Flywire Corporation

Greetings and welcome to the Flywire Corporation second quarter 2023 earnings conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Akil Hollis. Thank you, Akil. You may begin.

Thank you, and good afternoon. With me on today's call are Mike Massaro, Chief Executive Officer, Rob Urgel, President and Chief Operating Officer, and Mike Ellis, Chief Financial Officer. Our second quarter of 2023 earnings press release, supplemental presentation, and when filed, form 10-Q can be found at ir.flywire.com. During the call, we will be discussing certain forward-looking information. Actual 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 and the required disclosures and reconciliations 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 this afternoon. We are excited to share our Q2 2023 results, which show continued strong performance and momentum across the business. In a few minutes, Rob Orgel, our president and COO, as well as Mike Ellis, our CFO, will go into greater detail about our results for the quarter. But I will first share some highlights from our second quarter. Revenue left ancillary services with $79.5 million during the quarter, representing year-over-year growth of 54.4%, or 56.7% on a constant currency basis. Adjusted gross profit for the quarter was $50.5 million, an increase of 46.8% year-over-year. An adjusted EBITDA was negative $0.1 million for the quarter, representing a $6 million increase in our adjusted EBITDA versus Q2 of 2022. Based on this quarter's results and our outlook for the second half of the year, we are also increasing our guidance for 2023, and these details will be shared later in the call. It has been an exciting two years at Flywire since our first public earnings call. as we have continued our track record of efficient growth, making significant progress. We have roughly doubled in revenue on an organic basis. We acquired and successfully integrated two companies. We are driving improved operational efficiency within the organization, and we are also performing well against our financial targets we discussed at our analyst day last year. As you can see, we continue to execute against our growth strategies while also making progress against three key investment areas, which I'll provide an update on now. As a reminder, these investment areas are optimizing our go-to-market efforts, expanding our Flywire advantage with product and payment innovation, and strengthening and growing our Flymate community. In Q2, we continue to optimize our go-to-market efforts, with a key focus on high ROI initiatives. One area in which we have been successful is in the effectiveness of our globally distributed go-to-market teams. As we briefly highlighted last quarter, we have the ability to scale quickly in new geographic regions thanks to strong collaboration between sales, marketing, and relationship management, our efficient digital acquisition, and regional and industry experts. This quarter, that was on full display in our global education vertical. In the Asia-Pacific region, we achieved success signing a number of new clients and partners in Japan, Australia, and South Korea, spanning educational institutions as well as strategic partners and recruitment agents. For example, in Australia, we went live with another of Australia's leading Group of Eight universities. And in the UK, we continue to see strong synergies following our WPM acquisition. cultivating those relationships to grow with our existing clients. We believe our ability to combine high tech with a personal touch is always a winning combination, and our clients appreciate the partnership as we help prepare them for their peak payment season. Finally, I'd be remiss if I didn't mention another record-breaking quarter for travel. where we had our highest revenue quarter to date. Additionally, the global sales and marketing team continued their strong go-to-market partnership, hosting targeted events across four continents, driving net new client signs. We also continued to expand our flywire advantage during the quarter. This is part of our long-term vision to power the ecosystems in our core industries of education, healthcare, travel, and B2B. As a reminder, the Flywire Advantage consists of our next generation payments platform, our vertical specific software, and our proprietary global payment network. Our network is made up of global and regional banking partners, some of the largest card processing companies, as well as alternative payment providers all around the world. It is something that we own and control that we built to scale across geographies and for all transaction sizes. The network is not just there to move the money, we constantly innovate, enhance its capabilities, and add new payment methods for our customers. For example, this quarter we announced our improved partnership with Tencent Financial Technology, Tencent's fintech arm, to expand WeChat Pay, also known as WeChat Pay, as a payment option for Chinese students and families making tuition payments abroad. While Flywire offered this payment method previously, this direct connection to Tencent creates an enhanced experience for payers, which is now fully digital and streamlined, and it eases the reconciliation for institutions. Adding Tencent to our payment network also expands Flywire's footprint across China, one of our largest payer markets. More to sustaining our advantage is our data privacy, security measures, and industry certifications. We have premier security, compliance, and data governance certifications in the industries that we serve, which are key differentiators in the eyes of our clients. We were recognized for this on the global stage when Flywire was recently appointed to the 2023 through 2025 Payment Card Industry Security Standards Council, PCI-SFC Board of Advisors. As representatives of Flywire, our CTO and CIO join the board members from some of the world's most prominent organizations who are coming together to help build more secure payment ecosystems around the world. Now with a seat at the table, Flywire has the unique ability to help shape PCI standards for years to come, empowering us to better prepare ourselves and our clients. This recognition builds on our longstanding relationships with PCI, as our CTO was part of the original team that drafted version 1.0 of the PCI DSS standards. Speaking to our last key investment area, we also continue to strengthen and grow our flymate community. It is difficult to believe that we acquired Cohort Go a little over a year ago, welcoming over 50 new flymates as part of this transaction. Our combined team has seen rapid success with our insurance product growing over 60% on a pro forma basis in accomplishing our key product integration plans. These accomplishments continue to highlight Flywire's proven track record of successful M&A, as well as our ability to foster community and culture following an acquisition. At Flywire, we pursue strategic acquisitions if they can help us achieve one of three primary objectives. First, accelerate our growth in an existing industry or geography. Second, provide additional capabilities that enable us to drive net revenue retention, allowing us to upsell a new capability to an existing client. Or third, help us expand into a new industry, subsector, or geography we are not in yet. Additionally, I firmly believe that in order for it to be successful, one of the most important factors is cultural alignment. Finding a culture that complements our own has been among the top priorities for us in a handful of acquisitions we've done over the past few years, like WPM and Cohort Go. Similar to us, they were client-focused and value-driven organizations, ones that knew how to collaborate and innovate. Like Flywire, WPM and Cohort embraced a global workplace with so many talented teammates across the UK, Australia, India, China, Brazil, and more. These commonalities gave us a great launch pad and were key to helping us exceed the financial goals we set out for ourselves. As another example, our pay any school payment volume, which is primarily volume through educational agents, has grown over 50% since the Cohort Go acquisition on a pro forma basis. You've heard me talk a lot about culture and our approach to treating it as a strategic asset. As Flywire grows, we work hard to make sure we are constantly providing our flymates the opportunity to grow their career while also being part of something bigger than their job. At our most recent company meeting, we rolled out a renewed vision for the next five years tailored to the flymate experience. In addition to financial achievements, our vision outlines what attaining these goals will empower us to commit to as a business for social impact, to learning and growth, to flymate engagement. The vision was met with great excitement from our global flymates, who also recently celebrated being named a most loved workplace. The investments in go-to-market execution, expanding our Flywire advantage, and in strengthening our flymate community are also supported by positive trends across the industries that we serve, giving us even more confidence in the path ahead for Flywire. To highlight just a couple of recent trends, in education, The Australian Department of Education released new data that shows that in April of this year, international student visas increased 27% compared to April of last year, with China and India representing the top two sending countries. This is consistent with global student mobility trends we're tracking. For example, new data from HolonIQ suggests that total direct spending by international students is projected to more than double from pre-pandemic levels to reach $433 billion by 2030. In travel, we continue to see the trend of luxury travelers prioritizing travel over other discretionary spending. The UN's World Tourism Organization estimates that worldwide tourism arrivals this year are expected to reach up to 95% of pre-pandemic levels, up from 63% in 2022. And the latest data from TSA shows that throughput trends were consistently between 95% to 105% compared to 2019 levels, with spikes significantly higher, towards 132% over the July 4th weekend. In closing, I would like to thank our global flymates for helping to deliver another exceptional quarter. We continue to believe we have a winning strategy with a large and expanding opportunity ahead of us, and we are well positioned for the future. I would now like to turn the call over to Rob Orgel, our president and COO, to review some operational highlights from the quarter.