Flywire Corporation

Greetings, ladies and gentlemen, and welcome to Flywire Corporation's second quarter of 2022 earnings call. At this time, all participants are in listen-only mode. The question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star then zero on your telephone keypad. As a reminder, This conference is being recorded. I would now like to turn the conference over to your host, Akhil Hollis, Vice President, Investor Relations and FBA, FB&A. Thank you.

Thank you and good afternoon. With me on today's call are Mike Massaro, Chief Executive Officer, Rob Orgel, President and Chief Operating Officer, and Mike Ellis, Chief Financial Officer. Our second quarter 2022 earnings press release, supplemental presentation, and when filed, associated quarterly report on Form 10-Q can be found at ir.flatwire.com. During the call, we will be discussing certain forward-looking information. After results could differ materially from those contemplated by these forward-looking statements. We will also be discussing certain non-GAAP financial measures. Please refer to our press release and SEC filings for more information on the risks regarding these forward-looking statements. that could cause actual results to differ materially, risk factors associated with our business, and required disclosures related to non-GAAP financial measures. This call is being webcast live and will be available for replay on our website. I would now like to turn the call over to Mike Massaro.

Thank you, Akhil, and thank you to everyone that is joining us today. We are excited to share our Q2 2022 results with all of you and provide more insights on the future of Flywire. We saw strong performance in the second quarter, and in a few minutes, Rob Orgel, our President and COO, as well as Mike Ellis, our CFO, will go into greater detail about our operating and financial performance during the quarter. But first, I will start with a few financial highlights. As you will see from our results, we continue to have success in penetrating the significant total addressable market that our education, healthcare, travel, and B2B verticals represent. Total payment volume for the quarter increased 49% compared to Q2 2021. Revenue less ancillary services was 51.5 million, representing year-over-year revenue growth of 56%, even despite increasing FX headwinds. Adjusted gross profit was 33.2 million in Q2, an increase of 48% year-over-year. Adjusted EBITDA was negative 6.1 million which was better than internal expectations driven primarily by stronger revenue growth. Today we'll be raising our full year 2022 financial guidance for both revenue less ancillary services and adjusted EBITDA, which Mike Ellis will share details on later in this call. I am quite proud of the great results we are sharing this quarter, especially at how the business continues to navigate these exceptional macro economic times. Of course, None of this would be possible without our amazing flymates, and I'd like to take the moment to thank them for all their incredible efforts. I'll now move on to discuss our industry verticals and trends. While none of us can predict the future, based on the historical, current, and expected trends, we believe Flywire is well-positioned for continued growth across our verticals. Education and healthcare have historically been resilient during recessions and economic downturns. Travel, particularly luxury travel, continues to be strong, supported by pent-up demand from the pandemic. And with more businesses focused on digitizing and streamlining global accounts receivable, we expect to see increased demand for solutions like ours in the B2B sector. Let's take a closer look at trends, starting with education. Education has remained strong even during recessionary periods. with the National Bureau of Economic Research reporting that college and university attendance levels increased even during the Great Recession. Education today is still in the midst of a post-COVID recovery as the international student enrollment volumes normalize and travel restrictions are removed. According to the Institute of International Education's 2021 Open Doors Report, total international students as a percentage of total U.S. campus enrollments averaged 5.4% pre-COVID in the 2019-2020 academic year versus just 4.6% in the 2020-2021 academic year, leaving room for still further recovery. Additionally, after suffering steep losses in new international student enrollments in 2020 and 2021, U.S. colleges and universities are reporting increasing numbers of international student applications for the upcoming academic year. In fact, new research from the educational consultancy ISAF reported that 65% of U.S. universities surveyed this spring said international applications have increased. This is compared to just 43% in the same period last year. Shifting to trends in healthcare, we believe that our healthcare solutions are more relevant than ever, given that the healthcare industry continues to be durable as the services provided are often non-discretionary in nature. We have seen that healthcare organizations who use Flywire are able to better engage patients through multiple and preferred digital channels throughout the entirety of the healthcare payment experience. They can reduce bad debt write-offs and meaningfully increase revenue collections. By offering Flywire's payment plans and solutions to their patients, our clients are able to increase affordability of care they provide through our omni-channel engagement software and provide further transparency to their patients. According to a study prepared for Flywire by Forrester Consulting, Flywire's healthcare clients can see a 29% increase in revenue collections from our solutions. Looking at travel, American Express recently stated that the travel industry has rebounded post-pandemic at a faster and stronger rate than anyone expected. And we strongly agree. According to the US Travel Association, for the first time since the start of the pandemic, travel spending in April 2022 was 3% above 2019 levels. Approximately 28% of surveyed travelers plan to spend significantly more this summer compared to their summer 2019 travel budgets, despite higher prices. Again, these trends and our strong growth in travel continues to validate the large and growing opportunity we have with our solutions. As for our B2B vertical, we continue to work with many businesses to automate their accounts receivable and enhance their order-to-cash workflows. We are seeing particular success in businesses who already have international clients and with those looking to expand globally because our solutions eliminate many operational challenges related to international invoicing and payments, while also improving the customer experience. According to a recent survey from Globalization Partners, 83% of CFOs feel their long-term plans will focus on expansion into new countries despite mounting concerns around rising wages and inflation. To conclude on the trends we are seeing across our verticals, while the global economy may be uncertain, we continue to feel confident about the opportunity ahead of us here at Flywire. Next, I wanted to spend a few minutes providing an update on the investment areas that we outlined at the beginning of the year and during our recent Analyst Day event in May. Flywire has had successful investment track record. Our approach of taking long-term view, but also ensuring clear prioritization based on expected ROI has helped us grow this business while establishing multiple deep and strategic modes. We were able to enter new verticals, leveraging our core platform, expand our geographic footprint and effectively acquire and integrate organizations that further Flywire's mission and accelerate our performance. We believe it is strategically important to keep investing in our Flywire advantage, which is made up of our next generation payment platform, our proprietary global payment network, and our vertical specific software. Earlier this year, we laid out that 2022 will be a record year of investment for Flywire as we accelerated key initiatives in multiple areas of the company. At our analyst day, we shared more details of these investments, which include increasing our go-to-market team, further geographic expansion, and investing in our product and payment innovation teams. Let me first start with expanding our go-to-market. Our goal is to capture the significant total addressable market and opportunities that you've heard us talk about. We are investing in two main areas. First, more flymates in sales and relationship management. And second, optimizing our digital acquisition capabilities. We have prioritized our hiring around go-to-market roles this year and are very pleased with the amazing talent we've brought into the company so far. We've also improved the way we onboard our new go-to-market flymates to be more efficient and effective. This has generated a significant improvement in sales rep ramp time and a nearly 2x increase in pipeline value when comparing the first half of 2022 versus the same period of 2021. In addition, With just a modest year-over-year increase in our digital acquisition investment, we are already seeing impressive returns in sales pipeline generation, new client signed ARR. Next, I'll move to geographic expansion. Flyware is truly a global company. We believe there continues to be unique opportunities to expand globally to serve our clients and their customers. Almost two-thirds of our Q2 2022 ARR signed was outside of North America. And through the end of Q2, we have more than doubled the number of Flymates across India, China, Australia, and Latin America compared to the same time last year. We believe our proven ability to hire talent around the world maximizes our local market understanding and improves our ability to service our customers. This is a major differentiator for Flywire. And finally, I'll cover our investment in product and payment innovation. where we are focused on creating even more value for our clients, their customers, and the broader industries that we serve. This quarter, we continue to expand our payment network and improve payment experiences around the world, permitting a new local method in Colombia as part of our LATAM expansion to improving the payment experiences in India by streamlining required regulatory forms to enhancing local payment acceptance in Europe through the expansion of direct debit capabilities. Our strategy is to continue to solve complexity for our clients, ultimately expanding our flywire advantage to power these vertical ecosystems. In closing, as many of you are aware, we recently announced the acquisition of CohortGo, which fits into our core M&A pillars we have discussed many times with all of you. CohortGo is an international education payments provider that brings additional students, education agents, and essential student services to Flywire's growing payment ecosystem. This deal also deepens our commitment to product and payment innovation and helps us further invest in Asia Pacific, a key near-term geographic focus for Flywire. We are thrilled to welcome over 50 new flymates from Cohort Go into our Flywire community. We're excited to have their expertise and capabilities as we expand Flywire's strength even further in education. While Cohort Go's revenue is relatively small compared to Flywire's overall revenue, Mike Ellis will share an updated guidance for the full year, which incorporates the expected incremental impact of this acquisition. Additionally, I'd like to mention that the integration of WPM continues to go well, and we are seeing great momentum with our education clients in the UK who are adopting our solutions. With that, I'd like to turn the call over to Rob Orgel, our president and COO, to share updates on our operating results and growth initiatives during the second quarter. Rob?