | $27.2 | 53.0% | | General and administrative | $82.9 | $61.6 | $21.3 | 34.6% | | Total costs and operating expense | $319.6 | $214.4 | $105.2 | 49.1% | | Loss from operations | $(30.2) | $(13.3) | $(16.9) | 127.1% | | Net loss | $(39.3) | $(28.1) | $(11.2) | 39.9% | - Transaction revenue increased by 51.5% to $224.2 million in 2022, driven by growth in payment volumes from existing and new clients[498] - Platform and usage-based fee revenue increased by 22.8% to $65.2 million in 2022, primarily due to WPM and Cohort Go acquisitions[499] Consolidated Results of Operations (2021 vs. 2020) | Metric (in millions) | 2021 | 2020 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenue | $201.1 | $131.8 | $69.3 | 52.6% | | Payment processing services costs | $70.2 | $47.8 | $22.4 | 46.9% | | Technology and development | $31.3 | $24.5 | $6.8 | 27.8% | | Selling and marketing | $51.3 | $32.6 | $18.7 | 57.4% | | General and administrative | $61.6 | $42.7 | $18.9 | 44.3% | | Total costs and operating expense | $214.4 | $147.6 | $66.8 | 45.3% | | Loss from operations | $(13.3) | $(15.8) | $2.5 | (15.8)% | | Net loss | $(28.1) | $(11.1) | $(17.0) | 153.2% | - Transaction revenue increased by 65.2% to $148.0 million in 2021, driven by a 76% increase in total payment volume[514] - Platform and usage-based fee revenue increased by 25.8% to $53.1 million in 2021, driven by a full year of Simplee revenue and increased client usage[515] Liquidity and Capital Resources As of December 31, 2022, Flywire's primary liquidity source was $351.2 million in cash, cash equivalents, and restricted cash, which is believed to be sufficient for working capital and material cash requirements for at least the next 12 months - As of December 31, 2022, Flywire's principal source of liquidity was $351.2 million in cash, cash equivalents, and restricted cash[527] - The company believes existing cash will be sufficient for working capital and material cash requirements for at least the next 12 months[528] - Future capital requirements depend on revenue growth, client cash receipts, sales and marketing expansion, development spending, and international expansion[528] Contractual Obligations As of December 31, 2022, Flywire's contractual obligations primarily consisted of operating lease obligations totaling $3.683 million Contractual Obligations (as of December 31, 2022, in thousands) | (in thousands) | Total | Less Than 1 Year | 1 to 3 Years | 4 to 5 Years | More Than 5 Years | | :--- | :--- | :--- | :--- | :--- | :--- | | Operating lease obligations | $3,683 | $2,027 | $1,656 | $— | $— | Cash Flows Operating activities provided $5.4 million in cash in 2022, while investing activities used $24.7 million, and financing activities used $24.0 million, resulting in a net decrease of $38.2 million in cash, cash equivalents, and restricted cash Summary of Cash Flow Information (in millions) | (in millions) | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $5.4 | $17.1 | $(14.2) | | Net cash used in investing activities | $(24.7) | $(62.9) | $(81.5) | | Net cash provided by (used in) financing activities | $(24.0) | $327.5 | $119.0 | | Net increase (decrease) in cash, cash equivalents and restricted cash | $(38.2) | $280.3 | $23.0 | - Operating activities provided $5.4 million in 2022, primarily from adjusting net loss for non-cash expenses and changes in operating assets/liabilities[532] - Investing activities used $24.7 million in 2022, mainly for the Cohort Go acquisition and capitalized software costs[536] - Financing activities used $24.0 million in 2022, driven by repayment of the Revolving Credit Facility and contingent consideration payments, partially offset by stock option exercises[538] Critical Accounting Policies Critical accounting policies include the valuation of intangible assets and contingent consideration, the treatment of preferred stock warrant liabilities, revenue recognition following a five-step process, and the determination of stock-based compensation expense using the Black-Scholes model - Critical accounting policies include the valuation of intangible assets (acquired developed technology, relationships, trade names, noncompete agreements) using income approaches like relief-from-royalty and multi-period excess earnings methods[546][547] - Contingent consideration in business combinations is recognized at fair value on the acquisition date and remeasured each reporting period, with changes recognized in general and administrative expense[552][553][554][555][556][557] - Warrants to purchase preferred stock were classified as liabilities and marked to market using the Black-Scholes model until the IPO, after which they were exercised or converted[558][560] - Revenue recognition follows a five-step process, distinguishing between transaction revenue (payment processing fees, marketing fees) and platform and usage-based fee revenue (cash collection optimization, payment plans, subscriptions, ancillary services)[562][563][564][566][567] - Stock-based compensation expense for stock options is determined using the Black-Scholes option-pricing model, with highly subjective assumptions like expected term, volatility, and risk-free interest rate[573][574][575][576] Emerging Growth Company Status Flywire previously qualified as an 'emerging growth company' but no longer does as of December 31, 2022, now classified as a large accelerated filer, requiring compliance with new accounting standards applicable to public companies - Flywire previously qualified as an 'emerging growth company' and opted for an extended transition period for new accounting standards[581] - As of December 31, 2022, the company no longer qualifies as an emerging growth company, becoming a large accelerated filer, and must comply with new accounting standards applicable to public companies[583] Recent Accounting Pronouncements Flywire adopted several ASUs as of January 1, 2022, including ASU 2016-02 (Leases), ASU 2019-12 (Income Taxes), ASU 2021-04 (Earnings Per Share), ASU 2016-13 (Credit Losses), and ASU 2020-06 (Convertible Instruments), with some having no material impact - Flywire adopted ASU 2016-02 (Leases), ASU 2019-12 (Income Taxes), ASU 2021-04 (Earnings Per Share), ASU 2016-13 (Credit Losses), and ASU 2020-06 (Convertible Instruments) as of January 1, 2022, due to no longer qualifying as an emerging growth company[584][1244][1245][1246][1247] - The adoption of ASU 2016-13 (Credit Losses) and ASU 2020-06 (Convertible Instruments) did not have a material impact on the consolidated financial statements[1246][1247] Quantitative and Qualitative Disclosures About Market Risk Flywire is exposed to market risks from foreign currency fluctuations and interest rate changes, managing currency risk with hedging algorithms and forward contracts, while interest rate risk from its variable-rate Revolving Credit Facility is not expected to materially affect financial position - Flywire is exposed to market risks from foreign currency fluctuations and interest rate changes[586] - The Revolving Credit Facility has a variable interest rate, but an immediate 10% change would not materially affect financial position, results of operations, or cash flows[587] - Foreign currency risk arises from cross-border payments, with exposure typically lasting one to four days, managed using in-house currency hedging algorithms and non-deliverable forward foreign currency