Flywire(US:FLYW)2022-08-10 16:00PART I. FINANCIAL INFORMATION This section provides the unaudited condensed consolidated financial statements and management's analysis for the period ended June 30, 2022 Financial Statements (Unaudited) The unaudited financial statements for Q2 2022 reveal significant revenue growth, increased operating expenses, a larger net loss, and higher cash usage from operations Condensed Consolidated Balance Sheets Total assets and stockholders' equity decreased as of June 30, 2022, primarily due to reduced cash and an accumulated deficit Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $360,584 | $385,360 | | Total current assets | $415,447 | $443,788 | | Goodwill | $81,643 | $85,841 | | Total assets | $605,768 | $639,845 | | Liabilities & Equity | | | | Total current liabilities | $105,867 | $117,477 | | Total liabilities | $143,231 | $157,644 | | Accumulated deficit | ($159,803) | ($125,857) | | Total stockholders' equity | $462,537 | $482,201 | Condensed Consolidated Statements of Operations and Comprehensive Loss Revenue significantly increased for Q2 and H1 2022, but faster growth in operating expenses led to a wider net loss Statement of Operations Highlights (in thousands, except per share data) | Metric | Q2 2022 | Q2 2021 | H1 2022 | H1 2021 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $56,537 | $36,976 | $121,090 | $81,967 | | Loss from operations | ($17,397) | ($7,559) | ($24,501) | ($14,025) | | Net loss | ($23,797) | ($18,146) | ($33,946) | ($26,798) | | Net loss per share | ($0.22) | ($0.35) | ($0.32) | ($0.73) | Condensed Consolidated Statements of Cash Flows Net cash used in operating activities increased significantly in H1 2022, while financing activities shifted from a cash source to a cash use Cash Flow Summary for Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | ($27,591) | ($13,553) | | Net cash used in investing activities | ($3,633) | ($3,582) | | Net cash (used in) provided by financing activities | ($1,783) | $324,870 | | Net (decrease) increase in cash | ($26,776) | $307,974 | Notes to Condensed Consolidated Financial Statements Key notes detail the 2021 IPO, revenue segmentation, WPM and Cohort Go acquisitions, and the adoption of new lease accounting standards - On May 28, 2021, the company completed its IPO, issuing 12,006,000 shares of voting common stock and receiving net proceeds of $263.8 million40 Revenue by Geography (in thousands) | Region | Q2 2022 | Q2 2021 | H1 2022 | H1 2021 | | :--- | :--- | :--- | :--- | :--- | | United States | $28,493 | $22,964 | $69,058 | $56,538 | | Canada | $9,537 | $7,282 | $17,686 | $12,798 | | United Kingdom | $10,724 | $4,454 | $20,603 | $7,887 | | Other countries | $7,783 | $2,276 | $13,743 | $4,744 | - In December 2021, Flywire acquired WPM, a UK-based software provider for universities, for an estimated total consideration of $59.6 million to accelerate its market share in the UK education sector9495 - Subsequent to the quarter end, on July 13, 2022, Flywire acquired Cohort Solutions Pty Ltd. (Cohort Go), an Australian education payments provider, for an estimated aggregate purchase price of $32.2 million155 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses strong Q2 2022 revenue and payment volume growth, offset by increased operating expenses and a larger net loss, while maintaining strong liquidity Overview and Key Metrics Flywire, a global payments company, reported significant Q2 2022 growth in total payment volume and revenue, despite a decline in Adjusted EBITDA - Flywire's business is built on three core elements: a next-gen payments platform, a proprietary global payment network, and vertical-specific software161 Key Operating Metrics and Non-GAAP Measures (in millions) | Metric | Q2 2022 | Q2 2021 | H1 2022 | H1 2021 | | :--- | :--- | :--- | :--- | :--- | | Total Payment Volume | $2,860.3 | $1,923.8 | $7,034.1 | $4,786.5 | | Revenue | $56.5 | $37.0 | $121.1 | $82.0 | | Adjusted Gross Profit | $33.2 | $22.5 | $72.0 | $50.1 | | Net Loss | ($23.8) | ($18.1) | ($33.9) | ($26.8) | | Adjusted EBITDA | ($6.1) | ($0.1) | ($4.4) | $6.9 | Results of Operations Q2 2022 revenue grew significantly due to higher payment volumes, but a faster increase in operating expenses led to a wider net loss Comparison of Results for the Three Months Ended June 30 (in millions) | Item | 2022 | 2021 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenue | $56.5 | $37.0 | $19.5 | 52.7% | | Total costs and operating expense | $73.9 | $44.5 | $29.4 | 66.1% | | Loss from operations | ($17.4) | ($7.5) | ($9.9) | 132.0% | | Net loss | ($23.8) | ($18.1) | ($5.7) | 31.5% | - The increase in operating expenses was primarily driven by higher personnel costs due to increased headcount, increased stock-based compensation, and higher marketing and travel expenses as COVID-19 restrictions lifted244245246 Liquidity and Capital Resources The company maintains strong liquidity with $362.6 million in cash from its 2021 IPO, sufficient to fund operations for the next 12 months - As of June 30, 2022, the company's principal source of liquidity is cash, cash equivalents and restricted cash of $362.6 million270 Summary of Cash Flows for Six Months Ended June 30 (in millions) | Cash Flow Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | ($27.6) | ($13.6) | | Net cash used in investing activities | ($3.6) | ($3.6) | | Net cash (used in) provided by financing activities | ($1.8) | $324.9 | Quantitative and Qualitative Disclosures About Market Risk The company manages foreign currency exchange risk through hedging and assesses interest rate risk from its credit facility as immaterial - The company is exposed to short-term foreign currency exchange risk on cross-border payments and mitigates this volatility using in-house hedging algorithms and non-deliverable forward foreign currency contracts296 - Interest rate risk stems from the $25.9 million outstanding under the Revolving Credit Facility. An immediate 10% increase or decrease in interest rates is not expected to have a material effect on the company's financial position294 Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2022, with no material changes to internal controls - Management, including the CEO and CFO, concluded that as of June 30, 2022, the company's disclosure controls and procedures were effective299 - No changes in internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, internal controls were identified during the quarter ended June 30, 2022300 PART II. OTHER INFORMATION This section addresses legal proceedings, risk factors, equity sales, and other pertinent disclosures Legal Proceedings The company is not currently involved in any legal proceedings expected to materially impact its business or financial statements - The company is not currently a party to any legal proceedings that are expected to be material to its business or financial statements303 Risk Factors Key risks include operating losses, intense competition, reliance on partners, global economic instability, cybersecurity threats, and extensive regulatory compliance burdens - The company has a history of operating losses, with a net loss of $33.9 million for the six months ended June 30, 2022, and may not achieve or sustain profitability in the future332 - The business is subject to risks from the COVID-19 pandemic and global economic instability, including the conflict in Ukraine, which could impact payment volumes, sales cycles, and overall demand356412414 - The company faces significant legal and regulatory risks, including compliance with complex payment regulations, AML/CFT laws, and evolving data privacy laws like GDPR and CCPA, which could result in fines and operational changes508520524 - Cybersecurity is a major risk, as the company processes large amounts of sensitive data. A data breach could result in significant fines, reputational damage, and loss of clients431433439 Unregistered Sales of Equity Securities and Use of Proceeds No unregistered equity sales occurred, and the $263.8 million IPO proceeds remain invested with no material change in their intended use - There were no unregistered sales of equity securities during the reporting period626 - The net proceeds from the May 2021 IPO were $263.8 million. As of June 30, 2022, there has been no material change in the planned use of these proceeds626627 Defaults Upon Senior Securities Not applicable Mine Safety Disclosures Not applicable Other Information Not applicable Exhibits This section lists all exhibits filed with the Form 10-Q, including officer certifications and XBRL data files Signatures The report is signed by the Chief Executive Officer and Chief Financial Officer on August 11, 2022