Q2 2023 Flywire Corporation Earnings Call

Greetings and welcome to the fly Wire 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 a kill Hollis. Thank you of kills you may begin.

Thank you and good afternoon.

With me on today's call are Mark Massaro, Chief Executive Officer, Bob Udell, President and Chief operating Officer, and Mike Ellis Chief Financial Officer.

Our second quarter 2023 earnings press release supplemental presentation, and when filed Form 10-Q can be found it I haven't got plywood that call.

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'll also be discussing certain non-GAAP financial measures.

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.

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.

Cited to share our Q2 2023 results, which show continued strong performance and momentum across the business.

A few minutes, Rob Oracle, our president and CFO as well as Mike Atlas, Our CFO will go into greater detail about our results for the quarter, but it will first share some highlights from our second quarter.

Revenue less 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.

And adjusted EBITDA was negative 0.1 million for the quarter, representing a $6 million increase in our adjusted EBITA 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. These details will be shared later in the call.

It has been an exciting two years, that's why why are since our first public earnings call. As we have continued our track record of efficient growth.

Significant progress we have roughly doubled in revenue on an organic basis, we acquired and successfully integrated two companies we.

We are driving improved operational efficiency within the organization.

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 that.

As a reminder, these investment areas are optimizing our go to market efforts, expanding our fly wire advantage with product and payment innovation and strengthening and growing our <unk> community.

In Q2, we continued 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 and 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.

Winning 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 U K. 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 payments season.

Finally, I'd be remiss, if I Didnt mentioned, another record breaking quarter for travel where.

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 size.

We also continued to expand our fly wire advantage during the quarter.

This is part of our long term vision to power the ecosystems and our core industries of education health care travel and BTB.

As a reminder, the flywheel 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 Fintech arm to expand waste and pay also known as wechat pay as a payment option for Chinese students and families, making tuition payments abroad, while fly wire offered this payment method previously Vista.

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 <unk> to our payment network also expands flowers footprint across China, one of our largest payer markets.

Ford is 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 flywheel was recently appointed to the 2023 through 2025 payment card industry Security Standards Council PCI S SC board of advisors.

As representatives of fly wire, our CTO and CIO joined the board members from some of the worlds most prominent organizations, who are coming together to help build more secure payment ecosystems around the world.

Now with a seat at the table flyway or 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 long standing relationships with PCI.

Our CTO was part of the original team that drafted version one point out of the PCI DSS standards.

Speaking to our last key investment area. We also continue to strengthen and grow our fly make community.

It is difficult to believe that we acquired cohort go a little over a year ago welcoming over 50, new fly rates as part of this transaction.

Our combined team has seen rapid success with our insurance products growing over 60% on a pro forma basis in accomplishing our key product integration plans.

These accomplishments continue to highlight flowers proven track record of successful M&A as well as our ability to foster community and culture following an acquisition.

At fly why are 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.

And provide additional capabilities that enable us to drive net revenue retention, allowing us to up sell a new capability to an existing client or third help us expanded to a new industry sub sector 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 and a handful of acquisitions. We've done over the past few years like W. P. M in cohort go.

Similar to us they were client focused and value driven organizations once that knew how to collaborate and innovate.

Like fly Werner W. P M in cohort embraced a global workplace.

With so many talented teammates across the U K, 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.

Fly wired grows we work hard to make sure we are constantly providing our fly made 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 flying that 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 fly made engagement <unk>.

<unk> was met with great excitement from our global fly mates, who also recently celebrated being named most loved workplace.

The investments in go to market execution, expanding our fly wire advantage and in strengthening our fly mate community are also supported by positive trends across the industries that we serve giving us even more confidence in the path ahead for fly wire.

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.

Ability trends, we're tracking for example, new data from <unk> 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 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 spike significantly higher towards 132% over the July 4th weekend.

In closing I would like to thank our global <unk> 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 <unk>, our president and COO to review some operational highlights from the quarter Rob.

Thanks, Mike Good afternoon, everyone as Mike mentioned, it's been a great start to the year and we believe we will continue to see robust growth in the second half of 2023.

Our sales team delivered great results during the quarter and added over 165, new clients. This capped off a strong first half of the year for the sales team.

Q2, <unk> also remains strong and above the three year average discussed in our analyst day.

This quarter's success was driven by our continued execution of our five strategic growth pillars. As a reminder, those pillars 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.

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Starting with growth with existing clients. A first example is our going live with our domestic collection management solution at Wellesley College.

Liberal Arts College for women based in Massachusetts Wells.

Wellesley has used our cross border payments offerings since 2011.

Just a few months of being live with our domestic collection management solution. We saw nearly a 20% reduction in past due student tuition balances, while also reducing manual staff efforts through an automated outreach and sign up process. We are seeing many schools interested in our collection management solution, reflecting their interim.

And a streamlined process for collecting overdue student tuition bills.

Within our travel vertical I'll highlight fresh tracks, Canada, Our Canadian tour operator in business for over 20 years and based in Vancouver, we on boarded a fresh tracks a year ago to support their cross border payments and enable them to accept payments from 31 different countries and 25 different currencies with the ability to scale to over.

140 currencies.

With our recent integration with fresh tracks instance of Salesforce Dot Com, we are now able to capture all of their payment transaction volumes integrating with major systems of record like Salesforce and as part of our strategy to work with more enterprise clients in the travel vertical.

We also had many new clients go live across the verticals in the quarter, including Tennessee State University, which was founded in 1912 and has over 8000 enrolled students, including international students from over 40 countries.

<unk> went live with both our cross border and domestic education payment offerings at the same time.

<unk> solutions are integrated with the Loosens banner student information system, and our fast implementation time has enabled <unk> to begin offering payment plans for students and families in time for fall 2023, and spring 2024 semesters.

We also recently went live with a few group of eight universities in Australia, which Mike mentioned earlier one of those is the University of Adelaide, which now offers our cross border solution.

Adelaide enrolls nearly 24000 students of which approximately 30% are international.

We're excited about the traction within the group of eight universities in Australia bigger picture, we are making progress in our growth plans with multiple verticals in Australia and are continuing to build out capabilities to broaden and improve our services in that country.

In healthcare, we went live with Rogers behavioral health provider of specialized mental health and addiction treatment services based in Pennsylvania.

Rogers is integrated with Cerner millennium, EHR platform, which provides an enterprise wide view of patient care.

<unk> digital self service payment solution Rogers has very quickly been able to reduce the number of patient phone calls regarding payments that their staff members had to handle since going live in the second quarter about 95% of online patient payments have been made through fly wires self service portal, indicating the user friendly experience with our platform.

<unk>.

We're also pleased to share that patient billing satisfaction has received a high rating of four six out of five stars.

This progress reflects our commitment to supporting patients and simplifying financial interactions in the health sector.

Within our <unk> vertical we recently went live with <unk>, a global software leader in digital insights and research technology. Since it was founded in 1998 and has 18 global offices that help over 3200 companies gather consumer insights fly.

<unk> solution is integrated with net suite and quality in a R.

<unk>, helping to streamline disparate accounts receivable processes within the organization.

Claudia exclusive partner for international receivables and leveraging fly wires proprietary payment network and recurring billing capabilities client customers using the offering received industry, leading visibility from order to payment settlement.

This enables sent to reduce friction and transaction processing with their customers and to prove their efforts managing key internal finance metrics. Overall, we are very happy with our progress in <unk>.

We also continued to grow via channel partnerships in Q2, we announced our partnership with disco a market leader in international recruitment and career development to optimize the cross border education payments experience for students studying in Japan.

Fly wire is just goes exclusive payment provider for enrollment and application fees and we're integrated directly into their E apply system.

<unk> network of more than 1000 universities colleges and vocational schools represents a great opportunity to present, our brand and value proposition and expand our footprint in Japan.

Another strategic lever of growth is expansion to new industries geographies and products. One way. We do this is by continually improving the strength of our global payment network.

In addition to the improved partnership with Tencent that Mike mentioned earlier, we recently signed a partnership with the state Bank of India, or Spi, which is the largest public sector bank in India.

Fly wires, enabling seamless digital payments from India for Spi account holders. This is in addition to similar connections we've established with IC ICI and H Dfc Bank in India.

We also improved our domestic payments capabilities through the addition of interac, a realtime interbank payments network in Canada.

This will help us capture additional payment flows for universities in Canada. We believe there is no substitute for this kind of detailed network work and that this is part of the differentiation of fly wire that delivers real value for our clients and payers.

Lastly, as we grow we remain mindful of our spending and desire to scale as a company whose costs are primarily personnel, we are thoughtful of who and where we hire new flying H. We also employ a rigorous vendor management process to drive down other costs. This contributed to our adjusted EBITDA outperformance in Q2.

And we continue to look for ways to look for process efficiency streamline tools and drive cost savings.

With that I would now like to turn the call over to Mike Ellis, Our CFO Mike.

Thank you Rob good afternoon, everyone. Today I'll provide an overview of our results for the second quarter, and then I will discuss our outlook for Q3 and the full year.

We do like the ancillary services was $79 5 million in Q2, representing a 54, 4% growth rate compared to Q2 2022.

On a constant currency basis, our revenue less ancillary services growth rate for Q2, 2023 would have been 57%.

We experienced a revenue headwind of approximately $1 3 million due to the strength of the U S dollar compared to the British pound and the Canadian dollar in Q2 2023 compared to Q2 2022.

Our revenue growth rate was driven predominantly by an increase in total payment volume, particularly due to strong growth from our international cross border payment volumes.

Vacation vertical and the United Kingdom, as well as strength from European destination management companies and our travel vertical going into the summer season.

With respect to payment volumes, we processed $4 1 billion. During Q2, 2023, which represented an increase of 43% from the $2 9 billion processed during Q2 2022, specifically transaction revenue less ancillary services increased 61% compared to Q2 2022, driven by a 50.

5% increase in transaction payment volume.

Platform and usage based fee revenue increased 27% compared to Q2 2022, driven by an 11% increase in platform and usage based payment volumes as well as fees that didn't carry associated payment volumes such as our revenue from student health insurance referral payer services that we discussed on our prior call.

We generated $50 5 million in adjusted gross profit during the quarter, representing a 46, 8% increase compared to the $34 4 million earned during Q2 2022, specifically our adjusted gross margin was 63, 5% for Q2 2023 down 330 basis points from the $66 eight.

Percent for Q2 2022, the year over year change in adjusted gross margin was driven primarily by three factors first strong growth of our transaction revenue versus our platform revenue, particularly from our travel vertical where credit cards are predominant and second settlement losses on foreign exchange transactions as discussed last quarter.

We hedge our exposure to changes in foreign exchange rates, while settling transactions. So while these losses lower our adjusted gross profit. We also saw offsetting gains on our hedges within our operating expenses. Those two factors were partially offset by a third factor, which was the contribution and outperformance of our high margin insurance busy.

As previously mentioned.

Our year to date change in adjusted gross margin of negative one 6% was slightly higher than the full year guidance of negative 1% to one 5% we shared at the beginning of 2023 due to the outperformance of our travel vertical we expect our travel vertical to continue to outperform for the remainder of 2023.

Have reflected this in our full year guidance, which I will share momentarily as a result, we expect the adjusted gross margin decline for the full year to be greater than the originally anticipated range of 1% to one 5%. However, we remain confident in our strong unit economics across all payment methods and enjoyed continued stability in our <unk>.

<unk> spreads in Q2 in terms of gross profit as a percentage of volume.

Moving onto operating expenses technology and development expenses were $16 1 million for Q2 2023, an increase of 21% over the $13 2 million incurred during Q2 2022.

The increase was primarily the result of adding fly mates to our engineering and technology teams, which drove increases in employee related costs, including stock based compensation consistent with our investment plans. In addition, we incurred more costs associated with scaling our hosting and software costs to meet increased transaction volumes.

Selling and marketing expenses were $27 3 million for Q2 2023, an increase of 44% over the $18 9 million incurred during Q2 of 2022.

This increase was mainly driven by investments in go to market resources, which drove increases in employee related cost, including commissions and stock based compensation.

General and administrative expenses were $24 6 million during Q2 2023, an increase of 23% over the 20 points Euro million incurred during Q2 2022. This year over year increase was predominantly due to adding fly made to support our general and administrative teams, which drove increases in employee related costs incurred.

Stock based compensation.

Adjusted EBITDA for the quarter was negative 0.1 million an improvement of 6.0 million over the negative $6 1 million reported for Q2 2022.

With respect to capitalization as of June 32023, we had $328 1 million in cash and cash equivalents no long term debt and 111 8 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.

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Moving on to guidance, which is based on foreign exchange rates as of June 32023.

For full year 2023 based on our results for the second quarter and our outlook for the second half of the year. We now expect revenue less ancillary services to be in the range of 372 million to $380 million, representing a year over year growth rate of 41% at the midpoint.

Our full year 2023 expectations reflect an increase in our second half revenue expectations on a constant dollar basis as well as improved FX conditions at the end of June versus the end of March.

Further movements in exchange rates could impact results.

We expect to deliver full year 2023, adjusted EBITDA in the range of 33 million to $39 million.

This represents an increase of $3 million at the midpoint of our previously provided guidance, we are not increasing our full year guidance by the full amount of our Q2 outperformance due to expenses that were originally planned to be incurred during the first half of the year, which are now expected to be incurred throughout the remainder of this year.

At the midpoint of our full year 2023 guidance range, we expect to generate approximately an incremental 400 basis point improvement in adjusted EBITDA margin, a slight increase from our previous guidance.

For Q3, 2023 revenue like the ancillary services is expected to be in the range of 116 million to $122 million, which represents a year over year revenue growth rate of 34% at the midpoint, which incorporates factors I mentioned with respect to our full year guidance as well as our lapping the cohort go acquisition.

Due to the strong results heading into Q3, we now expect Q3 adjusted EBITDA to be in the range of $24 million to $28 million, which at the midpoint represents a $7 8 million year over year improvement compared to our reported adjusted EBITDA for Q3 2022.

We were very pleased with how the business performed during the second quarter, highlighting a strong return on both our organic and strategic investments in closing as announced in our press release I will be leaving <unk> in 2024 after more than eight years, it's been an incredible experience, helping build this company and working with this very talented global team.

I'm committed to supporting the company through this transition period.

I'll now turn it back over to Mike for closing remarks, Mike.

Thanks, Mike we appreciate everyone joining us today and we'd like to finish with a thank you to Mike Ellis, who has truly been a pleasure building flyway or with him over the past eight years and I know this business would not be where it is today without his efforts.

With that we will now transition to the Q&A portion of the call operator.

Thank you we will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue you.

You May press Star two if you would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.

One moment, please while we poll for questions.

Okay.

Yes.

Thank you. Our first question comes from Dan Perlin with RBC capital markets. Please proceed with your question.

Thanks, Good evening.

I wanted to just start on the education vertical for a second and specifically you know you called out.

Like what's the college wasn't oncology for domestic based payments and one of the driving factors I guess for that it sounded like it was a 20% reduction in past due collections I'm wondering.

As you are continuing to pursue this kind of domestic based approach into your back book for cross border. I mean is that is that one of the main.

Drivers for universities as they're trying to think about assessing taking you guys on the domestic side of the equation as well.

Hey, Dan This is Rob I'll step in and start on this one.

The strength in our domestic education business is broader than just this domestic collections platform. So first and foremost our offering centers around the ability to have a fuller solution that enables a full breadth of payments across the domestic student population. So that's a payment plan and capabilities.

And onetime payments in many of the things you've heard us talk about in the past.

The particular solution that we described for Wellesley. Just now is another part of our sweet part of our student financial software and that is focused on these overdue tuition payments.

The only school that has seen some pretty remarkable results using that platform that they've shared with us in recent months and so we do see strong interest in that in the U S and we look to enable that offering outside the U S as well going forward. So.

All part of our ability to be strong and domestic here in the U S. But also enabling some of those capabilities around the world.

Got it.

Can I just a quick follow up on kind of adjusted gross margins, Mike you called out I think you said declining more than that.

The one to one five points for the year did you put a finer point on that.

As you think about maybe the trajectory into the second half and is there any cadence we need to be mindful of as we think about sequential movements. There. Thank you.

Yes.

Sure. So I would first say that listen we're really pleased with the 47% improvement that we show an adjusted gross profit and again the second thing I'll point out is that the spreads in our transactional revenue have been stable. What we're seeing is that the travel outperformance is having a small drag on adjusted gross margin, but still really excellent unit economics and driving.

Adjusted gross profit dollars for us.

When you have to don't lose sight of the fact of the 150 basis point impact from the FX loss. So if you exclude that youre somewhere in that one 8% range, and that's probably where I'd probably peg it.

But.

We're pretty confident in our unit economics, and our ability to kind of drive our adjusted gross profit dollars and that's really what we're focused on.

Got it thanks for that.

Thank you. Our next question comes from Jason Cooper Berg with Bank of America. Please proceed with your question.

Good good afternoon, guys. This is Tyler on for Jason and thanks for taking the questions.

I wanted to start by first asking about the the upside surprise to revenue during the quarter.

When looking at the business I know <unk> was more of a seasonal low point when it comes to education, but if you could just break out sort of where the growth really came from for example was it a quicker ramp up in APAC travel.

And then just thinking about the back half of the year, just sort of given the current macro environment or are there any puts and takes there worth are worth considering.

Hey, Tyler.

Appreciate the question so in short a couple of the areas that were called out outperformance.

Right.

Education Asia and EMEA also for travel we talk a lot about.

The growth in our EMEA travel business again, and a recovery of Asia.

From a travel business perspective, so those are two clear callouts in the quarter.

Again, I think part of what Youre seeing as well is also different seasonality right as we add different business units youll.

You'll see additional seasonality come from travel that is different than the historic seasonality of our.

Of our education business.

Again as typically predominate in Q3, so youre seeing kind of a almost a redistribution of that seasonality a bit as we see growth in other verticals. So hopefully that answers your question.

Yeah. It does I appreciate that and then just as a follow up at first glance. The updated guide it looks like revenue was raised by more than the beat EBITDA margin EBITDA was raised essentially by the beat I know you mentioned that there was going to be some increased expenses that got moved into the back half of the year, but I was wondering if you can maybe just level set for us what sort of investments. The company is planning on implementing in the back half.

And then are those incremental or just any update there.

So this is Rob I can I can start and then else feel free to jump in if you like.

We are essentially performing very well across the business we see.

A bit more hiring that will happen in the second half of the year. That's just pushed from Q2 that the main piece of expense. There is a little bit also in marketing that we'll just hit in the second half versus the first half as we actually lay out the phone plans for the year, but you can see that the increments are the adjustments are very modest relative to the plan.

Yes, I would only add that we take a very disciplined approach and I think as we talked about during Q1, some pacing of our hiring ensuring we're seeing some macro concerns dissipate over the year and.

We're anticipating investing more in the sales and marketing as Rob indicated.

Great. Thanks, again, guys nice job on the quarter.

Yeah.

Thanks.

Thank you. Our next question comes from Ashwin <unk> with Citi. Please proceed with your question.

Hey.

The installations on the on the results.

And Mike.

Sorry, just can you I know youre going to be around for a few more quarters, but.

My appreciation and thank you.

The.

I have is with regards to is that a good way to measure <unk>.

<unk> of your of your services.

<unk>.

Okay.

Broadening out of footprint, that's something it's proven that you can do.

We get a lot of investor questions about.

Yeah, what percent of students at actually using fly plywood items here, but wasn't choices and things like that so any thoughts on how to measure penetration.

So.

Rob I'll start this one off.

We've obviously been in this business for a good long time, and we have always had initiatives to continue to drive forward utilization and retention all the all the metrics around adoption and so the first thing I'd do is say because I think your question is probably focused on sort of that cross boarder adoption use case, where we continue to.

Drive things that build value around our services to continue to drive it up.

The comment we've always heard is that adoption is highest in the first year.

And then there may be some drop off in subsequent years that phenomenon is true, but we actually view that as opportunity right the opportunity for us to continue to get better at providing value in retaining those.

Students for even longer through their educational cycles. So we've got active initiatives around that and really view that as upside.

<unk> point that I'd make is remember that the the the business and the NR that we deliver is driven on expanding our set of offerings across the university as well. So if you think about the things we're doing it's not just about the cross border, we have an incredible opportunity across our business to serve the domestic student populations within our clients.

As well as the cross border, that's our sort of our core strengths historically.

And then even more broadly taking the example of folks like Wellesley that we just talked about earlier in this call other product dimensions as well. So when you ask the question about sort of adoption and utilization broadly we're very early in the cycle and with upside across all the dimensions I've just mentioned.

And Ashwin just to add to Rob's point I would say, obviously our strategy of land and expand is also.

Our end game right.

Through all of that software deployed.

Getting all the payments right by by having cross border domestic overdue receivables right. When you deploy more software you inherently solve the utilization question as you're being used for all students payments out of given University. So again as Rob said different strategies, depending on geography, but ultimately the same end goal.

Understood that's very useful.

I wanted to focus maybe on healthcare.

I mean, obviously you guys continue to have incremental signings and more progress in the space.

But what we perhaps have not necessarily heard.

It is.

The typo.

Yeah.

So the profusion of signings like we have in say travel are.

R R.

Our education, and so I kind of wanted to ask about.

The.

The environment and the desire of those clients and prospects to.

To sign.

What may or may not be perhaps holding them up what might be a good longer term growth rate for healthcare.

Yes. This is Rob I'll start here again.

First just to be Super clear, we're very positive on our health care business as long term prospects. Despite what we have to concede some challenges in the first half of the year. So just just to put all of this in context, obviously, it's a business with very strong contribution to gross profit it's got great.

High gross margins, we are signing new clients as you heard today with Rogers and growing many existing clients. There are bunch of other new client signs as well along with two new customer deployments and a major expansion that have already happened in Q3 at the same time healthcare.

Health care is it a sector thats growing as fast as some of our others and we haven't enjoyed the level of growth rate that we expected to see in the year and so.

That's been on a combination of factors, but ultimately we do believe the second half of the year.

See us where all the progress and the hard work that the team is doing the clients that they are signing the clients that theyre getting live will bring us back to a healthy growth rate.

We are seeing good progress getting signings through our partnership with Cerner. We've had success through other partners and other EHR integrations and so overall look healthcare is a tougher business to sell in but we remain very bullish on the business.

Thank you very much tremendous job. Thanks.

Thank you. Our next question comes from John Davis with Raymond James. Please proceed with your question.

Hey, good afternoon, guys, Mike just wanted to touch on gross margins I put a finer point on it if I understood. What you were saying earlier basically.

The lower gross margin is just a function of the outperformance in travel. So gross profit dollars are better than I expected is just it's just mix of nothing else, that's causing the lower gross margins just want to confirm that.

Yes, John that is true the one thing I would add to that is the lapping of the cohort go acquisition that occurs July I think we just lapped it so that will also.

That did contribute to our adjusted gross margins during the first half of the year.

Okay, Great and then Rob I think in your prepared remarks, you called out an ror stronger than kind of the three year average in the quarter. Just wondering if you could touch on that is that just students returning in a post COVID-19 environment Cross sell maybe caught a couple of factors are leading to that strong that'd be helpful.

Sure J D. So that NR has been in a pretty narrow range across a series of quarters. That's led to a pretty consistent NR, whether youre looking at one year or three year averages and so it's all been very consistent and built on the same foundation of sort of land and expand that you've heard us talk about before so what you see.

There is strength really across.

Education, and travel, which probably are driving that and are the most <unk> is a smaller piece of it and operating at the highest level.

Health care a bit lower but.

Contributing to that overall corporate performance that staying in that exact range that we talked about.

And the underlying drivers of that are really the same as what we've talked about in the past, which is to say you see us growing cohorts very well over periods, you see us having strength across the geographic channels that you've heard us talk about in the past and continuing to win.

<unk> expanded software across a range of our clients so whether it's <unk>.

Getting getting more coverage in an <unk> client, whether it's getting more software into a school all the same building blocks are what's adding up to that.

In our typical range.

Okay, Great and then one last quick one for Mike Ellis both of the <unk> guide implies a little bit less of a sequential step up.

<unk> been in prior years, maybe how much of that is like travel until the other vertical as being a bigger contributor versus some services just help us think about the sequential improvement in revenue kind of <unk>.

Yes, John So we're pretty confident in the guidance ranges that we provide and it's really a function of what we believe is going to happen with respect to our travel vertical as well as international Education Health care as Rob indicated it's been a little bit of a drag, but still really excellent economics, and we've kind of built that all into our model.

And similar to last year, if you looked at the trend lines as it relates to the first half and second half, we typically do see a slower overall growth rate in second half of the year, that's really a function of the really the size and the contribution and the seasonality of our business that we see in Q3 and to a lesser extent Q4.

Okay. Appreciate the color thanks, guys.

Thank you. Our next question comes from Bob Napoli with William Blair. Please proceed with your question.

Alright, Thank you and Mike Ellis. Thank you for all your help over the years I appreciate it and wish you the best.

Thank you Sir.

So just on a competitively are you seeing.

Your Tencent relationship I think there is another education company and it works with Tencent just broadly are you seeing any changes in the competitive environment. What are you most keeping your eye on competitively.

Hey, Bob This is Mike.

We continue to be we continue to be very encouraged.

It was how we compete in the markets as we've said before we compete within the verticals.

No one across these verticals, so we'll get it within a given vertical which we see competition.

And I would say, we feel very strong about how we're competing in the innovation we're doing the accounts were winning.

In new geographies, adding new methods you mentioned the 10%.

I think it's just further indication that.

We're a important player in this space and we can get deeper relationships with globally recognized brands like that and I.

I think that's that's obviously very important we also mentioned in part of the earnings recognition by PCI being added to that council.

That's a really good indicator right, that's not a position that a lot of our competitors have or can hold and so that recognition I think helps us continue to innovate be seen as an innovator within the sectors that we're in.

And I've said it before we like to compete we have a team that that is good.

Eating in and we're going to get up every day to do it.

Thank you and then you called out that the insurance business a couple of times, maybe a little more color on that and then just in travel and then I'll get off.

Where are you seeing the success in travel who are you competing against what areas of travel.

Are you having the most success and why are you enable emanate as it generally theres a lot of players in the travel market, but you seem to have.

Unique position.

Yes.

I think what we're doing is identifying subsectors that.

Have very much been neglected inside inside the broader travel system right. We're not competing for small dollar e-commerce for travel we're looking at kind of luxury tours accommodations.

These destination management companies and those those those segments. It really been forced to kind of select a local regional acquirer to process card payments and then manually deal with bank related payments were.

We're signing up third party wallets that may be applicable given countries and have to string together a solution on their own oftentimes those companies don't have extensive it teams.

So.

They are kind of putting together kind of a patchwork solution.

So what we've done is we've brought our kind of modern technology software invoicing payment capabilities.

Those payment experiences into these clients that have been able to streamline the back office management of all those vendors. In addition to really deploy a payment experience with like an e-commerce experience, but really tailored to those sectors and those large and complex payment. So.

That's that's really putting us on a different level than just hey.

Hey, I'm, allowing you to accept credit cards, and so obviously fly where has the bank the banking infrastructure.

The credit card processing capabilities, and third party payment method capabilities, and we're bringing that all together for them. So.

Traditionally they are stringing something together multiple vendors multiple banks mobile card processing players.

That's why we are replacing.

And then second question around insurance as well.

Really we continue to be very much encouraged.

We talked about that a lot as an expanding.

Part of our flower advantage and kind of looking at what can be done to provide additional value add to the payer.

That's a great example.

We had a great agent solution.

Which targets educational agents.

The cohort go acquisition had an insurance offering that was part of that so really bringing that insurance offering to our number of Payors, which was obviously significantly larger and also the number of educational agents right. That's really led to.

A great synergy that we were we were expecting when we did that deal and are proud to say we are we continue to see great great growth from so.

We think we're just getting started when it comes to payer related services and things, we can do to drive additional value.

And I think the the.

The insurance aspect is just one of them you can imagine other offerings with our travel business. There's also certain types of additional account creation that could occur with payers. So we think the future is really bright in relation to that that offering.

Thank you.

Thank you. Our next question comes from Darrin Peller with Wolfe Research. Please proceed with your question.

Hey, guys.

Let me just start off quickly on the number of customer adds which is coming in a pretty healthy in fact very strong rates of last two quarters and then you had $1 70 and now one what was it 165 I'm not mistaken.

That's up you know somewhere around 20% or 10% to 20% from the run rate quarterly adds you would have about a year ago already. So is that you know how much of that is just the pure organic strength as you scale up the business versus inorganic and just adding new geographies and contribution from M&A, but also any color on the size.

<unk> is a small travel businesses or is it really meaningful universities, just the mix would be helpful.

Hey, Darrin, it's Rob good to hear your voice I'll jump in and start on this one so first of all I'd say, it's really all organic when we talk about the sort of new customer signs at this stage, maybe theres just a few that tie out somewhere and some of the way, but really this is organic shrank. This is based on the investments we've made in the sales team expanding our geographic.

Capabilities.

The success is really very global.

And across the verticals.

I think the last part of your question was can you talk a little bit more about sort of the size and profile of the deals we have looked at.

Yeah, Yeah, yeah. So so it is definitely skewed towards travel, but underneath that skew where there was travel if you look in the <unk> side of things. The actual client size was up just slightly if you looked at the average client size in the travel business. It was down just slightly and blended out to an average client.

<unk> that was right in line with what we are.

<unk> achieved in recent quarters. So overall, a really good result for our sales team that is working hard and doing well.

That's great to hear I guess my follow up would be around really two quick topics that under Jack one of them is the M&A side and I know W. P. M was being built out and kind of scaled up for third quarter and so how's the progress been there and then just the implications of that plus broadly speaking the conviction you have in the EBITDA margin trajectory, both from M&A impacts, but just.

Sure and simply organically you guys talked about this year, having the impact of Anniversarying hiring I know somebody touched on this earlier, but a little more detail on your confidence level of back to the midpoint of that 3% to 6% medium term would be great.

<unk> by the way congrats to you and all the best Thanks again.

Thank you.

First on EBIT margins with Mike.

I'd say, we continue to be confident in that range of $3 to 600.

Obviously as we get over kind of Q3 and into Q4, we've always said that's going to give us optionality for next year.

One thing we want people to hopefully see as our confidence by increasing.

Those numbers from this point forward this year and so we're going to look at next year as we get into 2020 for planning have lot of Optionality.

And hopefully come together with a plan that balances growth as well as those EBITDA margin expansion targets that we've that we've shared before.

Hopefully that answers that part of the question the other part of the question.

Randy I can jump in on the W. Pnp.

No.

WPM continues to progress very well.

Signed additional clients I believe are our clients signing count is now.

North of 55.

We are in.

The heading into what will be the larger of the peak type season for the U K as well.

<unk> taken advantage of the previous several months to get our implementation work.

As far along as we can for as many clients as we can so we feel really good about what will be the contribution from W. P. M. This Q3, which we think will be kind of the first quarter OEM a substantial number of clients.

And then are able to leverage the integration I would say the work on WPS is not done like we still have opportunities going forward, because there'll be kansas to take on even more schools there'll be chances.

And our footprint on the domestic.

Because most of the work that we've done so far has been not entirely but predominantly focus on cross border net net feel really good about the contribution for Q3, but also feel really good about upside opportunity after Q3.

Thank you. Our next question comes from sensing Huang with JP.

J P Morgan.

J P. Morgan so sorry.

No need to apologize it's all good.

You guys doing.

I want to vote for once they are approved.

Appreciation of course of Michaels as well on the news just wanted to ask on the new payment types you talked about.

Interac in and some others I'm just curious is there a greater demand for some of these.

RTP networks or lower costs national schemes I'm, just curious if that's a general theme that you're observing and if there are any implications for before.

Things going on there.

Sorry go ahead Mike.

Yeah.

Hey, Tien tsin. Thanks for the question I would say we continue to see positive.

Sorry, when we add new methods, we're always looking to increase acceptance.

As we've said before Fireeye doesn't control how people choose to pay and we want to have as many options available as we can to the Payors I would say in general there is a desire from our clients to have the most convenient ways to pay.

And then in addition to always looked at look at cost of acceptance right. It provide different price points.

From a cost of acceptance perspective, so as bank transfers become.

<unk> or are there certain countries around the world that have systems that make that.

Easier more digitized more online we see it.

And interest in having them.

And our clients have an interest in making it is convenient and is easy to pay so we don't see it really of any shift from a flywheel perspective.

From a pricing or spread perspective, we control the costs associated to any method.

And again, if that's a domestic option or a cross border option. We are different obviously ways to monetize those transactions as folks are are quite familiar with.

So thinking about it from a travel perspective, 100% understand travel in card and Youre not trying to.

Influence you know the consumers funding choice, but I'm just curious is there an opportunity to maybe price that business a little bit differently on the travel side or would you be willing to take on more.

Credit exposure maybe.

Alternative payment method there.

These trend sort of continue.

On the travel side.

Yes.

Obviously, there's a certain aspect that that exists inside travel around.

Usage.

Associated with credit cards.

How the consumers have traditionally paid for travel experiences at the same time.

We see consumers want that want convenience right. So you could see things like installments become more.

Intuit travel business again flowers noninterest bearing right clients don't extend interest payments really just different payment terms.

So sometimes different payment terms can kind of invoke different ways to put it in a payment method and <unk>.

Again clients are always looking for ways in which they can.

Provide more value I think banking banking rails are critical as you start looking at something we've talked about before around payables.

Around commission flows in a lot of these industries.

We think having the banking rails and the infrastructure to do that.

On not only the receive side, but on the on the send side. So I'd expect those types of things to come into the travel business over time as well as more software.

Obviously as we drive more solutions for customers in that segment I think all of those will help us.

Helping improve our offering to travel clients.

Got it okay, it's not something to watch nice results. Thank you guys.

Thank you. Our next question comes from Joel Richards with curious Securities. Please proceed with your question.

Hi, guys. This is Joe on for Andrew Jeffrey Thanks for taking my questions and congrats Mike.

Regarding both the healthcare and education components of the domestic business can you tell us a little bit how you expect those two areas to ramp for the remainder of the year and whether or not we could see any acceleration in organic growth.

For the second half of 'twenty and into 2024, and then kind of just like in that context.

Any color around like what greater domestic volume mix means for yielding gross margin would be really helpful.

So I can start with sort of the trends and then Mike you can maybe talk to the gross margin piece. So.

The U S. Domestic education business is growing very nicely, it's growing well above the overall company growth rate, which as you see us announcing today is a it's a very healthy growth rate. So we expect that to continue.

And.

Doing very well with that domestic <unk> footprint across a range of solutions, we've talked about.

Health care has had a tougher first half of the year, but we do believe with the deployments that are going live now and that have gone live just in the last little bit that.

That we will see a much healthier growth rate for health care business in the second half of the year.

Yes, I would expect the adjusted gross margin profile for the domestic business to be pretty consistent with what we've been reporting in our transactional based business and probably closer to the overall average but.

But on the higher end of that average, it's a really good business and again the unit economics, regardless of the payment method or the type of our really strong in the business.

Alright, Awesome and then it sounds like you also kind of expect the durability of the travel recovery to kind of be sustained for the remainder of the year.

Are you guys thinking about potentially tougher comps over the next 12 months for.

For international.

Yes.

I'll take that one this is Mike.

I think we continue to look at how early we are in the travel sector right. It's a massive total addressable market.

It isn't like when the pandemic hit we were sitting on.

A high percentage market share and this is the recovery play obviously there is some benefit of returning to pre pandemic levels, that's happening, but we're signing significant numbers of accounts and we see a lot of room to run in new client acquisition in the sub segments.

Highlight there's geographies right.

Think of the same playbook, we've talked about before more geographies allow us to drive more at our our new client adds and new geographies for travel.

Geographic expansion do you expect can travel there sub sector expansion theres other sub sectors. We're looking at expanding into another use cases inside travel and then I mentioned earlier the additional products right. We're still primarily driving one main product into into our travel accounts and so you can imagine we have a <unk>.

<unk> plans to add additional software just like we've done in other verticals.

And add more value and drive more revenue within those existing accounts. So we feel really good we're.

Early innings in travel obviously the growth numbers are great and we.

We think it's going to continue to grow for years to come.

Yeah.

Awesome. Thank you so much.

Okay.

Thank you. Our next question comes from Charles Nabhan with Stephens. Please proceed with your question.

Hi, good afternoon, and thank you for taking my questions. So with respect to the full year Guide increase you had mentioned that FX would be a bit of a tailwind relative to your previous expectations would it be possible to quantify how much of that raise was attributable to the greater than expected FX tailwind.

Yes, sure so essentially when we think about our full year guidance, Mike just talked about all the positive results were as it relates to travel and we called out our cross border education. The majority of the increase in the guide really comes to those two components, but we do have built into that guidance.

Some FX tailwind that we do anticipate low single digit millions.

That much but really it comes down to the fundamentals of the business.

Got it and just as a quick follow up.

One of the verticals that you didn't really touch on Tonight with was B to B. So I wanted to get your comments on any any notable trends youre seeing there.

Yes, we're feeling really good about the <unk> business, we expect to continue to invest in that.

Was one of their strongest quarters ever in terms of.

It was a great quarter in terms of revenue.

It's still growing from a smaller base, but it's growing at the highest rate in the company and we expect that to continue to perform really well.

I look forward to investing more in that part of the business.

Got it I appreciate the color and Michael Thank you for everything and best of luck.

Thank you.

There are no further questions at this time.

This concludes today's teleconference.

May disconnect your time.

Disconnect your lines at this time, thank you for your participation.

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Greetings and welcome to the fly Wire 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 a kill Hollis. Thank you Appeals you may begin.

Thank you and good afternoon.

With me on today's call are Mark Massaro, Chief Executive Officer, Bob Udell, President and Chief operating Officer, and Mike Ellis Chief Financial Officer.

Our second quarter 2023 earnings press release supplemental presentation, and when filed Form 10-Q can be found 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.

We'll 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 Mark Massaro.

Thank you Jill and thank you to everyone that is joining us. This afternoon. We're excited to share. Our Q2 2023 results, which show continued strong performance and momentum across the business.

In a few minutes, Rob Oracle, our president and CFO as well as Mike Atlas, Our CFO will go into greater detail about our results for the quarter, but it will first share some highlights from our second quarter.

Revenue less 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.

And 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. These details will be shared later in the call.

It has been an exciting two years, that's why wire 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 were draw.

<unk> 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.

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 fly wire advantage with product and payment innovation and strengthening and growing our <unk> community.

In Q2, we continued 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.

As we briefly highlighted last quarter, we have the ability to scale quickly and 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 spinning 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 <unk>.

U K, we continue to see strong synergies following our <unk> 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 Didnt mentioned, another record breaking quarter for travel where.

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 flywheel advantage during the quarter.

This is part of our long term vision to power the ecosystems and our core industries of education health care travel and BTB.

As a reminder, the flour advantaged 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 <unk>.

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, <unk> Fintech arm to expand waste and pay also known as wechat pay as a payment option for Chinese students and families, making tuition payments abroad, while fly wire offered this payment method previously <unk>.

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 flowers footprint across China, one of our largest payer markets.

For the 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 flywheel was recently appointed to the 2023 through 2025 payment card industry Security Standards Council PCI SSD board of advisors.

As representatives of <unk>, our CTO and CIO joined the board members from some of the worlds most prominent organizations, who are coming together to help build more secure payment ecosystems around the world.

Now with a seat at the table fly where 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 long standing relationships with PCI.

Our CTO was part of the original team that drafted version one point out of the PCI DSS standards.

Speaking to our last key investment area. We also continued to strengthen and grow our fly eight community.

It is difficult to believe that we acquired cohort go a little over a year ago welcoming over 50, new fly mates as part of this transaction.

Our combined team has seen rapid success with our insurance products growing over 60% on a pro forma basis in accomplishing our key product integration plans.

These accomplishments continue to highlight <unk> proven track record of successful M&A as well as our ability to foster community and culture following an acquisition.

At <unk>, 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.

<unk> provide additional capabilities that enable us to drive net revenue retention, allowing us to upsell of new capability to an existing client or third help us expand into a new industry sub sector 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 and a handful of acquisitions that we've done over the past few years like Wpm's cohort go.

Similar to us they were client focused and value driven organizations once that knew how to collaborate and innovate.

Like fly wire WPM in 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.

<unk> grows we work hard to make sure we are constantly providing our fly made the opportunity to grow their careers, 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 flying 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 fly mate engagement <unk>.

<unk> was met with great excitement from our global fly mates, who also recently celebrated being named most loved workplace.

The investments in go to market execution, expanding our flywheel advantage and in strengthening our <unk> community are also supported by positive trends across the industries that we serve giving us even more confidence in the path ahead for fly wire.

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.

Ability trends, we're tracking for example, new data from <unk> 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 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 spike significantly higher towards 132% over the July 4th weekend.

In closing I would like to thank our global <unk> 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 <unk>, our president and COO to review some operational highlights from the quarter Rob.

Thanks, Mike Good afternoon, everyone as Mike mentioned, it's been a great start to the year and we believe we will continue to see robust growth in the second half of 2023.

Our sales team delivered great results during the quarter and added over 165, new clients. This capped off a strong first half of the year for the sales team Q.

Q2, <unk> also remains strong and above the three year average discussed in our analyst day.

This quarter success was driven by our continued execution of our five strategic growth pillars. As a reminder, those pillars 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.

<unk>.

Starting with growth with existing clients. A first example is our going live with our domestic collection management solution at Wellesley College.

Liberal Arts College for women based in Massachusetts Wells.

Wellesley has used our cross border payments offerings since 2011.

Just a few months of being live with our domestic collection management solution. We saw nearly a 20% reduction in past due student tuition balances, while also reducing manual staff efforts through an automated outreach and sign up process, where youre seeing many schools interested in our collection management solution, reflecting their interim.

And a streamlined process for collecting overdue student tuition bills.

Within our travel vertical I'll highlight <unk>, Canada, our Canadian tour operator in business for over 20 years and based in Vancouver, we on boarded a fresh tracks a year ago to support their cross border payments and enabled them to accept payments from 31 different countries in 25 different currencies with the ability to scale to over.

140 currencies.

With our recent integration with fresh tracks instance of Salesforce Dot Com, we are now able to capture all of their payment transaction volumes integrating with major systems of record like Salesforce and as part of our strategy to work with more enterprise clients in the travel vertical.

We also had many new clients go live across the verticals in the quarter, including Tennessee State University, which was founded in 1912 and has over 8000 enrolled students, including international students from over 40 countries.

<unk> went live with both our cross border and domestic education payment offerings at the same time.

<unk> solutions are integrated with the Louisiana banner student information system, and our fast implementation time has enabled <unk> to begin offering payment plans for students and families in time for fall 2023, and spring 2024 semesters.

We also recently went live with a few group of eight universities in Australia, which Mike mentioned earlier one of those is the University of Adelaide, which now offers our cross border solution.

Adelaide enrolls nearly 24000 students of which approximately 30% are international.

We're excited about the traction within the group of eight universities in Australia bigger picture, we are making progress on our growth plans with multiple verticals in Australia and are continuing to build our capabilities to broaden and improve our services in that country.

In healthcare, we went live with Rogers behavioral health provider of specialized mental health and addiction treatment services based in Pennsylvania.

Rogers is integrated with Cerner millennium, EHR platform, which provides an enterprise wide view of patient care.

<unk> digital self service payment solution Rogers has very quickly been able to reduce the number of patient phone calls regarding payments that their staff members had to handle since going live in the second quarter about 95% of online patient payments have been made through fly wires self service portal, indicating the user friendly experience with our platform.

<unk>.

We're also pleased to share that patient billing satisfaction has received a high rating of four six out of five stars.

This progress reflects our commitment to supporting patients and simplifying financial interactions in the health sector.

Within our <unk> vertical we recently went live with <unk>, a global software leader in digital insights and research technology. Since it was founded in 1998 and has 18 global offices that help over 3200 companies gather consumer insights.

<unk> solution is integrated with net suite and quality.

Yeah.

Helping to streamline disparate accounts receivable processes within the organization.

<unk> exclusive partner for international receivables and leveraging fly wires proprietary payment network and recurring billing capabilities client customers using the offering received industry, leading visibility from order to payment settlement.

This enables <unk> to reduce friction and transaction processing with their customers and to prove their efforts managing key internal finance metrics. Overall, we are very happy with our progress in <unk>.

We also continued to grow via channel partnerships in Q2, we announced our partnership with disco a market leader in international recruitment and career development.

Optimize the cross border education payments experience for students studying in Japan.

Fly wire is discos exclusive payment provider for enrollment and application fees and we're integrated directly into their E apply system.

Just goes network of more than 1000 universities colleges and vocational schools represents a great opportunity to present, our brand value proposition and expand our footprint in Japan.

Another strategic lever of growth is expansion to new industries geographies and products. One way. We do this is by continually improving the strength of our global payment network.

In addition to the improved partnership with Tencent that Mike mentioned earlier, we recently signed a partnership with the state Bank of India, or Spi, which is the largest public sector bank in India.

<unk>, enabling seamless digital payments from India for Spi account holders. This is in addition to similar connections we have established with IC ICI and <unk> Bank in India.

We also improved our domestic payments capabilities through the addition of interac, a realtime interbank payments network in Canada.

This will help us capture additional payment flows for universities in Canada. We believe there is no substitute for this kind of detailed network work and that this is part of the differentiation of fly wire that delivers real value for our clients and payers.

Lastly, as we grow we remain mindful of our spending and desire to scale as a company whose costs are primarily personnel, we are thoughtful of who and where we hire new flying that we all.

Employ a rigorous vendor management process to drive down other costs. This contributed to our adjusted EBITDA outperformance in Q2, and we continue to look for ways to look for process efficiency streamline tools and drive cost savings.

With that I would now like to turn the call over to Mike Ellis, Our CFO Mike.

Thank you Rob good afternoon, everyone. Today I'll provide an overview of our results for the second quarter, and then I will discuss our outlook for Q3 and the full year.

Revenue less ancillary services was $79 5 million in Q2, representing a 54, 4% growth rate compared to Q2 2022.

On a constant currency basis, our revenue less ancillary services growth rate for Q2, 2023 would have been 57%.

We experienced a revenue headwind of approximately $1 3 million due to the strength of the U S dollar compared to the British pound and the Canadian dollar in Q2 2023 compared to Q2 2022.

Our revenue growth rate was driven predominantly by an increase in total payment volume, particularly due to strong growth from our international cross border payment volumes in our education vertical and the United Kingdom as well as strength from European destination management companies and our travel vertical going into the summer season.

With respect to payment volumes, we processed $4 1 billion. During Q2, 2023, which represented an increase of 43% from the $2 9 billion processed during Q2 2022, specifically transaction revenue less ancillary services increased 61% compared to Q2 2022, driven by a $50.

5% increase in transaction payment volume.

Platform and usage based fee revenue increased 27% compared to Q2 2022, driven by an 11% increase in platform and usage based payment volumes as well as fees that didn't carry associated payment volumes such as our revenue from student health insurance referral payer services that we discussed on our prior call.

We generated $50 5 million in adjusted gross profit during the quarter, representing a 46, 8% increase compared to the $34 4 million earned during Q2 2022, specifically our adjusted gross margin was 63, 5% for Q2 2023 down 330 basis points from the $66 eight.

<unk> percent for Q2 2022, the year over year change in adjusted gross margin was driven primarily by three factors first strong growth of our transaction revenue versus our platform revenue, particularly from our travel vertical where credit cards are predominant and second settlement losses on foreign exchange transactions as discussed last quarter.

We hedge our exposure to changes in foreign exchange rates, while settling transactions. So while these losses lower our adjusted gross profit. We also saw offsetting gains on our hedges within our operating expenses. Those two factors were partially offset by a third factor, which was the contribution and outperformance of our high margin insurance busy.

As previously mentioned.

Our year to date change in adjusted gross margin of negative one 6% was slightly higher than the full year guidance of negative 1% to one 5% we shared at the beginning of 2023 due to the outperformance of our travel vertical we expect our travel vertical to continue to outperform for the remainder of 2023.

Have reflected this in our full year guidance, which I will share momentarily as a result, we expect the adjusted gross margin decline for the full year to be greater than the originally anticipated range of 1% to one 5%. However, we remain confident in our strong unit economics across all payment methods and enjoyed continued stability in our tree.

<unk> spreads in Q2 in terms of gross profit as a percentage of volume.

Moving on to operating expenses technology and development expenses were $16 1 million for Q2 2023, an increase of 21% over the $13 2 million incurred during Q2 2022.

The increase was primarily the result of adding <unk> to our engineering and technology teams, which drove increases in employee related costs, including stock based compensation consistent with our investment plans. In addition, we incurred more costs associated with scaling our hosting and software costs to meet increased transaction volumes.

Selling and marketing expenses were $27 3 million for Q2 2023, an increase of 44% over the $18 9 million incurred during Q2 of 2022.

This increase was mainly driven by investments in go to market resources, which drove increases in employee related cost, including commissions and stock based compensation.

General and administrative expenses were $24 6 million during Q2 2023, an increase of 23% over the 20 points zero million incurred during Q2 2022. This year over year increase was predominantly due to adding fly made to support our general and administrative teams, which drove increases in employee related costs, including.

Stock based compensation.

Adjusted EBITDA for the quarter was negative 0.1 million an improvement of 6.0 million over the negative $6 1 million reported for Q2 2022.

With respect to capitalization as of June 32023, we had $328 1 million in cash and cash equivalents no long term debt and 111 8 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.

Sure.

Moving on to guidance, which is based on foreign exchange rates as of June 32023.

For full year 2023 based on our results for the second quarter and our outlook for the second half of the year. We now expect revenue less ancillary services to be in the range of 372 million to $380 million, representing a year over year growth rate of 41% at the midpoint.

Our full year 2023 expectations reflect an increase in our second half revenue expectations on a constant dollar basis as well as improved FX conditions at the end of June versus the end of March further movements in exchange rates could impact results.

We expect to deliver full year 2023, adjusted EBITDA in the range of 33 million to $39 million. This.

This represents an increase of $3 million at the midpoint of our previously provided guidance.

We're not increasing our full year guidance by the full amount of our Q2 outperformance due to expenses that were originally planned to be incurred during the first half of the year, which are now expected to be incurred throughout the remainder of this year.

At the midpoint of our full year 2023 guidance range, we expect to generate approximately an incremental 400 basis point improvement in adjusted EBITDA margin, a slight increase from our previous guidance.

For Q3, 2023 revenue less ancillary services is expected to be in the range of $116 million to $122 million, which represents a year over year revenue growth rate of 34% at the midpoint, which incorporates factors I mentioned with respect to our full year guidance as well as our lapping the cohort go acquisition.

Due to the strong results heading into Q3, we now expect Q3 adjusted EBITDA to be in the range of 24% to $28 million, which at the midpoint represents a $7 8 million year over year improvement compared to our reported adjusted EBITDA for Q3 2022.

We were very pleased with how the business performed during the second quarter, highlighting a strong return on both our organic and strategic investments in closing as announced in our press release I will be leaving <unk> in 2024 after more than eight years, it's been an incredible experience, helping build this company and working with this very talented global team.

I'm committed to supporting the company through this transition period.

I'll now turn it back over to Mike for closing remarks, Mike.

Thanks, Mike we appreciate everyone joining us today and we'd like to finish with a thank you to Mike Ellis, who has truly been a pleasure building flyway or with him over the past eight years and I know this business would not be where it is today without his efforts.

With that we will now transition to the Q&A portion of the call operator.

Thank you we will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad a.

A confirmation tone will indicate your line is in the question queue.

You May press Star two if you would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys, one moment, please while we poll for questions.

Yes.

Yes.

Thank you. Our first question comes from Dan Perlin with RBC capital markets. Please proceed with your question.

Thanks, Good evening I wanted to start on the education vertical for a second and specifically you know you called out.

Like what's the college wasn't oncology for domestic based payments and one of the driving factors I guess that it sounded like it was a 20% reduction in past due collections I'm wondering as.

As you are continuing to pursue this kind of domestic based approach into your back book for cross border. I mean is that is that one of the main.

Drivers for universities as they're trying to think about assessing taking you guys on the domestic side of the equation as well.

Hey, Dan This is Rob I'll step in and start on this one.

The strength in our domestic education business is broader than just this domestic collections platform. So first and foremost our offering centers around the ability to have a fuller solution that enables a whole breadth of payments across the.

The domestic student population, so that's our payment plan and capabilities.

And one time payments in many of the things you've heard us talk about it in the past.

The particular solution that we described for Wellesley. Just now is another part of our sweet part of our student financial software and that is focused on these.

Purdue tuition payments.

That's not the only school that has seen some pretty remarkable results using that platform that they've shared with us in recent months and so we do see strong interest in that in the U S and we look to enable that offering outside the U S as well going forward.

All part of our ability to be strong and domestic here in the U S. But also enabling some of those capabilities around the world.

Got it.

Can I just a quick follow up on kind of adjusted gross margins, Mike you called out I think you said declining more than that.

The one to one and a half points for the year did you put a finer point on that.

As you think about it.

Maybe the trajectory into the second half and is there any cadence we need to be mindful of as we think about sequential movements. There. Thank you.

Yeah.

Sure. So I would first say that listen we're really pleased with the 47% improvement that we show an adjusted gross profit and again the second thing I'll point out is that the spreads in our transactional revenue have been stable. What we're seeing is that the travel outperformance is having a small drag on adjusted gross margin, but still really excellent unit economics and driving.

Adjusted gross profit dollars for us.

You have to don't lose sight of the fact of the 150 basis point impact from the FX loss. So if you exclude that youre somewhere in that one 8% range, and that's probably where I'd probably peg it.

But.

We're pretty confident in our unit economics, and our ability to kind of drive our adjusted gross profit dollars and that's really what we're focused on.

Got it thanks for that.

Thank you. Our next question comes from Jason Cooper Berg with Bank of America. Please proceed with your question.

Alright. Good good afternoon, guys. This is Tyler Dupont on for Jason Thanks for taking the questions.

I wanted to start by first asking about the the upside surprise to revenue during the quarter.

When looking at the business I know <unk> was more of a seasonal low point when it comes to education, but if you could just break out sort of where the growth really came from for example was it a quicker ramp up in APAC travel.

And when just thinking about the back half of the year, just sort of given the current macro environment or are there any puts and takes there worth worth considering.

Hey, Tyler.

Appreciate the question so in short a couple of the areas that were called out outperformance.

Right.

Education Asia and EMEA also for travel we had talked a lot about.

The growth in our EMEA travel business again, and a recovery of Asia.

From a travel business perspective, so those are two clear callouts in the quarter.

Again, I think part of what Youre seeing as well is also different seasonality right as we add different business units youll.

Youll see additional seasonality come from travel that is different than the historic seasonality of our.

Of our education business.

Again as typically predominate in Q3, so youre seeing kind of almost a redistribution of that seasonality a bit as we see growth in other verticals. So hopefully that answers your question.

Yeah. It does I appreciate that and then just as a follow up at first glance. The updated guide it looks like revenue was raised by more than the beat EBITDA margin EBITDA was raised essentially by the beat I know you mentioned that there was going to be some increased expenses that got moved into the back half of the year, but I was wondering if you can maybe just level set for us what sort of investments. The company is planning on implementing in the back half.

And then are those incremental or just any update there.

So this is Rob I can I can start and then else feel free to jump in if you like.

We are essentially performing very well across the business we see.

A bit more hiring that will happen in the second half of the year. That's just pushed from Q2 that the main piece of expense. There is a little bit also in marketing that we'll just hit in the second half versus the first half as we actually lay out the forward plans for the year, but you can see that the increments are the adjustments are very modest relative to the plan.

Yes, I would only add that we take a very disciplined approach and I think as we talked about during Q1, some pacing of our hiring ensuring we're seeing some macro concerns dissipate over the year and we're anticipating investing more in the sales and marketing as Rob indicated.

Great. Thanks, again, guys nice job on the quarter.

Thanks.

Thank you. Our next question comes from Ashwin <unk> with Citi. Please proceed with your question.

A.

Congratulations on the results.

And Mike sorry.

Just thinking about I know youre going to be around for a few more quarters, but.

My appreciation and thank you.

The.

The question I have is with regards to is there a good way to measure.

Indication of your.

Of your services.

<unk>.

The broadening out of footprint, that's something it's proven that you can do.

We get a lot of investor questions about.

Yeah, what percent of students actually using plywood answered before their choices and things like that so any thoughts on how to measure penetration.

So it's.

It's Rob I'll start this one off.

We've obviously been in this business for a good long time, and we have always had initiatives to continue to drive forward utilization retention all the all of the metrics around adoption and so the first thing I would do is say because I think your question is probably focused on sort of that cross boarder adoption use case, where we continue.

To drive things that build value around our services to continue to drive it up.

The comment we've always heard is that adoption is highest in the first year.

And then there may be some drop off in subsequent years that phenomenon is true, but we actually view that as opportunity right the opportunity for us to continue to get better at providing value in retaining those.

Students for even longer through their educational cycle. So we've got active initiatives around that and really view that as upside.

Broader point that I'd make is to remember that the.

The business and the NR that we deliver is driven on expanding our set of offerings across the university as well. So if you think about the things we're doing it's not just about the cross border, we have an incredible opportunity across our business to serve the domestic student populations within our clients as well as the cross border. That's R. R.

Our core strengths historically.

And then even more broadly taking the example of folks like Wellesley that we just talked about earlier in this call other product dimensions as well. So when you ask the question about sort of adoption and utilization broadly we're very early in the cycle and with upside across all the dimensions I've just mentioned.

And Ashwin just to add to Rob's point I would say, obviously our strategy of land and expand is also.

Our end game right.

Through all of that software deployed youre getting all the payments right by by having cross border domestic overdue receivables right. When you deploy more software you inherently solve the utilization question as you're being used for all student payments at a given university. So again as Rob said different strategies depending on.

Graffiti, but ultimately the same end goal.

Understood that's very useful.

I wanted to focus maybe on healthcare.

I mean, obviously you guys continue to have incremental signings and more progress in the space.

But what we perhaps have not necessarily heard is.

The type of.

No.

So the profusion of signings like we have in say travel are.

R R.

Our education and so it kind of just wanted to ask about.

The.

The environment and the desire of those clients and prospects to.

To sign.

What may or may not be perhaps holding them up what might be a good longer term growth rate for healthcare.

Yes. This is Rob I'll start here again.

First just to be Super clear, we're very positive on our health care business as long term prospects. Despite what we have to concede some challenges in the first half of the year. So just just to put all this in context, obviously it is a business with very strong contribution to gross profit it Scott.

Got it great and very high gross margins, we are signing new clients as you heard today with Rogers and growing many existing clients. There are bunch of other new client signs as well along with two new customer deployments and a major expansion that have already happened in Q3 at the same time.

Health care is it a sector thats growing as fast as some of our others and we haven't enjoyed the level of growth rate that we expected to see in the year and so.

That's been on a combination of factors, but ultimately we do believe the second half of the year.

You'll see us where all the progress and the hard work that the team is doing the clients that they are signing the clients that theyre getting live will bring us back to a healthy growth rate.

We are seeing good progress getting signings through our partnership with Cerner. We've had success through other partners and other EHR integrations and so overall look healthcare is a tougher business to sell in but we remain very bullish on the business.

Thank you very much tremendous job. Thanks.

Thank you. Our next question comes from John Davis with Raymond James. Please proceed with your question.

Hey, good afternoon, guys, Mike just wanted to touch on gross margins I put a finer point on it if I understood. What you were saying earlier basically.

The lower gross margin is just a function of the outperformance in travel. So gross profit dollars are better than I expected is just it's just mix of nothing else, that's causing the lower gross margin just wanted to confirm that.

Yes, John that is true the one thing I would add to that is the lapping of the cohort go acquisition that occurred in July I think we just lapped. It so that will also not have that.

That did contribute to our adjusted gross margins during the first half of the year.

Okay, Great and then Rob I think in your prepared remarks, you called out an ror stronger than kind of the three year average in the quarter. Just wondering if you could touch on that is that just students returning in a post COVID-19 environment Cross sell maybe caught a couple of factors are leading to that strong that'd be helpful.

Sure Jamie so the NR has been in a pretty narrow range across a series of quarters. That's led to a pretty consistent NR, whether youre looking at one year or three year averages and so it's all been very consistent and built on the same foundation of sort of land and expand that you've heard us talk about before so what you see.

There is strength really across.

Education, and travel, which probably are driving that and are the most <unk> is a smaller piece of it and operating at the highest level.

Health care a bit lower but.

Contributing to that overall corporate performance that staying in that exact range that we talked about.

And the underlying drivers of that are really the same as what we've talked about in the past which is to say.

You see us growing cohorts very well over periods, you see us having strength across the geographic channels that you've heard us talk about in the past and continuing to win.

<unk> expanded software across a range of our clients so whether it's <unk>.

Getting getting more coverage in a beta client, whether it's getting more software into a school. All the same building blocks are what's adding up to that that NR in our in our typical range.

Okay, Great and then one last quick one for Mike Ellis both of the <unk> guide it implies a little bit less of a sequential step up.

Than in prior years, maybe how much of that is like travel until the other vertical as being a bigger contributor versus conservatism just help us think about the sequential improvement in revenue kind of <unk>.

Yes, John So we're pretty confident in the guidance ranges that we provide and it's really a function of what we believe is going to happen with respect to our travel vertical as well as international Education Health care as Rob indicated it's been a little bit of a drag, but still really excellent economics, and we've kind of built that all into our model.

And similar to last year, if you looked at the trend lines as it relates to the first half and second half, we typically do see a slower overall growth rate in second half of the year, that's really a function of the really the size and the contribution and the seasonality of our business that we see in Q3 and to a lesser extent Q4.

Okay. Appreciate the color thanks, guys.

Thank you. Our next question comes from Bob Napoli with William Blair. Please proceed with your question.

Alright, Thank you and Mike Ellis. Thank you for all your help over the years I appreciate it and wish you the best.

Sir.

Just on <unk>.

Competitively are you seeing.

Your turn.

Relationship I think there is another education company and it works with the Tencent just broadly are you seeing any changes in the competitive environment. What are you most keeping your eye on competitively.

Hey, Bob This is Mike.

Continue to be we continue to be very encouraged.

How we compete in the markets as we've said before we compete within the verticals we compete with no one across these verticals. So we will get it within a given vertical which we see competition.

And I would say, we feel very strong about how we're competing in the innovation we're doing the accounts were winning.

In new geographies, adding new methods you mentioned the 10%.

I mean, I think it's just further indication that.

We're a important player in this space and we can get deeper relationships with globally recognized brands like that.

I think that's that's obviously very important we also mentioned in part of the earnings recognition by PCI being added to that Council, we think Thats a really good indicator right. That's not a position that a lot of our competitors have or can hold and so that recognition I think helps us continue to innovate be seen as an innovator within the sectors that we're in.

And I've said it before we like to compete we have a team that that is good.

Competing in and we're going to get up every day doing.

Thank you and then you called out.

The insurance business, a couple of times, maybe a little more color on that and then just in travel and then I'll get off.

Where are you seeing the success in travel who are you.

You're competing against what areas of travel.

Are you having the most success and why are you enable them and it is generally there is a lot of players in the travel market, but you seem to have a.

Unique position.

Yes.

I think what we're doing is identifying subsectors that.

Have very much been neglected inside inside the broader travel system right. We're not competing for small dollar e-commerce for travel we're looking at kind of luxury tours accommodations.

These destination management companies and those those those segments. It really been forced to kind of select a local regional acquirer to process card payments and then manually deal with bank related payments.

Line up third party wallets that maybe applicable and given countries and have to string together a solution on their own oftentimes those companies don't have extensive it teams.

And so.

We're kind of putting together kind of a patchwork solution.

So what we've done is we brought our kind of modern technology software invoicing payment capabilities.

Those payment experiences into these clients that have been able to streamline the back office management of all of those vendors. In addition to really deploy a payment experience with like an e-commerce experience, but really tailored to those sectors and those large and complex payment. So.

That's really putting us on a different level than just.

Hey, I'm, allowing you to accept credit cards, and so obviously fly where has the bank the banking infrastructure.

The credit card processing capabilities, and third party payment method capabilities, and we're bringing that all together for them. So.

Traditionally there string and something together multiple vendors multiple banks multiple card processing players and that's where we are replacing.

Thanks for your question around insurance as well.

Really we continue to be very much encouraged we talked about that a lot as an expanding.

Part of our flour advantage and kind of looking at what can be done to provide additional value add to the payer.

And that's a great example.

Had a great agent solution.

<unk> targets educational agents.

The cohort go acquisition had an insurance offering that was part of that so really bringing that insurance offering to our number of Payors, which was obviously significantly larger and also the number of educational agents right. That's really led to.

Great synergy that we were we were expecting when we did that deal and are proud to say, we continue to see great great growth from so.

We think we're just getting started when it comes to payer related services and things, we can do to drive additional value.

And I think the.

The insurance aspect is just one of them you can imagine other offerings with our travel business. There's also certain types of.

Additional account creation that could occur with payers. So we think the futures really bright in relation to that that offering.

Thank you.

Thank you. Our next question comes from Darrin Peller with Wolfe Research. Please proceed with your question.

Hey, guys.

Let me just start off quickly on the number of customer adds which is coming in a pretty healthy in fact very strong rates of last two quarters. I think you had 170 and now one what was the 165 from not mistaken.

That's up you know somewhere around 20% or 10% to 20% from the run rate quarterly as you would have about a year ago already so is.

How much of that is just the pure organic strength as you scale up the business versus inorganic and just adding new geographies and contribution from M&A, but also any color on the size of the eases as a small travel businesses or is it really meaningful universities, just the mix would be helpful.

Hey, Darren this is Rob good to hear your voice I'll jump in and start on this one so first of all I'd say is it's really all organic when we talk about the sort of new customer signs at this stage, maybe theres just a few that tie out somewhere and some of the way, but really this is organic strength. This is based on the investments we've made in the sales team expanding our geographic.

Capabilities.

The success is really very global and.

And across the verticals.

I think the last part of your question was can you talk a little bit more about sort of the size and profile of the deals.

Look the merchant that yeah, yeah, yeah, yeah. So so it is definitely skewed towards travel, but underneath that skew where there was travel if you look in the <unk> side of things. The actual client size was up just slightly if you looked at the average client size in the travel business. It was down just slightly and blend it.

Out to an average client size that was right in line with what we've achieved.

Achieved in recent quarters. So overall, a really good result for our sales team that is working hard and doing well.

That's great to hear I guess my follow up would be around really two quick topics that under Jack one of them is the M&A side and I know W. P. M was being built out and kind of scaled up for third quarter and so how's the progress been there and then just the implications of that plus broadly speaking the conviction you have in the EBITA margin trajectory, both from M&A impacts, but just.

Sure and simply organically you guys talked about this year, having the impact of Anniversarying hiring.

If somebody touched on this earlier, but a little more detail on your confidence level of back to the midpoint of that 3% to 6% medium term would be great and Mike Ellis is by the way Congrats to you and all the best Thanks again.

Thank you.

First on the EBIT margins with Mike.

I'd say, we continue to be confident in that range of 300 to 600.

Obviously as we get over kind of Q3 and into Q4, we've always said that's going to give us optionality for next year.

One thing we want people to hopefully see as our confidence by increasing.

Numbers from this point forward to this year and so we're going to look at next year as we get into 2020 for planning have lots of Optionality.

And hopefully come together with a plan that I think balance sheet growth as well as those EBIT margin expansion targets that we've that we've shared before so that was hopefully that answers that part of the question. The other part of the question.

Randy I can jump in on the W. P M P.

No.

WPM continues to progress very well.

Find additional clients I believe our client signing count is now.

North of 55.

We are in.

The heading into what will be the larger of the peak type season for the U K as well.

We've taken advantage of the previous several months to get our implementation work.

As far along as we can for as many clients as we can so we feel really good about what will be the contribution from WPM. This Q3, which we think will be kind of the first quarter OEM a substantial number of clients.

That are that are able to leverage the integration I would say the work on Wpn has not done like we still have opportunities going forward, because there'll be kansas to take on even more schools there'll be chances.

And our footprint on the domestic.

Because most of the work that we've done so far has been not entirely but predominantly focused on cross border net net feel really good about the contribution for Q3, but also feel really good about upside opportunity after Q3.

Thank you. Our next question comes from sensing one with J J P. Morgan.

J P. Morgan so sorry.

No need to apologize al good how are you guys doing.

I want to vote for once.

The depreciation.

Depreciation of course to Michaels as well on the news just wanted to ask on the new payment types you talked about.

Interac in and some others I'm just curious is there a greater demand for some of these.

RTP networks or lower costs National scheme. So I'm just curious if that's a general theme that you're observing and if there are any implications for before.

Things going on.

Sorry go ahead Mike.

Yeah.

Hey, Tien tsin. Thanks for the question I would say we continue to see positive.

Sorry, when we add new methods, we're always looking to increase acceptance.

As we've said before a flyweight doesn't control how people choose to pay and we won't have as many options available as we can to the Payors I would say in general there is a desire from our clients to have the most convenient ways to pay.

And then in addition to always looked at look at cost of acceptance right. It provides different price points.

From a cost of acceptance perspective, so as bank transfers become.

Or are there certain countries around the world that have systems that make that.

Easier more digitized more online we see it.

And interest in having them.

And our clients have an interest in making it is convenient and is easy to pay so we don't see it really of any shift from a <unk> perspective.

From a pricing or spread perspective, we control the costs associated to any method.

And again, if thats, a domestic option or a cross border option. We are different obviously ways to monetize those transactions as folks are are quite familiar with.

So thinking about it from a travel perspective, 100% understand travel in card and Youre not trying to.

Influence the consumers finding choice, but I'm just curious is there an opportunity to maybe price that business a little bit differently on the travel side or would you be willing to take on more.

Credit exposure maybe.

Alternative payment method there.

These trends sort of continue on the <unk>.

Oh, sorry.

Yes, I mean, obviously, there's a certain aspect of it that exists inside travel around just usage.

Associated with credit cards.

How the consumers are traditionally paid for travel experiences at the same time.

We see consumers want that want convenience right. So.

Could see things like installments become more.

Into a travel business again flowers noninterest bearing right clients don't extend interest payments really just different payment terms.

And so sometimes different payment terms can you kind of invoke different ways to put it in a payment method.

Again clients are always looking for ways in which they can.

Provide more value I think banking banking rails are critical as you start looking at something we've talked about before around payables.

Around commission flows in a lot of these industries.

We think having the banking rails and the infrastructure to do that.

On not only the receive side, but on the on the same side. So I would expect those types of things to come into the travel business over time as well as more software.

Obviously as we drive more solutions for customers in that segment I think all of those will help us.

Help improve our offering to travel clients.

Got it because it's not something to watch nice results. Thank you guys.

Thank you. Our next question comes from Joel Richard <unk> with <unk> Securities. Please proceed with your question.

Hi, guys. This is Joe on for Andrew Jeffrey Thanks for taking my questions and congrats Mike.

Regarding both the healthcare and education components of the domestic business can you tell us a little bit how you expect those two areas to ramp for the remainder of the year and whether or not we could see any acceleration in organic growth.

For the second half of 'twenty and into 2024, and then kind of just like in that context.

Any color around like what greater domestic volume X means for yielding gross margin would be really helpful.

So I can start with sort of the trends and then Mike you can maybe talk to the gross margin piece. So.

The U S. Domestic education business is growing very nicely growing well above the overall company growth rate, which as you see us announcing today is a very healthy growth rate. So we expect that to continue.

Dan.

Doing very well with that domestic <unk> footprint across a range of solutions, we've talked about.

Health care has had a tougher first half of the year, but we do believe with the deployments that are going live now and that have gone live just in the last little bit that.

That we will see a much healthier growth rate for health care business in the second half of the year.

Yes, I would expect the adjusted gross margin profile for the domestic business to be pretty consistent with what we've been reporting in our transactional based business and probably closer to the overall average.

But on the higher end of that average, it's a really good business and again the unit economics, regardless of the payment method or the type of our really strong in the business.

Alright, Awesome and then it sounds like you also kind of expect the durability of the travel recovery to kind of be sustained for the remainder of the year.

How are you guys thinking about potentially tougher comps over the next 12 months.

For international.

Yes.

I'll take that one this is Mike.

Joe I think we continue to look at how early we are in the travel sector right. It is a massive total addressable market.

It isn't like when the pandemic hit we were sitting on.

High percentage market share and this is the recovery play obviously there is some benefit of returning to pre pandemic levels, that's happening, but we're signing significant numbers of accounts and we see a lot of room to run in new client acquisition in the sub segments.

I'd also highlight there's geographies right.

At the same playbook, we've talked about before more geographies allow us to drive more at our our new client adds and new geographies for travel.

<unk>.

Graphic expansion do you expect in travel there sub sector expansion theres other sub sectors. We're looking at expanding into another use cases inside travel and then I mentioned earlier the additional products right. We're still primarily driving one main product into it.

Our travel accounts and so you can imagine we have.

A number of plans to add additional software just like we've done in other verticals and that.

More value and drive more revenue within those existing accounts. So we feel really good.

Early innings in travel obviously the growth numbers are great.

And we think it's going to continue to grow for years to come.

Yeah.

Awesome. Thank you so much.

Yeah.

Thank you. Our next question comes from Charles Nabhan with Stephens. Please proceed with your question.

Hi, good afternoon, and thank you for taking my questions. So with respect to the full year Guide increase you had mentioned that FX would be a bit of a tailwind relative to your previous expectations would it be possible to quantify how much of that raise was attributable to the greater than expected FX tailwind.

Yeah sure. So essentially when we think about our full year guidance, Mike just talked about all the positive results were as it relates to travel and we called out our cross border education. The majority of the increase in the guide really comes to those two components, but we do have built into that guidance.

Some FX tailwind that we do anticipate low single digit millions if that much but really it comes down to the fundamentals of the business.

Got it and just as a quick follow up.

One of the verticals that you didn't really touch on Tonight with B to B. So I wanted to get your comments on any any notable trends youre seeing there.

Yeah, we're feeling really good about the <unk> business, we expect to continue to invest in that.

Was one of their strongest quarters ever in terms of.

It was a great quarter in terms of revenue.

Still growing from a smaller base, but it's growing at the highest rate in the company and we expect that to continue to perform really well.

Look forward to investing more in that part of the business.

Got it I appreciate the color and Michael Thank you for everything and best of luck.

Thank you.

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