Flywire(FLYW) - 2023 Q4 - Earnings Call Transcript

Financial Data and Key Metrics - Revenue less ancillary services grew by 43% year-on-year in FY 2023, reaching $42 million in adjusted EBITDA, which is 11$96.1 million, a 43% increase year-over-year, with adjusted gross profit at $63.5 million, up 42$7.7 million, a $6.7 million increase from Q4 2022 [38] - The company processed$5.4 billion in payment volumes during Q4 2023, a 33% increase from Q4 2022 [57] - Cash and equivalents stood at $655 million as of December 31, 2023, with no long-term debt [58] Business Line Data and Key Metrics - In education, the company expanded its higher education footprint globally, with notable growth in the UK and Asia Pacific, and increased its full suite solution in the US [11] - In healthcare, the company accelerated its partnership strategy, solidifying relationships with Cerner and FinThrive, and bolstered its global payment network with a focus on India and China [12] - In travel, the company experienced strong growth in new clients, particularly with tour operators and destination management companies in EMEA and APAC regions [40] - The B2B vertical is the fastest-growing, with significant traction in subsegments like insurance, software, and manufacturing [55] Market Data and Key Metrics - The company estimates its TAM in education to be$660 billion, in healthcare $500 billion, in travel$530 billion, and in B2B $10 trillion [51][25][54][55] - The company signed over 700 new clients in 2023, including over 170 in Q4, and now serves more than 3,800 clients globally [39] - The company moved more than$24 billion through its global payment network in 2023, a 33% increase year-over-year [39] Company Strategy and Industry Competition - The company plans to focus on optimizing go-to-market capabilities, expanding its Flywire advantage, and strengthening its FlyMate community in 2024 [13] - The company is investing in its API strategy to better serve clients and partners, and is focusing on embedding payments into existing software and workflows [15][43] - The company is exploring new areas of focus, such as ocean experiences and niche online travel agencies, and has gone live with Aqua Expeditions, a luxury travel company [27] Management Commentary on Operating Environment and Future Outlook - The company expects strong growth in 2024 despite a complex macro environment, with revenue less ancillary services projected to be between $483 million and$509 million, representing 30% year-over-year growth at the midpoint [32] - The company anticipates adjusted EBITDA in the range of $65 million to$76 million for 2024, with a 320 basis point improvement in adjusted EBITDA as a percentage of revenue less ancillary services [32] - The company is confident in its ability to deliver positive net income and continue its growth trajectory [13] Other Important Information - The company has more than 90 partnerships and tech ERP integrations across its verticals, which help identify new clients and accelerate implementations [14] - The company is investing in building a public API to surface the power of its payments platform, allowing customers to integrate the API into their existing ERPs or software [44] - The company is focusing on strategic payables opportunities, particularly around commission payments in travel and education verticals [45] Q&A Session Summary Question: Impact of Canadian regulatory changes on revenue and seasonality - The company expects a mid-single-digit million-dollar impact on Q1 2024 revenue due to changes in Canada, with a full-year impact in the low teens millions [66][67] - The company is confident in its ability to offset the impact through its diverse client base and strong execution [94] Question: Drivers of net revenue retention (NRR) growth - The company attributes NRR growth to expanding its footprint within existing clients, adding new products and services, and growing its payment network [61][97] Question: Expectations for 2024 revenue growth and volume - The company expects continued growth in payment volumes, particularly in B2B and travel, with education and healthcare also contributing to overall growth [73] Question: CFO transition and margin outlook - The company is confident in the CFO transition, with no significant changes expected in cost dynamics or margin expansion strategies [124] Question: Update on client implementation delays - The majority of delayed implementations have gone live, with the company feeling good about the status of projects that have gone live on time [129] Question: Payer services initiative and opportunities - The company sees significant opportunities in payer services, particularly in insurance and other value-added services for students and travelers [132][133] Question: FX volume in India - FX volume in India normalized in Q4 2023, with the company satisfied with the growth and FX percentage [135] Question: Guidance range and visibility - The company expanded its revenue guidance range to account for uncertainty around Canadian regulatory challenges, with plans to narrow the range as the year progresses [138]