Flywire Corporation Q1 2023 Earnings Call
Right.
Greetings and welcome to the fly Wire Corporation first 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 a keel hauled.
V P of S. P N E and Investor Relations. Please go ahead.
Thank you and good afternoon.
On today's call I'm, Mike Massaro, Chief Executive Officer, Bob Udell, President and Chief Operating Officer, Mike Ellis Chief Financial Officer.
Our first quarter 2020 earnings press release supplemental presentation, and when filed Form 10-Q can be found at IR at <unk> Dot 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.
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.
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 Mark Massaro.
Thank you Jill and thank you to everyone that is joining us this afternoon.
We are excited to share our Q1 2023 results that showed strong performance and momentum across the business.
In a few minutes, Rob Oracle, our president and COO.
As well as Mike <unk>, our CFO will go into greater detail about our results for the quarter.
But I will first share some highlights from our Q1 performance.
Revenue less ancillary services was $89 1 million during the quarter representing year over year growth of 50%.
Or 57% on a constant currency basis.
Adjusted gross profit for the quarter was $59 9 million, an increase of 50% year over year.
And adjusted EBITDA was $7 million for the quarter.
Representing a 470 basis point increase in our adjusted EBIT margin versus Q1 2022.
So as you can see Q1 2023 was a great quarter for fly wire driven by the efforts of our flying it's all around the world continuing to execute against our growth strategies, while also making progress against our three investment areas that I will provide more updates on now.
First we continued to invest in enhancing and optimizing our go to market efforts.
Smith and our globally distributed sales team.
For example, after recently focusing travel sales and marketing efforts in South Africa.
We signed a number of net new travel clients that include destination management companies accommodation providers and tour operators underscoring our ability to scale up quickly and new geographic regions cheese.
Geographic expansion. In addition to other go to market efficiencies help yield our largest ever revenue quarter to date for our travel sector.
With our team, bringing in a record number of net new travel clients in Q1.
Our second investment area is how we expand our flower advantage.
One of our long term vision to power the ecosystems, and our core industries of education healthcare travel and <unk>.
It is hard to believe that our first analyst day was almost a year ago.
Which is where we initially outlined some of the product and payment innovation happening around payer services and our vision to pursue these tam expansion opportunities to enhance the lifetime value of our players and deliver more value to fly wire overtime.
One of the areas, where we are seeing success is in the selection of student health insurance for Australia bound international students flowers implemented our insurance comparison tool as part of the overall payer experience and in doing so we deliver added value to multiple stakeholders in the ecosystem, including students and agent partners.
Continuous health insurance is mandatory in order to obtain a student visa and we provide a seamless option as well as choice to the student and family we.
We also offer this market place to our vast network of agent partners now have our insurance solution embedded within the fly wire agent portal.
As a reminder, agents are an important component of the education ecosystem and it is common practice for international students to partner with them. In fact 75 per cent of students being placed in Australia have partnered with an education agent.
Just one example of our proven ability to drive value for multiple stakeholders in our ecosystems.
We are encouraged by the growth and potential of this new solution.
And our third T investment area, what's the strengthening grow or fly may community.
Two one I had the privilege of traveling around the world to visit clients partners and of course, our incredible <unk>.
I continue to hear firsthand from our clients and partners the industry expertise global payment knowledge and local market support helps us build trust and drive value with our software.
During my trip to Edinburgh for our annual fly why our user conference I got to spend time with more than 200 representatives from our UK education clients I was so impressed by our fly mates, who bring a unique combination of local experience and technical expertise.
To better serve our clients.
There was great energy at this event seeing our clients commitment to fly wire in our mutual desire to continue to innovate for students and parents gives me a lot of confidence in our expansion efforts in this key market.
On my visit to Singapore, I was lucky to be part of the ribbon cutting ceremony for our new office opening sure to fly wires philosophy of promoting a hybrid work environment. The new office features thoughtful meeting spaces that encourage collaboration both in person and virtually.
Spending time with our expanded team hearing the multiple languages being spoken and the breath of countries represented.
It was no surprise to me that my visit coincided with the incredible recognition of being named a great place to work in Singapore.
And finally on a trip to Vietnam, I intend to strategic team off site with our APAC education team. The roles of these fly mates at this off site ran the gamut from sales to implementation to agent partnerships product technology as well as our global payment network. They all shared a.
Common passion for our products and for solving even the most complex payment challenges for our clients and payers.
With global mobility, returning to postpone demick levels this opportunity to meet many new fly mates in person as well as catch up with longterm fly mates, who have helped build this company was truly special I couldn't help but come away feeling reinvigorated by our mission and the team that we have built.
In closing these quarterly results are also supported by positive tailwinds across the industries that we serve giving us even more confidence in our path ahead.
For example, China's moved to reopen its borders and resume issuing visas signals an uptick in international student mobility for both our education business and a positive trend for our travel business occur.
According to the China Outbound research Tourism Institute Chinese outbound travel is expected to recover to around two thirds of its 2019 highs and with around 110 million border crossings expected from China.
Also in travel the U S Transportation Security agency screened over 58 million passengers in February alone continuing the early 2023 trend of travel numbers outperforming pre pandemic volume at a national level.
In <unk>.
You're encouraged to see the C F o's and other financial professionals focused on streamlining their payment processes. According to our new survey, 87% of respondents would like to offer additional payment methods in an effort to decrease days sales outstanding.
And health care hospitals, and health systems continue to choose fly wire in part due to our integrations with a leading ehr's.
And according to our latest research, 97% of I T leaders state that tight integration with the H R and a streamline implementation process are important considerations.
When you're choosing a technology vendor.
This was truly a tremendous start to our year, thanks to our winning strategy execution in our T investment areas and tailwinds across the industry that we serve and I couldn't be more excited to what's ahead. This year I would now like to turn the call over to Rob Orgel, Our President and C. O O to review some operational highlight.
From the quarter Rob.
Thanks, Mike Good afternoon, everyone. It's been a great quarter, which included impressive growth on the top line, while also demonstrating our ability to efficiently scale.
On top of our song revenue and adjusted EBITDA results, we had our largest sales quarter ever with a record number of client side.
During the quarter, we signed more than 170, new clients, including a record within the travel vertical and one of our largest projected revenue clients ever sign in the education vertical.
<unk> remained strong and consistent with our previous reported.
This performance further validates our investment strategy towards efficient growth.
As a reminder, or growth strategies include growing with existing clients, adding new clients expanding our ecosystem through channel partnerships, expanding to new industries geographies and products and finally strategic value enhancing acquisitions.
I will spend a few moments reviewing some recent success stories, reflecting the strategies, but we've also added information on our strategy within our supplement and invite you to visit <unk> Dot <unk> Dot com to review it.
First an example of how we grew with new clients includes going live with our cross border payments offering at U C. L. A U C. L. A is main campus UCLA as a public research University founded in 18, 81 that takes great pride in bringing together diverse students from around the world.
Many of US feel is over 31000 undergrad students and over 14000 graduate students have an international visa status. We're very excited to our best in class software and payments to U C. L. A is main campus and a plus service and that's according to UCLA as payments and compliance manager and we look forward to building upon are real.
Nation ship with UCLA going forward.
We also had a new client and our health care vertical along with seeing productivity improvements across our sales team.
That included an increase in pipeline generated in higher projected deal value signed in the quarter as compared to Q1 2022.
An example of a new client go alive for the corner is mountain Health Network West, Virginia based nonprofit health delivery system comprised of hospitals and medical centers across 23 counties in West, Virginia, Southern Ohio in Eastern Kentucky.
During the quarter, we went live with Gabel Huntington Hospital, which was named one of America's hundred best hospitals for 2023 by health grades. She Hh shows fly wire to improve their patient financial experience by giving patient self service payment plans and to streamline the back office billing and reconciliation process with.
Fly wire Mountain health is now able to consolidate all visits into one view one balance and one payment plan across all patient visits we look forward to working with mountain Health network.
And our travel vertical we saw growth with our existing client base as we benefited from the reopening of the APEC region with clients that we've added over the past few years, albeit off a very small base, our destination management company revenues and the APAC region grew almost tenfold.
We also continue to sign new clients. For example, we went live with exclusive travel group Ah New Zealand based DMC, providing luxury travel services across Australia, New Zealand, the South Pacific and Papa New Guinea.
Fly wire software solutions help the company received payments and the same currency as the invoice being sent out to travel clients coming from the U S, Canada U K and Europe .
And our <unk> vertical we continue to leverage and expand the number of capabilities of our key ERP systems integrations for.
For example, we created an integration was salesforce for specialty Coffee Association or S. C. A a global trade association for the coffee industry.
Let's see a implemented fly wires, new invoicing and payment API, which enabled S. C. A to utilize our full invoicing and payments system within their Salesforce instance, dissent invoice and payment instructions to their customers.
My wife's new API gives businesses like SCA the option to utilize our full invoicing and payments system or send customers a payment request, while their existing ERP system manages the invoice.
S. T. A went live with our <unk> payment solution during the first quarter and process a meaningful amount of payments volume with only about a month and a half of being lives. We look forward to continuing our work with S. C. A.
Mike already mentioned, an example of how we are driving further growth through strategic and value enhancing acquisitions. When you referenced the student health insurance comparison platform, we acquired with cohort though.
On top of our earlier efforts to enable cohort goes robust pay any school capability for fly wires agents. This current effort has enabled distribution expansion, while we maintained a sharp focus on supporting and retaining the existing cohort go agents that already help students find health insurance.
The agents currently using the cohort go portal experience will be migrated in stages on the consolidated fly wire platform during Q2 and Q3, the service, which supports the convenience and needs of our students and the agent serving those students and has helped fly wire grow this exciting aspect of our payer services, which we called out as one of our.
Investment areas at last year's Analyst day.
And the current economic climate, we are also being diligent on all types of expenses.
We are carefully pacing are hiring in line with our plan and we added less than 50% of annualized run rate expense and new personnel in Q1 versus the year ago period.
We feel good about the high value roles and strong talent that we are adding to the business as we continue to balance growth and profitability initiatives.
The ability to pace are hiring while still delivering the kind of strong business growth. We showed in Q1 is rooted in our ongoing efficiency initiatives.
For example, the AI Chatbot, we discussed last quarter has already enabled us to handle nearly 20 per cent of all payer inquiries during the quarter using the chatbot self service capabilities, allowing our client support team to demonstrate operating leverage and increase their focus on more complex support cases, we are in the midst of autumn.
Nation, streamlining efforts and adding a high RLI to this and a number of areas, including client Onboarding K Y C transaction monitoring and our cash management team all as part of our preparation for handling even larger volumes of clients transactions and payment volume with increasing efficiency. These are busy and.
Exciting times, a fly wire.
I would now like to turn the call over to Mike Ellis are CFO Mike.
Thank you. We're all good afternoon, everyone could help provide an overview of our excellent results for the first quarter and will then discuss our outlook for full year and Q2 2023.
Revenue left ancillary services was $89.1 million in Q1, representing a 50 per cent growth rate compared to Q1 2022.
On a constant currency basis, a revenue less ancillary services growth rate for Q1 2023 was 57%.
That is expected we experienced a revenue headwind of approximately $4 million due to the strength of the U S dollar compared to the GBP and Euro during Q1 2023 versus Q1 2022.
Foreign exchange fluctuations since our queue, one guidance, which was based on exchange rates at December 31st 2022 did not significantly impact our queue. One revenue performance are.
Revenue growth rate was dripping predominantly by increase in total payment volume, particularly due to strong growth from our international cross border payment volumes in our education and travel verticals.
With respect that payment volumes, we process 5.7 billion <unk> 2023, which represented an increase of 36% from the 4.2 billion process during Q1 2022.
Specifically transaction revenue list ancillary services increased 57 per cent compared to Q1, 2022, <unk> 50 per cent increase in transaction payment volume.
Black women using phase III revenue increased 20 per cent compared to Q1 2022, driven by a 14 per cent increase in platform and usage based payment volume as well as non payment volume related increases and <unk> based in other platform of usage based fees.
Regenerated $59.9 million and adjusted gross profit during the quarter, representing a 50% increase compared to the 40.0 million earn during Q1 2022.
Specifically are adjusted gross margin was 67.2% for Q1 2023 down just 30 basis points from the 67.5 per cent reported as adjusted for 212022.
The strength of our adjusted gross margin. During Q1 2023 was driven primarily by higher margin revenue from October would go acquisition, including the pay your services activity mentioned by Robin Mike and settlement gains on foreign exchange transactions regarding settlement gains, we do hedge our exposure to changes in foreign exchange rate, while settling transactions.
But while these games helped our adjusted gross profit. We also saw offsetting losses on our hedges. So it was close to neutral to adjusted EBITDA. Overall. These favorable adjusted gross margin impacts were offset by payment method mix shipped to credit cards, driven by the strength of our travel vertical we continue to expect adjusted gross margins declined one to.
1.5% for the full year of 2023 relative to full year 2022, due to increasing credit card usage related to the growth of our travel vertical.
Moving on to the operating expenses technology and development expenses were $14.5 million for 212023, an increase of 32% over the $11.0 million incurred during Q1 2022.
The increase was primarily the result of adding flying made store engineering and technology teams during 2022, which drove increases an employee related costs, including stock based compensation consistent with our 2022 investment plans.
Selling and marketing expenses were $24 $4 million, but you want 2023, an increase of 39% over the $17.6 million incurred during Q1 of 2022 <unk>.
This increase was driven by adding fly makes to our sales and marketing team to be a direct hiring and our acquisition of cohort, though primarily during 2022, which drove increases an employee related costs, including stock based compensation. In addition, we incur more costs associated with third party conditions as a result of our revenue growth during Q1 2023 compared to Q1.
2022.
General and administrative expenses were $28 $1 million, you want 2023 cent increase of 49% over the $18.8 million incurred during Q1 2022. This.
This year over year increase was predominantly due to adding fly MAGE to our general and administrative teams, which drove increases an employee related costs, including stock based compensation and a D.
Different we incur more costs associated with operating as a public company, including the initial your cost associated with number one implementing the requirements of section 404, B of Sarbanes Oxley and number two are expedited Form 10-K filing as a large accelerated filings.
Excluding these items, which had an outsized impact during Q1 relative to what we expect for the remainder of this year or G&A increased by 33 per cent.
Adjusted EBITDA for the quarter was $7.0 million, an increase of $5.1 million over the 1.9 million reported for Q1 2022 or.
Our adjusted EBITDA margin increased over 470 basis points in Q1 2023 compared to Q1 2022 due to strong adjusted gross profit growth and some expense deferral into later quarters.
With respect to capitalization as of March 31st 2023, we had $327.1 million in cash and cash equivalents and no longterm debt.
As of March 31, 2023, we had 110.6 million shares of common stock outstanding which is slightly different from the weighted average shares outstanding used to calculate net loss per share due to the timing of shares issued during the quarter.
Moving onto guidance, which is based on foreign exchange rates as of March 31, 2023.
Full year 2023 based on our results for the first quarter and current trends. We now expect revenue less ancillary services to be in the range of $360 million to $370 million, representing a year over year growth rate of 37% at the midpoint.
This also represents an increase of $6.5 million when compared to the mid point of our previously provided full year 2023 got it.
We expect to deliver full year 2023, adjusted EBITDA in the range of 30 million to 36 million. This represents an increase of $2.0 million at the midpoint of our previously provided guidance, we're not increasing our full year guidance by the whole B do expenses that were originally planned to be incurred during the first quarter, which are now.
Now expected to be encouraged throughout the remainder of this year at the mid point of a full year 2000 twenty-three guidance range, we would expect to generate approximately an incremental 340 basis point improvement and adjusted EBITDA margin, a slight increase from our previous guidance.
Four Q2, 2023 revenue less ancillary services is expected to be in the range of 71 million to 75 million, which represents a year over year revenue growth rate of 41% at the mid point as we enter our seasonally lowest quarter of the year.
Due to the strong results heading into Q2, we now expect you to adjusted EBITDA to be in the range of negative $5 million to negative 3 million, which at the mid point represents a 2.1 million year over year improvement compared to a reported adjusted EBITDA for Q2 2022 are.
Q2 expectations for negative adjusted EBITDA reflects the revenue seasonality and the cost structure of our business at the mid point of our guidance are adjusted EBITDA margin represents an increase of 640 basis points you over here.
We were very pleased with how the business performed during the first quarter, providing evidence of the resiliency of the verticals in which we operate with that I'd like to turn the call over to the operator for questions operator.
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First question five Nepali with William Blair. Please go ahead.
Alright, Thank you and thanks for the question good afternoon nice results that to see.
Yeah, I mean 170, new clients added I think that's.
I think that's a record for you guys and.
What do you.
Given the macros seems to be Choppier, and certainly a lot more concerned gladly in between banks and and just Brian accurate concern is that like what are you seeing.
Rob It as far as your business in response from clients it doesn't seem like you're noticing.
Any slowdown.
Yeah. This is Mike Hey, Bob Thanks for the question.
I just highlight you know again, we're we're solving a lot of problems that exist for our clients in the back office right. The core tenet of our value prop up software and payments coming together it resonates and I think when people are being asked to do more with less which I think so many of our clients are being asked.
To do that looking at software solutions like ours that that bring with it payment optimization that that that usually hits the mark for them. So I think it's a combination of that isn't changing and our clients world and our prospects World and we're also spending a lot investing and go to market right increasing our team some.
Eyes focused on efficiencies as we said and some of the prepared remarks earlier that I think is what you're seeing that growth come from and we're pretty excited about it.
Thank you and where are you what's surprising you where you exceeding your expectations and.
<unk> what areas of your business May you have some incremental concerns.
Obviously, the overall business is doing very very well.
You want that one around sure Britain's Bob the business really performed well across all the vertical so one of the things that I would say it was particularly gratifying was seeing good good activity across each of the vertical we didn't call out that it was a particularly strong quarter for travel rates in that account is a significant number of client.
Wins it across travel.
They do tend to be are smaller sized clients relative to the other vertical. So we want to keep all of this sort of in proportion, but a great a great quarter across geographies, meaning success around the world across the vertical and.
And delivering what was a record projected are are signing across the the aggregate of all those customer wins.
Great. Thank you appreciate it.
The next question John Davis with Raymond James. Please go ahead.
Hey, good afternoon, guys, Alright, Mike a couple of quarters ago, you had mentioned that international students were running call at 85 per cent of pre COVID-19 levels, just curious kind of where we stand today with with China reopening if you have any kind of ballpark idea versus pretty COVID-19.
Yeah, Hey, Judy.
<unk> turned back positive.
We mentioned some of those traveller numbers coming out of China, and frankly, you would just Asia opening up in general and so we're encouraged by it but you know I I would highlight those those comments I made were also referencing how we plan for the year, which is kind of that Rowling recovery right. So we expect students to show up and.
Markets, like Australia, and Canada, and the U S. They all have different timing throughout the year.
And and we expect some combination of 23 and 24 to get back to pre pandemic levels.
So not assuming any type of snap back to that number just.
Just a steady recovery to pre pandemic levels and then you know.
Remind you of that decade.
Decade to decade, instead of stats that shows that international student growth number around low single digits low mid single digit growth and I think once you get past that pre pandemic level, you'll see kind of return to that kind of grocery Gregory.
Okay. That's helpful and like maybe just an update on WPM, obviously, when you announce a deal the volume opportunity was was pretty exciting. So just curious where are we on converting WPM.
Schools are customers onto the flower platform from a payment processing perspective, and just just maybe a broader update on the WTO macrovision.
So so things are going very well, Rob jumping in here J D. So you know I think we're really pleased with the progress. The first step was signing on clients, having them understand and adopt the value proposition that we were presenting that's gone very very well we shared some of those numbers in past calls now it's about getting those clients live with optimized implementation.
And making sure that we are ready for for the increased peaks that happened later in the year certainly Mike mentioned in his comedy and I were both in Edinburgh for the conference and I think we feel really good about the position we have with these clients.
And their belief that we will provide a great solution for them in the work that we're doing to do that so I think what we're.
We go into the busier part of the year very bullish that the volumes will be there.
That we had anticipated last year was good and I think we think this year will be better.
Okay. One last quick one for Mike Ellis.
Obviously very impressive EBITDA margin expansion in one to also got into some nice where I guess better margins.
Two Q.
Apply more muted and the back half you know, maybe 100 basis points of expansion in the back half of the year. So maybe just a couple of things that are weighing on it anything that we should be thinking about from a margin expansion in the back half of the year.
Okay, D and you're making reference to adjusted gross margin or the adjusted EBITDA margin Alright, adjusted EBITDA mode.
Yeah. So.
We're really pleased with the flow through that we saw during Q1, and we are guiding to even better than last year flow through four Q2.
I still think we're early on in the quarters of 2023.
And you also have some impact as it relates to the cohort go acquisition that will get lapped in the latter part of July .
And those things all taken into consideration J D is where we're coming out as it relates to our adjusted EBITDA, but we're really pleased with the <unk>.
Results so far in Q1, and what we're seeing early on in queue too, which is why we are increasing.
The increasing our full year adjusted EBITDA margin to that 340 basis points up from just above 300, when we first provided got it alright.
Alright, <unk> I'll call you guys back.
They should be.
Next question Chase Bank with Bank of America. Please go ahead.
Good afternoon, everyone. This is Tyler Dupont on for Jason and thanks for taking the questions Uhm. So first I just want to start off with like one <unk> seems to be pretty strong in the updated <unk> twenty-three revenue estimates of your quite healthy. So I guess I was just wondering for what segments with geographies are seeing more substantial outsize performance and driving that growth.
<unk> APAC travel has seen some pretty nice recovery, all COVID-19 lows, but.
For example, this a European luxury travel market silver bust as well despite the choppy macro.
And I guess jumping off that point I'd be curious to know if your macro assumptions have changed in any way when looking at for your guidance.
Yeah. Thanks for the question I would call. It a couple of areas. If you look at education, you know in the U S also into the U S. The numbers were quite quite strong in addition to that.
We don't talk a lot about this but non higher education. So you remember just a return of K 12 boarding schools language programs.
Those who have come in quite quite strong in.
Prior years right those were not the things to come back first as good as the age of the student goes down your willingness to send them halfway across the world was not there in prior years due to the pandemic and we're starting to see strong recovery and performance of those subsectors of education.
Which is important to note.
And then I just highlight travel you know it whether you look at the comments from from this call or the prior call.
We're seeing the opening of the Asia, both from a traveler outbound and a destination.
Destination, our clients are now receiving.
Travelers from all over the world that level that that they haven't seen since the pandemic.
I was fortunate myself to visit one and use one of our clients in Vietnam on a recent trip to Vietnam, and and you're just you're hearing anecdotally just people moving around the world more and and that's benefiting us.
Okay, Great I appreciate that and then just as a follow up it looks like the updated guidance implies around traditional 40 basis points of adjusted EBITDA margin upside for 2023, if you look at the mid point.
Where within the business do you expect to see the majority of that upside and what has surprised you if anything there.
As in like yellow and thanks for the question I think the continued performance of the business as it relates to revenue growth rate and the adjusted gross profit growth rate is really what's driving.
Are incremental adjusted EBITDA margin and I think in connection with that it's a very disciplined approach around our cost structure and ensuring that we're phasing are hiring properly. We're looking at investment from an <unk> perspective in order to ensure that we can deliver.
Incremental 340 basis points for the full year.
Okay, great. Thank you very much.
Next question Darren Paller with Wolf Research. Please go ahead.
Hey, guys nice job on the on the quarter I just wanted to touch first on going back to.
There are in the same store sales and how you're executing in each of the verticals with your existing customers to obviously continue to land and expand strategy that you guys have done so well maybe a quick update on what's been succeeding so you know.
The last few months versus what we've seen obviously, particularly in the education vertical, but if there's more room. There. If you can kind of deconstruct the growth between that same store.
And expand and some of the new business coming on to customers.
Darren I can try to step in and started that one so like I said in my comment.
R. R. Donnelley consistent is actually probably slightly up for the quarter, but as you know we like to frame that in terms of the three year average and so on when you look at it on that basis. It was very steady with what we previously shared on prior calls.
You look at it and start looking at it by by the verticals again very consistent performance. If you look in education is the same drivers that have been driving us before if you look in the U S. For example is still still the biggest client market what you'd see is continued success in that domestic education pushed those clients you know not only are we adding climb.
<unk>, but the clients are growing nicely.
If you look at the U S Cross border. It grew strongly as micro sending so those are clients many of whom had been with us for many years and just the strength and sort of the international student numbers in the cross border are all helping support that cohort growth that you've heard us talk about in the past where clients continue to grow year over year, even those have been with us for.
A good long time.
We do have new product initiatives as well, but I think really it's the strength of land and expand and all of its flavors that that's helping US an education, if you move to travel.
We are benefiting and travel from a group of clients that are seeing this outsize growth that might just talked about a second ago. So those those are also helping feed and are are <unk>.
<unk> is less mature and healthcare.
And are there isn't isn't as strong, but it's something that we're working on as we continue to expand with clients and we do see good growth in a bunch of existing clients.
Not as strong a contributor to overall in our our but that overall in our our has been great.
Okay. Thanks, guys. Just a quick follow up I just wanted to make sure I understand the court Court go contribution for the quarter. If there's any dollar amount you can give us just as a reminder.
More importantly, I mean, it's obviously an area that should be succeeding pretty well now and I know you called it out so maybe just revisit the strength there whether it's the regional exposure or it's just the reopening in some of those regions. What it really does provide for you know in in the future again.
Yeah sure Darin I'll start and then handed to Mike for for a bit more clarity on the numbers. So we'll cover go really if you remember are kind of pillars of inorganic what helps us accelerated in an industry or a region being pillar number one number two being delivering new capability that we think we can use to drive in or or or enhance our offerings.
And really cohort kids, killing one and number two for us right where.
Dave is not only a presence in.
Further presence in Asia Pacific in Australia. It also gave us capabilities around.
Capabilities to.
To make payments to additional.
Schools that were not yet contracted with as we mentioned the last call and also pay or services, which which I mentioned on this call spit.
Specifically around international student insurance right and so that's really tied to that expanding of that fly wire advantage. So see those as areas in which fit into the strategy, we talked about an investor day, but help accelerate that with capabilities and our teams now kind of be one so.
Hopefully frames that kind of capabilities, both from a payer perspective pay your services as well as our ability to make payments to the agent solution to schools that are not yet working with fly wire yeah. Those are the two functional.
Capabilities, we got through that acquisition and we're investing behind those uhm I'll, let my double click on the on the growth two are consistent with what we said at the beginning of the year with respect to guidance on the organic business and just so we're clear.
Inorganic impact for 2023 will be the cohort go business.
And that is consistent so we do expect.
To contribute about three percentage or.
Low single digit percentages to our overall growth rate for the full year.
Okay.
Thank you guys.
Thank you Sir.
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Next question comes from Ken such ASCII.
MS Research. Please go ahead.
Hey, good evening, everyone. Thanks for taking my questions here and congrats on the Ah Lucy and partnership that that's great to see and maybe I can just ask you about that just you know can you expand on that partnership a bit more I mean, how much does that help you on the domestic side versus cross border.
Or international I guess within within education.
Isn't it in an exclusive arrangement because I know you know touching that has worked with them in the past so any thoughts there would be great and I guess any any thoughts on how that partnership chinas growth rate in the education business.
Yeah, Hey, Ken this is Mike.
We're really excited about it I mean, you know to get that level of <unk>.
Endorsement through a Lucy and and that award and also just the.
Participation level, we had at their annual event this year.
Was was really just next level for us.
And they are a big player I mean, obviously in the United States, but also someone that we can partner with in different parts of the world as well and.
<unk> remember <unk> as you kind of said, we're kind of a new kid on the block and the domestic game here in the United States and so getting that level of endorsement that kind of detailed integration of the clients can leverage it really gives us great exposure to.
Getting people to migrate off legacy platforms onto a fly wires full sweet offering here in the United States. So we're super excited about it we have had a relationship with them for awhile, but I would say that relationships definitely go on to the next level.
This is not an exclusive relationship so just to clear up that point that you made but when you feel really well positioned there that with that level of integration that we have which we think's best in class.
Really is gonna put us as a competitive differentiator for for the years ahead.
Okay.
Thanks, Mike and and maybe just as my follow up I wanted to ask about the adjusted revenue growth guidance throughout the year when when we try to adjust for the acquisitions that were mentioned previously it looks like your banking and some softer grow throughout the year with adjusted revenue.
Going from say high forties on an organic F X neutral growth basis down to maybe mid thirties, and <unk> and then I guess high twenties in second half of the year and I guess I'm just curious like how much of that is just conservatism just based off of it being early in the year versus something that you're seeing in the trends in the data.
[noise] suggest that you have to remember the seasonality of the business and again, we grew up in education. So Q3 in absolute dollars is a very large quarter relative to the other quarters. So the growth rate that you would find in Q3 will naturally even though it brings on a lot of absolute dollar growth that growth rates is going to be lower it doesn't.
Mean that we have less confidence in our business in the second half of the year, but there is still macro concerns in the environment that we operate in but we're really pleased with the resiliency of the vertical in which we operate.
And we believe that our growth rate and the incremental adjusted EBITDA that were guiding too is appropriate given the backdrop of macroeconomic concerns in light of the resiliency of articles.
Okay Alright, thanks, My appreciate it.
Thanks again.
Per line with RBC. Please go ahead.
Thanks, guys I just have a question about travel in particular, you've won a ton of new business, there and I I appreciate that maybe deciding of those are not quite as big as maybe some others, but I I would appreciate maybe a little bit of an update in terms of how we need to be thinking about the implementation pipeline rollout.
Both in terms of kind of throughout the year and maybe even if it sets up into the next and then kind of secondarily can you just remind us again kind of near the.
Financial mechanics here with travel growing so much faster than the credit card usage, just Wanna make sure on the same page in terms of your commentary around gross profit.
Rob here I can I'll start with just sort of that implementation part and then Michael hand in hand off to you for the sort of implications of travel growth an overall picture. So we.
We did sign a great number of clients.
Travel and and and the other vertical so I'll touch on all of it.
The the travel implementations are really quite quick indeed, right. We've talked about it in the past is being measured and a small number of weeks and so we expect these to go quickly that's been our track record and we see a very fat fast Pat the monetization.
For those so we think that continues true even with Upsized number of wins and really we're seeing the other verticals continue to implement while I know there's been some talk out there of that being less so but in our case, we continue to see a good progress against implementations across the other verticals as well.
With respect to the adjusted gross margin come as you know that similar to monetization right are adjusted gross margin to some extent as in output based on what our client payers choose to pay with Andy accounting of a credit card transaction you just have a fee.
Over a cost and that just results in a lower adjusted gross margin as it relates to those transactions, but our spreads across all of our transaction types of remained stable over the.
Last number of reported quarters. So we're very pleased with that.
With that consistency of the spread that we are able to charge.
What you find is that as that travel <unk> segment grow you'll have more credit card utilizations with just carry a lower adjusted gross margin, but really good excellent unit economics and driving adjusted gross profit dollars, which is really what we're focused on.
Got it and the only thing I would add to that as as you as you see as you see more software it come through that may offset in some quarters and you'll.
You will see growth in B, b and travel that will pull that adjusted gross margin down, but that's kind of the puts and takes of that dynamic.
And there's a high quality problems just a quick one on the.
Student Health insurance I thought if you're if I heard right, you're calling out and just kind of one market for doing that at this point I just wanted to know how do you think about leveraging that across all these other opportunities you got from from international student per second.
Yeah, that's a great call out you know we're really excited.
<unk> obviously.
The success, we've had rolling that out more broadly to students and agents with the with the combination of cohort and fly wires software now offering that capability.
And that's our primary focus is that market.
Have a huge amount it's a requirement in Australia and you have a huge amount of students driven through the agent channel 75 per cent or more used an agent to go study in Australia, and so that's kind of short term focus, but you're exactly right. There's different needs in the top four top five destination markets around international student Health insurance.
There's different requirements of different market different providers are capabilities, but you are exactly right to point out that we have the capability in that in that point between payment and the agent relationship to really kind of put that offering we think it a really compelling location. So.
I would say you are ready to call. It out there is opportunity. There are short term focuses on Australia in and we will of course be researching and working hard on scene, where else we could take them.
That's great. Thank you so much.
Next question Tenjin, Wang what J P. Morgan and please go ahead.
Great. Thanks for the Great results here I know the travel a piece has been highlighted really strong winds just.
I'm curious.
Your ability to their confidence in.
Refilling the pipeline and then the backlog here. It just I guess, it's a pull forward question. If you saw some of that is there still ample opportunity here this sort of sustainable minimum.
Yeah pay attention thanks for the question.
Really confident traveled team's doing a great job, we're scaling that team in a very thoughtful way I think I've made made the comment in Pryor call that Australia, New Zealand as a market, where we didn't actually even have a playmate dedicated to travel for us and now being able to add more.
More fly mates there to help drive.
Drive pipeline, we mentioned some of the South Africa expansion efforts, so think of it as kind of going deeper into the subsectors think about expanding potentially finding new areas of.
Certain types of tourism that we are able to add to a given the sub sector and then opening up new geographies right.
I think you can assume that our team knows that playbook as you've seen us kind of roll it out across different industries.
That geographic expansion and the travel team knows they need a lot of leverage to grow to keep maintaining that and.
You can assume they're pulling pulling a lot of those levers now.
Okay, I'm glad to hear it and it just might follow up on it.
I know we've talked about this before but I figured I'd ask again, just give them that that we've seen the results with other banking turmoil going on.
Just just curious what you know.
Of course operationally you guys navigated that well, but is there any impact on demand in any way in flight.
Quite the quality that kind of thing I know you're also involved in domestic payment plans and.
All the complexity around that and so I'm thinking about like the quality is a theme and I don't know if you have an opinion on that and how it shapes demand.
Yeah, I mean for us.
The unfortunate partners with some of the largest global.
Global financial institutions in the world and and.
And that's how our client you know funds are are moves through those accounts so again for us.
Probably a lot of others that may be leveraged smaller regional banks.
For money movement.
That's never really been what.
It's my wife's done.
Partially because of the global nature.
Nature of our business right you need banks that have that kind of global footprint.
And a lot of the regional ones don't and then as it comes to demand really noticed no shift or no change in demand.
We're seeing from clients and not slowing down their decision, making if anything the fact that we're processing payments with those large global financial institutions as a positive for us in this type of environment.
Yeah, well done guys. Thank you.
We have a follow up.
Please go ahead.
Oh, Thank you I appreciate it just curious.
Curious on the.
The the travel vertical.
<unk> the wins that you have is there has there been any change in your when right and how much of the business like in in.
And travel.
Article gets really jumping is a white space versus.
You know takeaways and who are you what.
As in place with the customers before you win that business.
Yeah, Hey, Bob.
So we typically we replacing kind of a local maybe card acquire that's in the mix and then maybe our client and travel is seeing a lot a lot or some bank transfers of wires kind of coming in that they're having to manually deal with so that's typically what we're replacing.
And when you think of us coming in with software.
It provides value to them and the ability to process payments from all over the world that value proposition compared to someone that can just accept a certain type of payment method and doesn't deliver the software.
Is obviously quite compelling I would also just highlight are teams really know these industries. They know the types of challenges that exist the.
The product and tech team to enhance.
Enhanced that product is adding features that matter to those travel clients and that and that helps with that flywheel and.
And then I just also underscore our customer service model our client service model is very different than probably a traditional acquire right. They're actually picking up the phone is one of the things we hear so often from our travel clients, they're picking up the phone and getting a real person.
And so you know if they have a question if they're trying to use a new feature if they're wondering how to handle a unique situation or <unk>.
Enhance their offering they can really reach out to actually talk to someone on our on our client service team and that's a real big differentiator oftentimes.
These types of clients don't get that type of kind of white clubs service from other providers that are kind.
Kind of going with more of a <unk>.
Volume based model.
Thanks, It's very high and I think he had a <unk> I think I think he had one quite dark.
Sorry, you had one comment about is it white space I mean, I think when it comes to geographic expansion in Subsectors I think it definitely.
We have a lot of confidence their radar teams proven the ability to come up with new Subsectors, finding Newark, new types of tour groups all the.
Tore categories, maybe I should say and then in addition to that we have a playbook to open up new geographies for clients within these sectors. So we feel really good about.
Opening up new ways to to sell and grow pipeline.
Yeah understood very well in the the customer service that the targeted salesforce knowledgeable salesforce, how 'bout on the software side what is unique about your software.
This is allowing you to to.
Wendy's businesses.
Simple example would be helpful.
Yeah really it's a it's a combination of a couple of good things. We've got air Bob's. This is Robert speaking. So obviously one of the core capabilities of the company is around doing integrations and one of the things. We've done is integrated into a lot of the systems that are familiar inside the travel space.
That allows us to do specialized functionality that makes sense and travel. So for example, you probably had the experience you book a trip.
As a schedule of payments that gets created right you pay a certain amount at book getting a certain amount maybe three months before the trip and more as you get close to the trip that's all kind of functionality that we enable four.
For our clients to be able to roll out simply and that allows sort of the collection of the full thumb for that trip.
Be way way more administratively easy for them to to manage and so that's an example, where its functionality. There's the dimensions about the global payment network that are really very differentiated right the ability to take payments from so many countries and so when you combine sort of the the.
The service with the functionality started final ploy Ah point.
Point being.
Full invoice engine right. So for many of these clients they will rely on our software to be sort of their platform for doing invoicing. So they don't have to do that if they have got something of their own but a great. Many do take advantage.
Of of of that invoicing and of course once you're using our platform you are using our invoicing you've got that.
Integration that I described reconciliation gets way simpler for those clients.
Okay. Thank you really appreciate it.
Thank you we have a follow up from cancer shot Trotsky with anonymous research. Please go ahead.
Hey, guys. Thanks, Thanks for picking up again here can you just provide some color on the lay of the land on the domestic education side, I mean, who who are the big players there and I'm just curious to your who you're taking share from in that business.
Yeah, Hey, Kent.
The way the U S market has really evolved in domestic payments.
Really been three three players that have played in that market. There is a division of global payments that plays in there.
Called touch net.
As a loan servicing company that has the payments division called Nelnet.
And then there has historically been a business previously called a higher one in cash net.
Which has been bought by private equity and owned by private equity. So those three players.
Had had really kind of started that domestic payment market in the United States.
Players that limited exposure outside the United States and so again, that's why that is kind of a difference between the U S market and then the rest of the world, whereas we've mentioned before we're seeing a lot of success, bringing kind of our full offering all around the world and so when it comes to the U S. It's really typically one of those incumbents that has a client and as it either goes out to bid or as we get.
The fly wire brand.
And the full capabilities known by those clients, that's where we're pulling business from.
Really good about our competitive position obviously, the Lucy in partnership helps us a lot there.
But we compete really well and we you know our team setup to compete and we'd like to compete.
Okay.
Maybe just <unk> just one more if I can sneak it in I think I heard some of the comments on on the settlement gains and there was some some offset of fort for those in the corner, but just in terms of ethics volatility I think we're facing some harder comps kind of year over year does that does that impact your business and I guess.
Is there any way to size that maybe in the second half if it does impact.
Your business at all.
Yes. This is Mike Ellis So what we did was we provided guidance as of March 31, 2023, and if you look at the.
The impact for FX as it relates to the currencies in which we operate comparing 12 31 22 versus 330 123, there they weren't really significant changes that would.
<unk> change to our full year revenue guidance at this time.
You certainly saw some improvements in April , but we didn't <unk>.
Star guidance based on monthly trends, we actually want to wait and see what the full quarter. It looks like because it's anyone's guess is a good guess as it relates to what will happen in the currency markets. So no further changes or impact as it relates to FX improvements or deterioration that that may have occurred during post 300.
31.
That's helped him I I guess I <unk> I was focused on a little bit more just on the just the ethics volatility like are you guys I guess benefit in any way from just.
Currencies kind of moving around and taken advantage of of spreads and just the kind of the the harder comps that we're we're currently over just on a year over year basis coming quarters.
So from an operational standpoint, we do get the benefits and sometimes the.
The negative impact as it relates to currency swings from the initiation of a payment to we when we when we settle.
What I did mention in Q1 is that we didn't see the weakening of the U S. Dollar occurred during some of those windows of time predominantly in January that allows us to buy dollars.
Less expensive. So therefore, we can recognize those gains.
Whether or not we see those in the future is not something that we guide or change our guidance for but I will tell you that our hedging strategy, which is basically an insurance model that we put in place offset those.
Improvements at the adjusted gross profit line and.
Really making it neutral to our adjusted EBITDA generation.
Alright, that's it thank you.
Sure there are no further questions at this time.
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