Flywire Corporation

Greetings and welcome to Flywire Corporation third 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, Akhil Hollis. VP Financial Planning and Analysis. Thank you, Mr. Hollis. You may begin.

Thank you, and good afternoon. With me on today's call are Mike Massaro, Chief Executive Officer, Bob Orgel, President and Chief Operating Officer, and Mike Ellis, Chief Financial Officer. Our third quarter 2023 earnings press release, supplementary presentation, and re-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. These 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 web test 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 Q3 2023 results, which show continued strong performance and momentum across the business. We are also pleased to announce the acquisition of StudyLink, an Australian company that specializes in international student application software. I will provide more details on this acquisition in a few minutes. Following my comments, 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 Q3. Revenue-less ancillary services was $116.8 million during the quarter, representing year-over-year growth of 31%. This represents our highest quarter of revenue-less ancillary services ever, and in dollars, approximately $28 million in growth. Adjusted gross profit for the quarter was $80.1 million, an increase of 28% year-over-year. a quarterly record for the company. Adjusted EBITDA was $27.5 million for the quarter, representing a $9.3 million increase in our adjusted EBITDA versus Q3 2022. And this was also a record for the company. This puts revenue less ancillary services year-to-date at $285.3 million, a growth rate of 43% year-over-year, reflecting the strength of our business and effectiveness of our go-to-market strategies in the underlying markets. As a result of this success, we are raising our full-year outlook for revenue-less ancillary services and adjusted EBITDA on a constant dollar basis. We are once again in an environment where the U.S. dollar has strengthened significantly, and this generated a headwind relative to the rates incorporated in our prior guidance, impacting Q3 reported results by approximately 1.4 million. In addition, there were a few other puts and takes for the quarter that Mike Ellis will cover later in the call, but overall it was a very strong Q3, which we believe demonstrated the strength and breadth of our business. Looking forward, we are also making progress against our three key investment areas, which include optimizing our go-to-market efforts, expanding our Flywire advantage with product and payment innovation, and strengthening and growing our Flymate community. First, I will dive deeper into our go-to-market efforts. We are pleased to share that we generated our highest quarter to date in terms of new projected revenue signed. This is the result of the optimization of our go-to-market strategy globally, where our sales and marketing teams continue to deliver new client wins and expansion with current clients across all verticals. Thanks to ongoing success with vertical specific events and targeted digital campaigns, by the end of Q3, we calculated our marketing returns to be greater than 10 to 1 based on pipeline generated to marketing spend, which far exceeds the industry standard of 5 to 1. And in travel specifically, we broke yet another record for bringing in the highest number of net new clients signed. and more than doubled travel Q3 revenue year over year. Our efficient client acquisition engine helped drive quick sales cycle and increased win rates in the travel vertical. We believe our successful M&A track record complements our strong organic growth. As you know, we announced the acquisition of StudyLink, an application and enrollment software for agents and universities deeply penetrated in the Australian higher ed market. Importantly, we are thrilled to be welcoming a talented group of 60-plus flymates to our global team. This deal enhances the StudyLink and Flywire value proposition to our shared stakeholders in the higher ed ecosystem. Universities, students, and agents. It gives us a great opportunity to expand on each company's existing and successful track records of providing top-tier solutions in Australia. StudyLink provides a cloud-based interface for universities and education agents to structure, streamline, and integrate international applications and enrollment into their admissions process. With StudyLink, we gain the software involved in powering the offer and acceptance in a top four core market for us, as well as accelerating our opportunity to monetize the nearly $1 billion in deposit volume their platform is involved in today, which we will work to grow. The combination of StudyLink and Flywire can capture the entire student payment journey, from the first enrollment deposit through the ongoing tuition payments. StudyLink's extensive roster of blue-chip clients present meaningful growth opportunities for Flywire, and their network of 20,000 agents can help us accelerate growth among education agents and help advance our strategic payables initiative focused on agent commissions. We believe the efficiency and benefits StudyLink brings to universities and education age and ecosystem has the potential to resonate in so many more countries beyond Australia. And look forward to helping to accelerate the expansion of the platform around the world, leveraging Flywire's clients, partners, and our global team. We are very excited to share the news today and have added some more details on the acquisition in our earnings supplement posted on our investor relations website. As we have said before, we are confident in our track record of strategic and value-add acquisitions and will continue to pursue acquisitions that can help us accelerate our penetration of existing verticals. During Q3, we also continue to expand our Flywire Advantage, our long-term vision to power the ecosystems in our core industries of education, healthcare, B2B, and travel. As a reminder, the Flywire Advantage consists of our next-generation payments platform, our vertical-specific software, and our proprietary global payment network, which combined enable us to deliver product and payment innovation for our clients and payers. Given our ongoing success in the travel industry, we decided to do a deeper dive this quarter and included a few additional slides in the supplements. In travel, we focus on three primary subsegments, destination management companies, accommodation providers, and tour operators. We estimate that these subsegments represent a large total addressable market of $530 billion. And these subsectors have been historically underinvested in from a software and payments perspective. Before Flywire, our travel clients were typically sending static, unsecured PDFs for invoices through disparate and legacy billing, invoicing, and CRM systems. With Flywire, our clients can consolidate their backend infrastructure while upgrading the entire payment experience. We signed more travel clients than ever in the quarter and continue to get our clients live faster thanks to our software and payments capabilities as well as our industry knowledge. This quarter in particular, many clients acknowledged switching to Flywire from a major payment processor, not only because of our ability to lower their payment costs, simplify reconciliation, and to deliver superior transaction security, but also because of our first-class customer support. One destination management company told us that they switched to Flywire because we understand the industry much better. The trust our team builds is critical to the success of our long-term client relationships and helps us further integrate into their payment ecosystem. Our split group payment capability capitalizes on the rising trend of group travel and enables our clients to offer group payment experiences itemized to each traveler safely and securely through our dashboard. We also hear from our DMC clients they need help paying out agents, other suppliers, and vendors. Because we solved the hard challenges with their receivables, they've entrusted us to solve these outgoing payment challenges, and many of them are now in beta with our payable solution. During the incredible growth over the past few years, gross profit spreads on our travel transaction volumes have been healthy and comparable to our overall Flywire gross profit spreads and improving over time. We are continuing to explore capabilities that add even more value via software and can drive even more gross profit across this sector. With our winning strategy in travel and our healthy financial profile, we are confidently exploring TAM expansion opportunities in the vertical that present meaningful growth for us. And finally, in the quarter, we continue to strengthen and grow our FlyMate community. Last quarter, I referenced a renewed five-year vision that we recently laid out for our flymates, which details how our financial success will empower us to commit to social impact, learning and growth, and flymate engagement. We believe we are on an exciting path to achieving the goals that we've set out for ourselves in these areas. Recently, we rolled out a reimagined management training program, a three-month immersive experience for first-time people managers. Based on FlyMate feedback, we bolstered the program to include more practical workshops and more executive involvement. I personally lead a session within the training and am always fulfilled and inspired by the FlyMates taking part in this program. Committed to providing our flymates their career of a lifetime, we also expanded our internal hiring programs to provide flymates new development opportunities. Many flymates are benefiting from both our global mobility program, which enables them to work on a specific project outside their home country for a temporary period, as well as our One Flywire program, where flymates have a first line of sight on new roles within the company, and the full support of their people managers to explore these roles in different departments. These programs empower us to build dynamic, multifaceted teams that can quickly assemble to help our clients and payers. The investments we're making in our Flymates are important and reflect our view that culture is a strategic asset and a key differentiator for Flywire. This is validated by the recognition we have received. We were most recently named among the top 20 most loved workplaces in the United States in Newsweek magazine. Before I hand off to Rob, I wanted to take a moment to acknowledge the tragic loss of life and suffering in Israel and Gaza as a result of the Israel-Amas conflict. We have a team of flymates in Israel, and our ongoing focus has been on their safety and well-being. We continue to be in constant contact with them and deeply respect their commitment to each other, to their communities, and to continued service to Flywire and our clients, despite very challenging circumstances. I would now like to turn the call over to Rob Orgel, our President and COO, to review our operational highlights from the quarter. Rob?