Q2 2024 Flywire Corp Earnings Call

Operator: 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, Ms. Allison MacLeod, Chief Marketing Officer. Thank you, Ms. MacLeod. You may begin.

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 Ms. Alison Mcleod Chief Marketing officer. Thank you. Mr. <unk> you may begin.

Speaker Change: Thank you and good afternoon with us on today's call are Mike Massaro, Chief Executive Officer, Rob Oracle, President and Chief operating Officer, and Cosmos category Chief Financial Officer.

Allison MacLeod: Thank you and good afternoon. With us on today's call are Mike Massaro, Chief Executive Officer; Rob Orgel, President and Chief Operating Officer; and Cosmin Pitigoi, Chief Financial Officer. Our second quarter 2024 earnings press release, supplemental presentation, and, when filed, Form 10-Q can be found at ir.flywire.com. During the call, we will be discussing certain forward-looking information. Actual results could differ materially from those contemplated by these forward-looking statements. We will also be discussing certain non-GAAP financial measures.

Speaker Change: Our second quarter 2024 earnings press release supplemental presentation, and when filed Form 10-Q can be found at IR dot fly wire 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 will also be discussing certain non-GAAP financial measures.

Allison MacLeod: 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.

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.

Allison MacLeod: This call is being webcast live and will be available for replay on our website. I would now like to turn the call over to Mike Massaro. Thank you, Allison.

Mike Massaro: Thank you Allison, and thank you to everyone that is joining us today. We are pleased to share our Q2 2024 results with all of you here today, demonstrating continued strong performance across the business. Concurrent with sharing our Q2 results today, we will also be discussing, The Announced Acquisition of Invoiced, an award-winning, accounts receivable, software-as-a-service platform for the B2B industry, a share buyback program to return capital to shareholders as part of our commitment to driving long term shareholder value, and how we are dealing with the revenue headwinds related to the ongoing Canadian government actions involving student study permits, both operationally and in terms of our fortune.

Mike Massaro: Rob Orgel, our President and CFO, and Cosmin Pitigoi, our CFO, will go into greater detail later in this call, but first, I will start with a few financial highlights. Revenue Less Ancillary Services was $99.9 million, an increase of 26% year-over-year. Adjusted gross profit for the quarter was $63.4 million, an increase of 26% year-over-year. Adjusted EBITDA was $5.8 million for the quarter, increasing by $5.9 million year-over-year. An adjusted EBITDA margin expanded nearly 600 basis points year-over-year, with strong free cash flow conversion. As we are past the halfway point of the year,

Mike Massaro: I want to underscore the strong business fundamentals that position Flywire for sustained growth and success. First, we have significant growth potential within our existing account, given the depth of our solutions can pull multiple levers to add more value to our client. We frequently use our land and expand strategy to grow our business. For example, winning a large cross-border payments client and then solving other payment challenges for them, like domestic, is one way we grow with clients while being deeply embedded into their ecosystem.

Mike Massaro: Second, we continue to drive great diversity of revenue across verticals, subsectors, countries, currencies, and clients. We are not a one-vertical company, consistent with our plan to broaden beyond education. Travel has grown into our second largest vertical by revenue, less ancillary services, reinforcing our ability to strategically diversify our business.

Mike Massaro: And consistent with our plans, we are not a U.S.-only revenue company. We are capturing market opportunity around the world, driving significant revenue from other geographic regions. And third, we are now and will continue to consistently convert adjusted EBITDA to free cash flow, while achieving strong revenue growth and expanded adjusted EBITDA demand. We believe our strength and ability to excel in all these areas sets Flywire apart from other businesses. All this being said, we continue to believe that our current valuation does not properly reflect the sizable market opportunity in front of us, our offering that uniquely combines software and payments, and our thoughtful approach to efficiency and scale.

Mike Massaro: So today, we are announcing a share repurchase program of $150 million, as we believe that our existing liquidity and projected free cash flow generation allows us to continue making organic investments to grow our core business, as well as strategic acquisitions while also giving us the opportunity to return capital to shareholders.

Mike Massaro: Cosmin will share more details on the share repurchase program later in the. Returning to operating performance, we have continued to make progress in our three strategic investments, optimizing our go-to-market capabilities, expanding our flywire advantage, and strengthening our flymaking. First, on our go-to-market capabilities, we continue to optimize and invest in our growth. Our increased investment in sales and relationship management is paying off in our B2B vertical, where in Q2, we increased our year-over-year client wins by 38 percent and generated an over 100 percent increase in pipeline value creation compared to Q2 last year. B2B is vast, but we are focused on subsegments of the market. For example, in Q2, we had great traction with an insurance company thanks to a combination of in-person events, digital acquisition, and direct sales outreach.

Compared to Q2 last year.

Speaker Change: B is fast, but we are focused on sub segments of the market. For example in Q2, we had great traction with an insurance.

Speaker Change: Thanks to a combination of in person events digital acquisition and direct sales outreach.

Speaker Change: In addition here at fly wire, we believe our successful M&A track record complements our strong organic growth today, we announced the acquisition of Invoiced and award winning accounts receivable software as a service platform and we are thrilled to be welcoming a talented group of new fly mates to our global team.

Mike Massaro: In addition, here at Flywire, we believe our successful M&A track record complements our strong organic growth. Today, we announce the acquisition of Invoiced, an award-winning, accounts receivable, software-as-a-service platform, and we are thrilled to be welcoming a talented group of new Flymates to our global team. The deal augments Flywire's B2B payment solution with workflow automation software purpose-built for mid-market companies to streamline the entire Accounts Receivable process. In addition to the experienced team with Invoice, we gain AR automation software involved in invoicing, communicating with payers, and reconciling payments to ERP.

Speaker Change: The deal augments flowers BW payment solution with workflow automation software purpose built for mid market companies to streamline the entire process.

Speaker Change: In addition to the experienced team with invoice, we gain a our automation software involved in invoicing communicating with Payors and reconciling payments ERP systems we.

Mike Massaro: We are also gaining the opportunity to monetize several billion dollars of domestic and international payment that is managed annually by the Invoice Platform. The combination of invoiced AR automation software with Flywire's proprietary global payment platform, which supports diverse payment methods in more than 140 currencies across 240 countries and territories around the world.

Speaker Change: We are also gaining the opportunity to monetize several billion dollars of domestic and international payment volume that is managed annually by the invoice platform the.

Speaker Change: The combination of invoice automation software with fly wires proprietary global payment network, which supports diverse payment methods and more than 140 currencies crossed 240 countries and territories around the world is expected to provide the <unk> industry with a full suite software and payment solution that streamlines workflows.

Mike Massaro: It's expected to provide the B2B industry with a full suite of software and payment solution that streamlines workflows for finance departments. The invoice client base presents meaningful growth opportunities for Flywire. We believe their software will significantly accelerate our product roadmap and add greater value to our B2B customers. We also believe the invoice software as a service platform has the long-term potential to resonate across our verticals as well, and we look forward to scaling it with the support of Flywire's clients and partners in our global. We are very excited to share this news today and have added more details on the acquisition in our earnings supplement posted on our investor relations website. Cosmin will also go into more detail about the financials of this deal shortly.

Speaker Change: For finance departments.

Speaker Change: Invoiced client base.

Mike Massaro: As we have said before, we are confident in our track record of strategic and value-add acquisitions, and we'll continue to pursue acquisitions that fit our strategy. In addition to both organic and inorganic go-to-market investments, we have also made great progress expanding our Flywire advantage. We remain focused on delivering product and payment innovation to power the vertical ecosystems in which we operate. One example is the recent expansion of our capabilities in India to streamline and digitize student loan payments for Indian students studying abroad. Through our partnership with HDFC Cradilla, India's largest private loan provider, Flywire enables Indian payers to seamlessly and digitally disperse their education payments in Indian rupees for the loans that are funded and managed by HDFC Cradilla.

Mike Massaro: This innovative approach helps us capitalize on the large market opportunity around Indian student loans, which we estimate to be approximately three billion U.S. dollars in annual payments. It also builds on our ongoing momentum in India, a key outbound market, and shows that we have confidence in our ability to drive shareholder value. Total projected ARR grew nearly 40% year over year across new signings and upsells. This quarter's growth was driven by the continued execution of our five strategic growth pillars.

Mike Massaro: Our combined transaction revenue from our top four higher education markets outside of Canada grew well above our overall corporate growth rate. Starting with the UK, which outperformed our expectations, transaction revenue growth was driven largely by volumes ramping from clients signed last fiscal year and product upsells and cross sells. Moving over to the Canadian education market in Q2, we saw a modest ramp in international students enrolling in colleges and universities.

Speaker Change: Starting with the U K, which outperformed our expectations transaction revenue growth was driven largely by volumes ramping from client signed last fiscal year and product Upsells and cross sells for.

Speaker Change: For example, <unk>.

Speaker Change: We signed the University of Bristol, where fly wire is integrated with the tribal sits ERP system as the exclusive payments provider.

Speaker Change: It still has about 30000 total students with approximately 9000 international students.

Speaker Change: This is also an example of a prior software only client that chose flyway or to handle the entire lifecycle of student related payment processing flows, including application deposit tuition and accommodations related fees.

Speaker Change: We plan to be live with Bristol ahead of the UK peak education season, this year and continue to ramp volumes into next year.

Speaker Change: We are also pleased to see positive these're related headlines in the U K with the new UK government, making statements welcoming international students and reaffirming support of the graduate route which is the policy that enables international students to stay in the UK on visas for a period after their studies.

Speaker Change: Shifting over to our Australian education market, we grew transaction revenue by a little over 50% year over year. Another very good results.

Speaker Change: This was driven primarily by the ramping of existing and recently added clients as we grow our client base, we continue to expand our product footprint with clients. It.

Speaker Change: It was also supported by continued growth of agent driven volumes that reflect the good work of our agent teams around the world deepening our agent relationships.

Mike Massaro: As Mike previously mentioned there is a lot of momentum as we integrate and cross sell our fly wire and steady link offerings for instance in Q2, we secured an extension of the settlement agreement with taste, South Australia, which serves international students from over 65 countries, we will be using this model with <unk>.

Speaker Change: <unk> and other existing studying with clients to expand the relationship to include fly wire payments.

Speaker Change: Moving over to the Canadian education market in Q2, we saw a modest ramp in international students enrolling in colleges and universities.

Speaker Change: Student numbers and associated revenue were notably better than Q1, but below our prior expectations.

Speaker Change: The combination of regulatory announcements and uncertainty resulted in lower application demand and enrollment across a broad span of schools.

Speaker Change: While these policies impacted our Canadian results for the quarter, we had some offsetting growth levers that help ease the macro and political cycle driven headwinds. For example, we are excited to expand our partnership with Global University systems, Canada, which is a network of 40 higher education institutions globally.

Speaker Change: As part of the expansion fly wire will process tuition payments for the University of Niagara Falls, which offers both undergraduate and graduate degree programs. Additionally.

Speaker Change: Additionally, we saw a very strong ramp up in transaction volume process from some of our larger projected <unk> clients that went live during the second quarter of last year, most notably the University of Toronto, a top ranked global public research University.

Speaker Change: And lastly, our K through 12 education segment in Canada experienced strong year over year growth from a combination of onboarding, new clients and increasing utilization across existing clients.

Speaker Change: So despite a more challenging short term growth environment in Canada. We are confident that the region is still well positioned to contribute to our longer term growth objectives.

Speaker Change: Finally for our U S education market, we're seeing strong traction with our domestic education student financial software offering both in terms of cross selling into our existing cross border client base and also winning net new clients for example.

Speaker Change: Elon University, and a public University and the state of Washington, where existing cross border clients, who added on our domestic solution during the quarter.

Speaker Change: Both universities were using the same incumbent providers legacy solutions for domestic payments processing prior to signing on for fly wires Sss domestic offering.

Speaker Change: We also added Alabama State University as a new client during the quarter as they signed up for a full domestic <unk> sweet.

Speaker Change: Alabama State will replace legacy solutions and consolidate vendors to use fly wired manage both domestic tuition payments and payment plans. Please.

Speaker Change: We see a long runway ahead of continuing to take market share from the incumbent providers in the U S. Domestic education market with our best in class integrated accounts receivable software and payments capabilities.

Speaker Change: Now moving onto our second largest vertical in terms of revenue less ancillary services.

Speaker Change: Travel with an estimated Tam of $530 billion grew over 55% year over year for the first half of the year with APAC travel outperforming growing over 75% year over year for the first half of the year.

Speaker Change: Notably average projected <unk> for new client signings in the travel vertical have increased by over 15% year over year during the quarter.

Mike Massaro: A few larger clients we went live with during the quarter include Samujana, a luxury villa provider in Thailand within our luxury accommodation sub-vertical, and Safari Frank, a multi-day safari tour provider in South Africa within our destination management sub-vertical. In health care, with an estimated TAM of $500 billion, I'll highlight the success we saw stemming from our multi-pronged channel partner strategy. This quarter, we signed over 10 new clients supported by our partnerships with the top U.S. bank, FinVi, Oracle Health, FinThrive, and Fiserv, and our team was able to get them live in a few short months without remarking that it was their most effective and efficient recent system implementation. We are pleased to see this level of activity with our channel partners.

Speaker Change: A few larger clients, we went live with during the quarter include Amazon a luxury villa provider in Thailand within our luxury accommodations sub vertical and Safari, Frank and multi day Safari tour provider in South Africa within our destination management sub vertical.

Speaker Change: In addition to this global traction. We also saw continued momentum with our newest ocean experiences sub vertical in Q2, we went live with <unk> a provider of luxury yarding experiences across the Greek islands.

Speaker Change: We're excited about the continued traction we're seeing in this new sub vertical as it continues to support the rapid growth of our overall travel vertical.

Speaker Change: In health care with an estimated Tam of 500 billion.

Speaker Change: I'll highlight the success, we saw stemming from our multi pronged channel partner strategy.

Speaker Change: This quarter, we signed over 10, new clients supported by our partnerships with a top U S Bank in VI, Oracle health fin thrive and fiserv.

Speaker Change: The partnerships have helped <unk> broadened our reach to serve non acute providers and to expand patient payment services to our large health system space, We signed multiple payment service deals through our Pfizer partnership, including Winona Health and independent health system with over 1100 employees in the <unk>.

Speaker Change: State of Minnesota.

Speaker Change: And with our partnership with fin VI, we signed on with bulk.

Speaker Change: Leading international ambulance, operator, with over 3000 ambulance and patient transportation vehicles and over 25000 employees around the world.

Speaker Change: This is a unique health care business that leverages, the capabilities and flexibility of our platform and our team was able to get them live in a few short months with soccer, marking that it was their most effective and efficient recent system implementation. We are pleased to see this level of activity with our channel partners.

Speaker Change: Finally, our <unk> vertical which covers a broad tam estimated to be about 10 trillion.

Speaker Change: Saw great traction with our bank of America partnership during.

Mike Massaro: During the first half of the year, we had over 60 client referrals from our partnership, with the bulk of these referrals and new pipeline opportunities coming during Q2. Not only did B of A deliver a record number of new referrals to our sales team, but they also worked with our teams to elevate Flywire's cross-border receivable solution to have greater visibility among their B2B clients for complex cross-border payments needs. Outside of our channel partner efforts, our direct sales team signed on CoreCentric, and we're happy to see them go live during the quarter.

Speaker Change: During the first half of the year, we had over 60 client referrals from our partnership with the bulk of these referrals and new pipeline opportunities coming during Q2.

Speaker Change: Not only to Bofa deliver a record number of new referrals to our sales team, but they also worked with our teams to elevate fly wires cross border receivable solution to have greater visibility among their b to b clients with complex cross border payments needs.

Speaker Change: Outside of our channel partner efforts, our direct sales team signed core centric and were happy to see them go lives during the quarter.

Speaker Change: Core centric, a leading global provider of payments procurement accounts payable and accounts receivable solutions to enterprise and middle market companies as both our client and the partner for fly wire with over 2000 customers using core centric to streamline payments processes and optimize working capital requirements.

Mike Massaro: Corecentric, a leading global provider of payments, procurement, accounts payable, and accounts receivable solutions to enterprise and middle market companies, is both a client and a partner for Flywire, with over 2000 customers using Corecentric to streamline payments processes and optimize working capital requirements. CoreCentric utilizes Flywire to accept payments for their managed accounts receivable solution, where it handles the invoicing and payment acceptance on behalf of enterprise clients globally.

Speaker Change: Or centric utilize us fly wire to accept payments for their managed accounts receivable solution and which of course centric handles the invoicing and payment acceptance on behalf of enterprise clients globally.

Speaker Change: We worked closely to integrate directly into core centric software platform called core connect where global payers can access and pay their invoices, while we're still in the early phases of implementation. We are excited about the opportunity to ramp volumes with core centric as the relationship progresses, and finally as Mike detailed our.

Rob Orgel: And finally, as Mike detailed, our acquisition of Invoiced complements the strong organic growth and will help us accelerate our go-to-market strategy in B2B, consistent with our thesis that software drives value and payment. Combining invoice, workflow, and automation software with Flywire's payment network will create a differentiated solution for businesses that can scale by leveraging the power of the Flywire platform, network, and team. Stepping out of our verticals and moving our efforts towards efficiency and scale, we remain committed to controlling costs and investing prudently while also remaining focused on driving top-line growth across our verticals and geographies.

Mike Massaro: <unk> of invoice complements the strong organic growth and will help us accelerate our go to market strategy in <unk> <unk>.

Mike Massaro: Consistent with our thesis that software drives value and payments combining invoice workflow automation software and fly wires payment network will create a differentiated solution for businesses that can scale by leveraging the power of the fly wire platform network and teams.

Speaker Change: Stepping out of our verticals and moving to our efforts towards efficiency and scale, we remain committed to controlling costs and investing prudently. While also remain focused on driving topline growth across our verticals and geographies, while we are being prudent with personnel and hiring pace overall, we are increasing the proportion of our personnel.

Rob Orgel: While we are being prudent with personnel and hiring pace overall, we are increasing the proportion of our personnel-related investments towards key sales and go-to-market teams this year compared to last year as our business continues to scale. These focused initiatives contribute scale and efficiency benefits that are leading to our steady improvement in adjusted EBITDA margin as we grow our global business. With that, I will now turn the call over to Cosmin to go over our results for the quarter, as well as discuss guidance for Q3 and 2024. Okay, Cosmin?

Speaker Change: All related investments towards key sales and go to market teams this year compared to last year as our business continues to scale.

Speaker Change: We are also working to improve our processes with a focus on adding automation within processes that touch our back office ERP accounting financial reporting reconciliation and client Onboarding systems and processes.

Speaker Change: These focused initiatives contribute scale and efficiency benefits that are leading to our steady improvement in adjusted EBITDA margin as we grow our global business.

Speaker Change: With that I will now turn the call over to <unk> to go over our results for the quarter as well as discuss guidance for Q3 and 2000 24000.

Cosmin Pitigoi: Thank you, Rob. And good afternoon, everyone. First, I would like to thank our clients, partners, and employees for helping us deliver another strong quarter in the face of external pressure. Today, I'll provide an overview of our results for the second quarter and then discuss our outlook for Q3 in the fiscal year. As Mike and Rob mentioned, we had a strong quarter across many of our customer and operating metrics, which underpin our long-term financial health.

Speaker Change: Thank you Rob and good afternoon, everyone first I would like to thank our clients partners and employees for helping us deliver another strong quarter in the face of external pressures.

Speaker Change: I'll provide an overview of our results for the second quarter, and then discuss our outlook for Q3 and the fiscal year.

Speaker Change: As Mike and Rob mentioned, we had a strong quarter across many of our customer and operating metrics, which underpin our long term financial health.

Cosmin Pitigoi: I continue to be energized by being part of this team as we rally together to deliver strong top and bottom line growth, all despite an unexpected high single-digit percentage impact on growth in the second quarter from Canada and what we now expect to be a $30 million plus headwind to our full year revenue, less ancillary service. Our team's resilience paid off as we beat the high end of our adjusted EBITDA guidance and are raising our full-year adjusted EBITDA margin expectations to reach approximately a 490-bit increase year-over-year at our midpoint of full-year revenue, less ancillary services, and adjust it with our guidance. We are a Rule of 40 company, despite this external Canada headline.

Speaker Change: I continue to be energized by being part of this team as we rally together to deliver strong top and bottom line growth.

Speaker Change: All despite an unexpected high single digit percentage impact to growth in the second quarter from Canada and.

Speaker Change: And what we now expect to be a $30 million plus headwind to our full year revenue less ancillary services.

Speaker Change: Our team's resilience pay it off as we beat the high end of our adjusted EBITDA guidance.

Speaker Change: And are raising our full year adjusted EBITDA margin expectation to reach approximately a 490 bps increase year over year.

Speaker Change: At our midpoint of full year revenue less ancillary services and adjusted EBIDTA guidance. We are our rule of 40 company. Despite this external Canada headwind.

Cosmin Pitigoi: At the same time, we executed on a strategic acquisition this quarter and are evolving our capital allocation strategy by announcing our first buyback, allowing us to opportunistically return capital to shareholders. Turning to our performance this quarter, starting with revenue. Revenue less than fully serviced was $99.9 million in Q2, representing a 26% year over year growth rate despite a high single-digit percentage headwind to growth related to our Canadian higher education business.

Speaker Change: At the same time, we executed on a strategic acquisition this quarter and are evolving our capital allocation strategy by announcing our first buyback.

Speaker Change: <unk> house to Opportunistically return capital to shareholders.

Speaker Change: Turning to our performance this quarter starting with revenue.

Speaker Change: Revenue less ancillary services was $99 9 million in Q2.

Speaker Change: Representing a 26% year over year growth rate.

Speaker Change: Despite a high single digit percentage headwind to growth related to our Canadian higher education business.

Cosmin Pitigoi: FX rates created a slight headwind of approximately $140,000 during the quarter, but for which we would have been right at our guidance midterm. While our revenue performance this quarter was relatively in line with our expectations, as we exited Q2 into July, we saw a slower-than-expected rolling recovery in Canada, creating a mid-to-high single-digit negative million-dollar impact instead of the expected mid-single-digit impact in Q2. This was offset by better than expected volumes from UK and Australia higher education clients and Stronger International Corridors performance.

Speaker Change: FX rates created a slight headwind of approximately $140000 during the quarter, but for which we would've been right at our guidance midpoint.

Speaker Change: While our revenue performance this quarter was relatively in line with our expectations as we exited Q2 into July we saw a slower than expected rolling recovery in Canada, creating a mid to high single digits negative million dollar impact instead of the expected mid single digit impact in Q2.

Speaker Change: This was offset by better than expected volumes from U K, and Australia higher education clients and.

Speaker Change: And stronger International corridor is performance.

Cosmin Pitigoi: We continue to see strong volume growth, with total payment volumes during the quarter reaching $4.9 billion, growing 19% year-over-year. From a modernization standpoint, our spreads have remained relatively consistent and stable over the last several reporting quarters.

Speaker Change: We continue to see strong volume growth with total payment volume during the quarter, reaching $4 9 billion growing 19% year over year.

Speaker Change: From a monetization standpoint, our spreads have remained relatively consistent and stable over the last several reporting quarters.

Speaker Change: Looking at the two components of our revenue transaction revenues based on fees as a percent of transaction value while platform and other revenues consists of software like fees.

Cosmin Pitigoi: Looking at the two components of our revenue, transaction revenue is based on fees as a percent of transaction value, while platform and other revenues consist of software-like fees. Starting with transaction revenue, we saw a 28% year-over-year increase driven by a 26% increase in transaction-related payment volume, primarily in our international and U.S. education vertical, as well as travel. Platform and other revenues increased 17% year-over-year, primarily driven by platform fees that do not carry payment volume, and specifically revenues associated with the contribution from StudyLink of $1.6 million.

Speaker Change: Starting with transaction revenue, we saw a 28% year over year increase driven by a 26% increase in transaction related payment volume, primarily in our international and U S education vertical as well as travel.

Speaker Change: Platform and other revenues increased 17% year over year, primarily driven by the platform fees that did not carry payment volumes, specifically revenues associated with the contribution from study link of one $6 million.

Cosmin Pitigoi: This is offset by softer performance in our health care business this quarter. However, as previously indicated, we expect the healthcare business to return to growth for the second half of the year. Adjusted gross profit increased to $63.4 million during the quarter, up 26% year-over-year, accelerating by about 500 basis points from Q1 2024. Adjusted gross margin was 63.5% for Q2 2024, which is flat compared to Q2 2023. As we look at the puts and takes driving gross margin year over year changes, business mix continues to put downward pressure on gross margin, with travel and B2B growing faster with the more prevalent use of credit cards.

Speaker Change: This was offset by softer performance in our health care business this quarter.

Speaker Change: As previously indicated we expect our healthcare business to return to growth for the second half of the year.

Speaker Change: Adjusted gross profit increased to $63 4 million during the quarter up 26% year over year accelerating by about 500 basis points from Q1 2024.

Speaker Change: Adjusted gross margin was 63, 5% for Q2 2024.

Speaker Change: Which is flat compared to Q2 of 2023.

Speaker Change: As we look at the puts and takes driving gross margin year over year changes business mix continues to put downward pressure with travel and b to be growing faster with the more prevalent use of credit cards.

Cosmin Pitigoi: This pressure was offset by stronger trends across our main education corridors, continued payment cost optimization, and a positive impact from FX shifts that occurred during settlement of transactions. These shifts are largely offset by FX hedges, which are booked in OPEX, resulting in a mitigated impact on adjusted EBIT. Adjusted EBITDA was $1.8 million above the high end of our range and grew to $5.8 million for the quarter, compared to a negative $0.1 million in Q2 2023. Adjusted EBITDA margin was up nearly 600 basis points year-over-year.

Speaker Change: This pressure was offset by stronger trends across our main education corridors continued payment cost optimization and a positive impact from FX shifts that have occurred during settlement of transactions.

Speaker Change: These shifts are largely offset by FX hedges.

Speaker Change: Which are booked in opex, resulting in a mitigated impact on adjusted EBITDA.

Speaker Change: Adjusted EBITDA was $1 8 million above the high end of our range and grew to $5 8 million for the quarter.

Speaker Change: Impaired to the negative <unk> 1 million in Q2 2023.

Speaker Change: Adjusted EBITDA margin was up nearly 600 basis points year over year.

Cosmin Pitigoi: The strength and adjusted EBITDA was driven by stronger gross profit and continued operating leverage, along with targeted and disciplined cost management through the year. However, even with these actions, OPEX is still growing in the high-single to low-double-digit year-over-year range. As you heard Rob mention earlier, we're focused on investing in our growth initiatives while showing improving scalability and efficiency in the business. To close out the income statement, I would like to provide some perspective on our net income dynamics.

Speaker Change: The strength in adjusted EBITDA was driven by stronger gross profit and continued operating leverage along with targeted and disciplined cost management through the year.

Speaker Change: Even with these actions Opex is still growing in the high single to low double digit year over year range. As you heard Rob mentioned earlier, we're focused on investing in our growth initiatives, while showing improving scalability and efficiency in the business.

Cosmin Pitigoi: In Q2, net income reflected a loss of $14 million, improving year over year by approximately $3 million. Q2 includes a higher income tax provision of approximately $4 million based on full year tax estimates, which amplified our loss in Q2, driven by the seasonality of our business. The year-to-date tax provision of $6.3 million therefore represents more than half the year's total tax provision and should normalize through the rest of the year as we pivot to profitability heading into next year.

Speaker Change: To close out the income statement I would like to provide some perspective on our net income dynamics. This year in Q2 net income reflected a loss of $14 million improving year over year by approximately $3 million Q.

Speaker Change: Q2 includes a higher income tax provision of approximately $4 million based on full year tax estimates, which amplified our loss in Q2, driven by seasonality of our business. The year to date tax provision of $6 3 million, therefore represents more than half of the year's total.

Speaker Change: Tax provision.

Speaker Change: And should normalize through the rest of the year as we pivot to profitability heading into next year.

Cosmin Pitigoi: Our balance sheet remains strong. We ended the quarter with approximately $571 million of available liquidity, consisting of $539 million of unrestricted cash and equivalents and $32 million of highly liquid short-term marketable securities against no long-term debt.

Speaker Change: Our balance sheet remains strong we ended the quarter with approximately $571 million of available liquidity, consisting of 539 million of unrestricted cash and equivalents and $32 million of highly liquid short term marketable securities.

Speaker Change: <unk> no long term debt.

Cosmin Pitigoi: During the quarter, we invested $58 million of cash into short and long-term corporate and government debt security. Turning to capital allocation, we continue evolving our strategy with three key priorities: investing in Organic Growth, as we discussed earlier today; executing strategic M&A, and returning capital to shareholders. We've demonstrated our execution across those pillars this quarter.

Speaker Change: During the quarter, we invested $58 million of cash into short and long term corporate and government debt securities.

Speaker Change: Turning to capital allocation, we continue evolving our strategy with three key priorities.

Speaker Change: Investing in organic growth as we previously discussed today.

Speaker Change: Executing strategic M&A.

Speaker Change: And returning capital to shareholders.

Speaker Change: We've demonstrated our execution across those pillars this quarter.

Cosmin Pitigoi: First, as Mike and Rob touched on earlier, the acquisition of Invoice is a continuation of our long-term plan to supplement strong organic growth and expand across business lines. We expect Invoice to add approximately $2 million of revenue with software-like gross margins in full year 2024. And while the business has strongly adjusted EBITDA margins, we expect to reinvest the majority of the margin dollars this year to grow the combined business. Second, I'm pleased to announce that our board of directors has approved a share repurchase program under which we may opportunistically repurchase up to $150 million of our outstanding common stock.

Speaker Change: First as Mike and Rob touched on earlier.

Speaker Change: Acquisition of Invoiced as a continuation of our long term plan to supplement strong organic growth and expand across business lines. We.

Speaker Change: We expect invoiced to add approximately $2 million of revenue with software like gross margins and full year 2024.

Speaker Change: And while the business has strong adjusted EBITA margin, we expect to reinvest the majority of the margin dollars. This year to grow the combined business.

Speaker Change: Second I am pleased to announce that our board of directors have approved a share repurchase program under which we may opportunistically repurchase up to $150 million of our outstanding common stock.

Cosmin Pitigoi: This is a direct reflection of our confidence in the long-term potential of the business, the strength of our balance sheet, and our modest operating cash needs, and is a responsible way to deploy capital that is consistent with our disciplined approach. This program allows us the opportunity to take advantage of short-term dislocations in our equity value as we focus on executing and building long-term value. Finally, it is important to note that this program still allows us ample capacity to continue to pursue strategic value-enhancing acquisitions.

Speaker Change: This is a direct reflection of our confidence in the long term potential of the business the strength of our balance sheet and modest operating cash needs.

Speaker Change: And is the responsible way to deploy capital that is consistent with our disciplined approach. This.

Speaker Change: This program allows us to Opportunistically take advantage of short term dislocations in our equity value as we focus on executing and building long term value.

Speaker Change: Finally, it is important to note that this program still allows us ample capacity to continue to pursue strategic value enhancing acquisitions.

Cosmin Pitigoi: Moving on to guidance, for full year 2024, we expect revenue less ancillary services to be in the range of $469 million to $485 million based on spot foreign exchange rates as of June 30, 2024. This represents a year-over-year growth rate of 25% at the mid-period. The revenue impact from Canada is now expected to be double the mid-teens expected in prior guidance. So we now expect the impact to be over $30 million for the full year, or approximately eight points of growth.

Speaker Change: Moving on to guidance.

Speaker Change: For full year 2024, we expect revenue less ancillary services to be in the range of 469 million to $485 million based on spot foreign exchange rates as of June 32024.

Speaker Change: This represents a year over year growth rate of 25% at the midpoint.

Speaker Change: The revenue impact from Canada is not expected to be double the mid teens expected in prior guidance.

Speaker Change: We do not expect the impact to be over $30 million for the full year or approximately eight points of growth.

Speaker Change: The $11 million reduction at the midpoint from prior guidance is driven by Canada performance <unk>.

Cosmin Pitigoi: The $11 million reduction at the midpoint from prior guidance is driven by Canada performance, including the removal of the recapture assumption. Note that our full year revenue output includes a benefit of approximately $2 million from the invoiced acquisition for the rest of the year based on the August 2nd close. You provide some context on our assumptions in this guidance. First, within Canada, earlier government actions have made it challenging for schools to be able to fill spots as fast as they had hoped.

Speaker Change: <unk> the removal of the recapture assumption.

Speaker Change: Note that our full year revenue outlook includes the benefit of approximately $2 million from the <unk> acquisition for the rest of the year based on the August 2nd close.

Speaker Change: Can you provide some context on our assumptions in this guidance, we're seeing two key dynamics in Canada first within Canada earlier.

Speaker Change: Earlier government actions have made it challenging for schools to be able to fill spots as fast as they had hoped.

Cosmin Pitigoi: This is creating a high single-digit impact in the second half versus prior expectation, roughly evenly spread across Q3 and Q4. Second, given the frequent conversations our team has been having with our network of global education agents, we now see increased uncertainty around the timing of students pivoting from attending school in Canada to other countries around the world where we have higher education clients, or what we are calling recap. As a result of these recent conversations and observations, we believe it is prudent to remove the mid-single-digit dollar benefit we expected to see in the second half from recap. As we head into our largest quarter, we are assuming a relatively normal education peak in August and September, primarily in the U.S. and the U.K. We will continue watching underlying trends throughout the quarter.

Speaker Change: This is creating a high single digit impact in the second half versus prior expectations roughly.

Speaker Change: Roughly evenly spread across Q3 and Q4.

Speaker Change: Second given the frequent conversations our team has been having with our network of global Education agents. We now see increased uncertainty around the timing of students pivoting from attaining scoring Canada to other countries around the world, where we have higher education clients or what we're calling recapped.

Speaker Change: Sure.

Speaker Change: As a result of these recent conversations and observations. We believe it is prudent to remove the mid single digit dollar benefit we expected to see in the second half from recapture.

Speaker Change: As we head into our largest quarter, we're assuming a relatively normal education peak in August and September.

Speaker Change: Similarly in the U S and the U K, we will continue watching underlying trends throughout the quarter.

Speaker Change: We are raising our full year adjusted EBITDA outlook with the new midpoint of our range above the prior high end stemming from solid gross profit growth and Opex discipline.

Cosmin Pitigoi: We are raising our full-year adjusted EBITDA outlook with the new midpoint of our range above the prior high end stemming from solid gross profit growth and OPEX savings. We expect to deliver a full year 2024 adjusted EBITDA in the range of $72 million to $80 million. At the midpoint of our full year 2024 guidance range, we expect to generate approximately 490 basis points of adjusted EBITDA margin improvement on a year-over-year basis, which represents a 170 BEPS increase from our prior guidance.

Speaker Change: We expect to deliver our full year 2024, adjusted EBITDA in the range of 72 million to $80 million at the midpoint of our full year 2024 guidance range, we expect to generate approximately 490 basis points of adjusted EBIDTA margin improvement on a year over year basis.

Speaker Change: Which represents a 170 bps increase from our prior guidance.

Cosmin Pitigoi: This improvement reflects optics efficiencies and agile cost discipline across the team, allowing us to look ahead to profitability as we exit into next year. Shifting to Q3 2024, revenue less ancillary services is expected to be in the range of $141 million to $151 million. This guidance, relative to our thoughts earlier this year, is primarily impacted by performance in Canada, along with the removal of the recapture, part of which was assumed in Q3.

Speaker Change: This improvement reflects opex efficiencies and agile cost discipline across the teams.

Speaker Change: Allowing us to look ahead towards profitability as we exit into next year.

Speaker Change: Shifting to Q3 2024 revenue less ancillary services is expected to be in the range of 141 million to $151 million.

Speaker Change: This guidance relatively to our thoughts earlier. This year is primarily impacted by performance in Canada, along with the removal of the recapture part of which was assumed in Q3.

Cosmin Pitigoi: Rounding out the guidance discussion, we expect Q3 revenue from Jeff Sidibata to be in the range of $37 million to $43 million, implying a nearly 400 bps margin increase at the midpoint on a year-over-year basis. In closing, as we continue our strong track record of execution, these temporary external challenges are making us even more focused and looking to the second half of this year to exit stronger as a team and as a business. I'll now turn it over to the operator for questions. Operator.

Speaker Change: Rounding out the guidance discussion, we expect Q3 adjusted EBITDA to be in the range of 37 million to $43 million <unk>.

Speaker Change: Implying a nearly 400 bps margin increase at the midpoint on a year over year basis.

Speaker Change: In closing as we continue our strong track record of execution. These temporary external challenges are making us even more focused and looking to the second half of this year to exit stronger as a team and as a business I'll now turn it over back to the operator for questions operator.

Speaker Change: Thank you <unk>.

Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is busy. You may press star 2 if you would like to remove your questions from the... For participants using speaker equipment, it may be necessary to pick up your handset before pressing the start button. One moment, please, while we poll for questions. The first question comes from the line of John Davis with Raymond James. Please go ahead.

Speaker Change: Now be conducting a question and answer session.

Speaker Change: If you would like to ask a question. Please press star one on your telephone keypad.

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

Speaker Change: Start to if you would like to remove your questions from the queue for participants using speaker equipment. It may.

Speaker Change: It may be necessary to pick up your handset before pressing the stock east.

Speaker Change: One moment please poll for questions.

Speaker Change: The first question comes from the line of John Davis with Raymond James. Please go ahead.

John Davis: Hey, good afternoon, guys Michael.

John Davis: Hey, good afternoon, guys. Mike and Cosmin, I just wanted to try and square, you know, visas in Canada are down about 30%. And I think your updated guide for Canada implies revenue is down 55 to 60%. So just want to understand and kind of square those differences.

Speaker Change: Michael Collin, but I, just wanted to try and square.

John Davis: Pieces in Canada are down about 30% and I think the guide your updated guide for Canada implies.

Speaker Change: Revenue is down 55% to 60%, so just want to understand that and kind of square those differences.

Speaker Change: Yeah.

Mike Massaro: Yeah, hey, John, thanks for that question. Yeah, no, so to clarify, if you look at the total numbers versus last year, it is not down that much. I would say it's down close to 30% if you look at it, you know, year over year. But what you have to remember is the $30 million that we're not referencing is against what we expected this year. And that would have included growth in Canada in a normal year.

Speaker Change: Hey, John Thanks for that question, yes, so to clarify.

Speaker Change: If you look at the total numbers versus last year it is not down.

John: That much I would say, it's down closer to 30%. If you look at it year over year, what you have to remember the $30 million that were not referencing is against what we expected this year.

John: And that would have included growth in Canada in a normal year.

Mike Massaro: So what you need to then sort of think about as far as growth is concerned is that number being down. So, year over year, I would say you're still in that sort of high 20 or so, you know, negative year over year, which you can see a little bit from the supplement that we provided. If you look at the slide in the supplement, we tried to provide two slides, one on what the assumptions are by a quarter of that $30 million, which is in that mid to high single digit across every quarter. And then we actually gave you the profile by a quarter for Canada. So you can see that it includes last year. And you can see that it dropped.

John: What you need to then sort of think about as far as growth would be against that number being down so year over year I would say you are still in that sort of high <unk> or so.

John: Negative year over year, which you can.

Speaker Change: See a little bit even from the supplemental we provided if you look actually at the end of the slides in the supplement with trying to provide to slide one on what the assumptions are by a quarter of that $30 million, which is in that mid to high single digit across every quarter and then we actually gave you the profile by quarter for Canada.

John: So you can you can see it including last year. So you can see that that drop.

Speaker Change: Okay, that's super helpful.

John Davis: Okay, that's super helpful. I just wanted to clarify. And then, Cosmin, as we look at incremental margins, I think last year they were about 24%. First half of this year, 29%. You know, it looks like you're implying, based on the updated EBITDA guide, about 40% incremental margins in the back half of this year. So is that the right way to think about go-forward incremental margins? Or how are you guys thinking about it as you look to drive profitability in the face of slowing growth? Yeah.

Speaker Change: One I wanted to clarify and then doesn't.

Speaker Change: As we look at incremental margins I think last year. There are about 24% first half of this year, 29%. It looks like you're implying based off of the updated EBITDA guide about 40% incremental margins in the back half of this year.

Speaker Change: So is that the right way to think about go forward incremental margins or how are you guys thinking about it as you look to drive profitability in the face of slowing growth.

John: Yes.

Cosmin Pitigoi: Yeah, look, as I said, I think the main drivers for margin, you know, margin for us is first and foremost gross profit. Second, you know, you've seen us be quite disciplined in terms of cost. And a portion of the third thing is us being just more disciplined, you know, around how we spend given the headwinds we've faced. Now, some of that, as you can see, benefited Q2. It helps them into the second half.

Speaker Change: As I said I think the main drivers for.

Speaker Change: Margin for US the first is the gross profit.

John: Ken.

John: You've seen us be quite disciplined in terms of cost and a portion of then the third thing is us being just more discipline.

John: Around how we spend given the headwinds.

Ken: Headwinds we've faced now some of that as you can see benefited Q2 that helps into second half.

Cosmin Pitigoi: However, you know, as you look at that into next year, obviously, we'll have to look, you know, some of that is us offsetting some of the headwinds. And so we'll have to look at next year. But I would say, you know, looking at the total year, it's probably a better gauge. But we'll have to sort of, you know, come back to you into the, you know, into next year as to how we think about the, you know, how to look ahead of that. But again, I think my comments on profitability would say that it's a big focus for us going forward and continued growth and give it a margin in line with, you know, above our expectations.

John: However, as you as you look at that into next year.

Ken: Obviously, we'll have to look some of that is that offsetting some of the headwinds.

John: And so we'll have to look at next year, but I would say looking at the total year is probably.

John: A better gauge, but we'll have to sort of come back to you into the.

John: Into next year, how do we think about the <unk>.

John: To look ahead of that but again I think my comment on profitability.

Ken: I'd say, that's a big focus for us going forward and continued growth in EBITDA margin in line, let's say above our expectations.

Speaker Change: Okay, great. Thanks, guys.

John: Thank you next question comes from the line of Jason Kupferberg with Bank of America. Please go ahead.

Operator: Thank you. The next question comes from the line of Jason Kupferberg with Bank of America. Please go ahead.

John: Hi, Good afternoon, guys. This is Tyler on for Jason Thanks for taking the questions.

Tyler Dupont: Hi, good afternoon, guys. This is Tyler DuPont on for Jason.

Tyler Dupont: Thanks for taking the questions. I wanted to ask about Canada as well, but from a slightly different lens. I know, you know, the F-24 guidance has been updated, right, to reflect that incremental softness, but can you just speak at all to how we should be thinking about Canada as we look beyond the second half into whether that's in 2025 or just more from a longer-term perspective? You know, I know you guys don't provide guidance or anything on long-term stuff like that, but can you just explain how we should think about Canada's revenue more on a longer-term or a go-forward basis?

Tyler: I wanted to ask about Canada, as well, but from a slightly different lens I know clinical guidance has been updated to reflect that incremental softness but can you just speak at all to how we should be thinking about Canada as we look beyond the second half.

John: Into whether that is 225, but just more from a longer term perspective, you know I know you guys don't provide guidance or anything on long term stuff like that but can you just level set how we should think about Canada revenue more on a longer term on a go forward basis.

John: Yes, Hi, this is Rob I'll jump in here. So we remain very optimistic about Canada on a longer term basis. So this is sort of a unique year, where we had the announcements related to the study permits early in the year there is continuing.

Rob Orgel: Yeah, hi, this is Rob. I'll jump in here.

Rob Orgel: So we remain very optimistic about Canada on a longer-term basis. So this is sort of a unique year, where we had the announcements related to study permits early in the year. There's continuing uncertainty created on the part of students because of ambiguity around graduate work permit policy. All of that is expected to be clarified this year. I've been to Canada. I spent time with our clients.

Speaker Change: The uncertainty created on the part of students because of ambiguity around graduate work permit a policy all of that is expected to be clarified this year I've been in Canada I've spent time with our clients. Their expectation is that those rules will all be clarified the program is that the schools offer will be tailored based on how.

Rob Orgel: Their expectation is that those rules will all be clarified. The programs that the schools offer will be tailored based on how that policy evolves, and the additional sort of certainty and confidence that brings will bring Canada sort of back into popularity as a destination. And so the long-term view of Canada is that it will continue to be a contributor of growth for us, despite the fact that this year is a tough year, as Cosmin just outlined.

John: That policy evolves and the additional sort of certainty and confidence that brings will bring in Canada.

Speaker Change: Back into sort of popularity of the destination and so the long term view of Canada is that it will continue to be a contributor of growth for us. Despite the fact that this year is a tough years cognex has outlined.

Rob Orgel: Okay, that's helpful. And then, secondarily, in the prepared remarks, I think you mentioned travel becoming the second largest vertical. Can you maybe just discuss the growth trends you're seeing there, sort of what in particular is driving that, and maybe juxtapose that with the trends in healthcare, which has historically been the second largest? I think you mentioned healthcare in the second half would return to growth. Just any comments there worth mentioning?

Speaker Change: Okay. That's helpful. And then I guess second secondarily in the prepared remarks, I think you mentioned travel becoming the second largest vertical.

Speaker Change: Can you maybe just discuss the growth trends, you're seeing there sort of what in particular is driving that and maybe juxtapose that with the trends in healthcare.

Speaker Change: Historically been the second largest I think you mentioned health care in the second half would return to growth just any any comments there working with benchmark.

Rob Orgel: Yeah, so thanks for the question. First of all, hopefully you saw from my comments the overall optimism and conviction around the strength of the business overall. So, as I went through the verticals, you heard a lot of great things going on based on the great execution of our team. Travel was a perfect example of that. The travel team was winning great deals all around the world.

Speaker Change: Yes.

Speaker Change: So thanks for the question first of all hopefully you saw from my comments overall optimism and conviction around the strength of the business overall, so as I went through the verticals.

Speaker Change: A lot of great things going on based on the great execution of our team travel was a perfect example of that the travel team was winning great deals all around the world as you heard in our prior comments there really four sub segments for us within the travel vertical all of which performed very well our newest being ocean adventure is performing well, but our preexisting around it.

Rob Orgel: As you heard in our prior comments, there are really four sub-segments for us within the travel vertical, all of which performed very well. Our newest, Ocean Adventures, performing well, but our pre-existing around accommodations, operators, and DMCs also reporting well. So, we continue to view that as a business with a great opportunity ahead of it. Healthcare is a little different story.

Speaker Change: Combinations operators in Dmc's also reporting well so we continue to view that as a business.

Speaker Change: With a great opportunity ahead of it.

Rob Orgel: Again, we do expect that, you know, teen growth in the second half of the year. Overall, healthcare has had the frustrations for us of kind of multiple steps forward, but offset by multiple steps back. That's similar to comments I've made on prior calls.

John: Health care is a little different story again, we do expect that to.

John: <unk> growth in the second half of the year overall healthcare has had the frustration for us.

John: Kind of multiple steps forward, but offset by multiple steps back that's similar to the comments I've made on prior calls we are winning new deals. We are expanding deals. We are seeing success with our integrated financing offering but those have been offset by challenges in part caused by the change healthcare situation, which although resolving.

Rob Orgel: We are winning new deals. We are expanding deals. We are seeing success with our integrated financing offering, but those have been offset by challenges, in part, caused by the changing healthcare situation, which, although resolving and improving did impact Q2, as well as just continued challenges. One client shrank based on divesting some hospitals, another client turned modestly, sorry, with a modest impact, and so that's the two steps forward, two steps back. Just to conclude, though, there is a lot of conviction in the platform, and we will expect to see growth in the second half. Okay, good.

Speaker Change: And improving did impact Q2, as well as just continued challenges one one client shrank based on divesting some hospitals and other client.

Speaker Change: <unk> modestly.

Speaker Change: Start with modest impact and so that's the two steps forward two steps back just to conclude though a lot of conviction in the platform and we will expect to see growth in the second half.

Speaker Change: Okay, Great I appreciate all the color. Thank you.

Speaker Change: Thank you next question comes from the line of <unk> Singh Huang JP Morgan. Please go ahead.

Operator: Okay, good. I appreciate all the color. Thank you. Thank you. The next question comes from the line of Tin Sing Huang with J.P. Morgan. Please go ahead.

Operator: Thank you. The next question comes from the line of Dean Singh Huang with J.P. Morgan. Please go ahead.

Singh Huang: Hey, Thanks, I wanted to ask on the invoice acquisition real interesting there is the home run opportunity to monetize the payments and their client base.

Speaker Change: I'm not sure what their client base looks like or what kind of overlap you might might.

Speaker Change: It might have what can you tell us there.

Speaker Change: Yeah, Hey, Tien Tsin, it's Mike Yes, we are super excited so it fits right in main pillars, we've talked about.

Mike Massaro: Yeah, hey, Tenjin, it's Mike. Yeah, we're super excited. You know, so it fits right in the pillars, you know, we've talked about prior, looking for opportunities to accelerate existing verticals, we're in, add new capabilities to drive NRR. And this fits right in those first two pillars.

Mike Massaro: You know, we've talked about prior looking for opportunities to accelerate existing verticals we're in, add new capabilities to drive NRR, and this fits right in those first two pillars that we've talked about before. And so our priorities and our focus, we think, 1st, is the monetization opportunity. I mentioned several billion dollars of invoice volume on that platform. It's our ability to monetize that both domestic and international volume there is really kind of priority number 1.

Speaker Change: Prior looking.

Speaker Change: Looking for opportunities to accelerate existing verticals, we're in and add new capabilities to drive that R. R.

Speaker Change: And this fits right in those first two pillars that we've talked about before and so our priorities and our focus.

Speaker Change: We think firstly is the monetization opportunity I mentioned south of several billion dollars of invoice volume on that platform.

Speaker Change: Ability to monetize that both domestic and international volume there.

Speaker Change: It was really kind of priority number one and so you can imagine the team is going to quickly get at work at that integrated solution and bring that to clients.

Mike Massaro: And so you can imagine the team is going to quickly get to work on that integrated solution and bring that to clients. The 2nd is really just leveraging our global distribution opportunity with an amazing marketing and go-to-market team. And obviously, a great way of generating new pipeline, and we think we can help supercharge access to that platform by getting it more rapidly sold and distributed on a global basis. And so those are 2 of the primary revenue synergies integration goals that we have.

Speaker Change: Second is really just leveraging our global distribution opportunity.

Speaker Change: An amazing marketing and go to market team and obviously.

Speaker Change: A great way of generating new pipeline and we think we can help supercharge.

Speaker Change: Access to that platform by getting it more rapidly sold and distributed on a global basis and so those are two of the primary.

Speaker Change: Revenue synergies integration goals that we have.

Speaker Change: And how quickly can you.

Speaker Change: Replace or.

Speaker Change: Go after the incumbent and put it on your platform on the payment side.

Speaker Change: One ill jump off.

Speaker Change: <unk> hundred 70 bps of additional margin upside with the revenue.

Speaker Change: Revision.

Speaker Change: And I heard the cost efficiency, but any other detail around.

Speaker Change: The contributing factors to that.

Speaker Change: That's all I had.

Mike Massaro: Yeah, yeah, so on your first question, just around the speed, obviously, you know, exciting news, just got it out there, just got it done. So the team's going to get to work on that integrated solution, like we've done in the past, however, when we had

Speaker Change: Yeah, Yeah. So the first question just around the speed, obviously exciting news just got it out there just got done so it seems good to get to work on that integrated solution like we've done in the past. However, when we had access to monetize volume through an acquisition.

Mike Massaro: Likewise, we've done in the past, but when we had access to unmonetized volume through an acquisition, it was a relatively short period of time to get out an integrated offering. You get to bring it to market. You know, I would expect it to be similar to what we talked about in the past on other deals where you have a little bit hitting potentially in a year like 2024 but mostly hitting 25, 26, 27 kind of waterfall for that volume. Yeah,

Speaker Change: It was a relatively short period of time to get up and integrate a lot of things you can bring it to market. So.

Speaker Change: I would expect it to be similar to what we've talked about in the past on other deals where you have a little bit hitting potentially in a year like 'twenty, four but mostly hitting a $25 26 27 kind of waterfall for that volume.

Speaker Change: Speaking of your second question.

Cosmin Pitigoi: So, Tenzin, on your 170 bets, that's, you know, total margin. I mean, a lot of that is driven by sort of like the three factors I mentioned earlier. As far as it relates to invoices, again, we, you know, we did not put almost any EBITDA upside on it, even though the business itself has healthy EBITDA margins. We didn't include any of that in our guidance because we wanted to invest against that to make sure that we get the benefit we exist from. That's kind of our view, as I said earlier, is a really strong exit for the year. And this deal is part of that.

Tien Tsin: Yes, so tien tsin on your 170 bps.

Speaker Change: Total margin and a lot of that is driven by sort of like the three factors I mentioned earlier as far as it relates to.

Speaker Change: Two invoice again, we did not put almost any EBITDA upside even though the business itself has healthy EBITDA margin. We didn't include any of that in our guidance.

Speaker Change: Because we wanted to invest against that to make sure that we get the benefit we exit strong that's kind of our view as I said earlier is a really strong exit for the year and this deal is part of that.

Speaker Change: Okay. Thank you for clarifying.

Speaker Change: Thank you next question comes from the line of Andrew Schmidt with Citi. Please go ahead.

Operator: Thank you. The next question comes from the line of Andrew Schmidt with Citi. Please go ahead.

Andrew Schmidt: Hey, Mike Rob Kauffman, Thanks for taking my questions and congrats on the invoice transaction I know Theres a lot of scarcity in terms of air solutions. So good to see that pick up.

Andrew Schmidt: Hey Mike, this is Rob Cosmin. Thanks for taking my questions and congrats on the invoice transaction. I know there's a lot of scarcity in terms of AR solutions, so it's good to see that pick up. You know, just to drill down on Canada, I guess, you know, the obvious question is just visibility in terms of the assumption that you've set now. And then, is it possible to disaggregate what is the impact of visa limits versus timing in terms of logistics and getting the students back to, you know, back to school? I think that'll help inform us in terms of your impact in terms of growth there. Thanks a lot.

Speaker Change: Just to drill down in Canada, I guess the obvious question is just visibility in terms of the assumption set now and then is.

Speaker Change: Is it possible to disaggregate, what is the impact from visa limits versus timing in terms of logistics and getting the students back to the.

Speaker Change: Back to back to school and you think that'll help inform us.

Speaker Change: Without your impact in terms of growth there. Thanks a lot.

Speaker Change: Yes. This is Rob I can start on that.

Rob Orgel: Yeah, this is Rob. I can start on that. Certainly, one of the data points that we look at is the aggregate of the visa data that's reported. But keep in mind that the results for us are the product of multiple things, right? There's that number, but we have multiple things.

Rob Oracle: Certainly one of the data points, we look at is the aggregate of the visa data that's reported but keep in mind that the results for us are the product of multiple things right. There is that number but we have multiple things and if you remember my comments I covered some of the offsetting factors for US right. So we've got new client acquisition. That's part of this we've got returning student payers that are part of this.

Rob Oracle: We have additional product upsells in the market and so and we've got the increasingly effective role of our agent network. That's also helping drive volume across all of the destination markets. So if you look at all of that it would be a factor that would go into it but our success and our ability to perform better than what are the sort of <unk>.

Rob Orgel: And if you remember my comments, I covered some of the offsetting factors for us, right? So we've got new client acquisition that's part of this. We've got returning student payers that are part of this. Additionally, we have additional product upsells in the market. And so, and we've got the increasingly effective role of our agent network that's also helping drive volume across all the destination markets. So if you look at all of it, it would be a factor that would go into it, but our success and our ability to perform better than what are the sort of aggregate visa numbers are the function of those factors that we have that give us a better result.

Rob Oracle: Again. These numbers are the function of those factors that we have that give us a better result.

Speaker Change: Got it and then the visibility question in terms of where you set the impact.

Rob Orgel: Got it. And then there is the visibility question in terms of where you set the impact.

Speaker Change: I mean, we've given you everything we can give you in terms of our expectation that if you look through the supplement materials, you'll see the growth rates.

Rob Orgel: And we've given you everything we can give you in terms of our expectations. As you look through the supplement materials, you'll see the growth rates for prior quarters, the current quarter, as well as how we've modeled it going forward, built into the guidance. And there are two charts, as Cosmin referred to, in the supplement that will show you the underlying assumptions. And that's based on, you know, our visibility into the trends and our conversation with clients and agents.

Rob Oracle: Prior quarters current quarter as well as how we model that going forward built into the guidance and there are two charters Kaufmann referred to in the supplement that will show you the underlying assumptions and that's based on.

Speaker Change: Our visibility into the trends in our conversations with clients and agents, yes, the only thing I'd add is.

Rob Orgel: Yeah, the only thing I'd add is, you know, I guess on the full year, obviously, we want to be clear and show the impact on that full year and get it out of the guide so that people can make those adjustments. If you look at that first half of the year, the business continued to outperform quite well in other areas and really was offsetting that headwind. And, you know, we want to make it really clear what that headwind was and make sure people saw it, and that makes up for the change in the full-year guide.

Speaker Change: I guess on the full year, obviously, we wanted to be clear.

Speaker Change: Show the impact on that full year and get it out of the guide so that people can make their make those adjustments. If you look at the first half of the year. The business continued to outperform quite well in other areas. It really was offsetting that headwind.

Speaker Change: We wanted to make it really clear what that headwind was to make sure people saw it and.

Speaker Change: That makes up for the change in our full year guide.

Speaker Change: Got it it makes a lot of sense and if I could squeeze in one more just the recapture I just want to be clear because I think the tenants of the fly wire models is global.

Rob Orgel: Got it. It makes a lot of sense. And if I could squeeze in one more, just the recapture, I just want to be clear, because I think, you know, the tenets of the Flywire model are this global. And I think, you know, you guys should be picking up some additional volume here.

Speaker Change: Thank you guys should be picking up some additional volume here is it is it.

Speaker Change: A function of just eat.

Speaker Change: Difficulty a measure of the recapture is it just a prudent assumption just curious it looked at it put a finer point on the removal of the recapture assumption. Thanks a lot.

Speaker Change: So this is Raj speaking again, hopefully you took from my comments the strength of the overall education franchise around the world right. We've talked about strength in UK, we talked about strength in Australia, we talked about strength in the U S. You look at the data to see sort of evidence of recapture and even though they are strengthened all of these markets. It's not very obvious how you determine that.

Rob Orgel: Is it, is it a function of just difficulty to measure the recapture? Is it just a prudent assumption? Just curious; I'd like to put a finer point on the removal of the recapture assumption.

Speaker Change: As recapture and so again, we're seeing good strength across the business, but don't feel that we can call comfortably that thats a recapture from Canada.

Speaker Change: Makes sense. Thank you Rob.

Speaker Change: Thank you next question comes from the line of stamp on them.

Rob Orgel: Thanks a lot.

Speaker Change: RBC capital markets. Please go ahead.

Speaker Change: Thanks.

Samantha Stamp: I was hoping maybe you could just spend a minute or two just kind of framing you've done a lot of deals in India recently, and I know you talked about it being a big outbound market. So.

Speaker Change: I'm, just trying to think about that as kind of an.

Speaker Change: The offset or a shock absorbed with some of the stuff that's been happening in Canada and how quickly you think you can recognize incremental growth from that market and then what do you see.

Speaker Change: Frame I guess, the long term expectations. It just seems like such a big opportunity but.

Speaker Change: And again, you've been signing a ton of deals there so anything around that would be helpful.

Speaker Change: Yes, I mean, obviously, there's a whole bunch of innovation, we've done there I mean, those those deals whether it's limitless.

Samantha Stamp: H FTC cardillo or whether it's the three bank integration those or not.

Speaker Change: Very common in partnerships and integrations.

Speaker Change: In our space. So we feel really proud about what the team has been able to get those.

Speaker Change: Innovation up get them live.

Speaker Change: And really deliver new solutions in the market I would also just say the agent investment we've made either that combination of software and our team.

Speaker Change: And India again, I think positions us really really well so we feel really good about the work.

Speaker Change: Look we've done to strengthen that market.

Speaker Change: We're doing similar things in other important markets like China and elsewhere.

Speaker Change: And again, that's part of the <unk> playbook is investing in the product payment innovation, making sure we have the local expertise on the market to deliver good results and we feel very good about what the teams accomplished in the last year.

Speaker Change: You alluded to.

Speaker Change: The way to get to the us.

Speaker Change: And again, we saw in Q2 really did tons of angina tube, so strength in China and feel good about both those entering Q3.

Speaker Change: Okay.

Speaker Change: Just one other quick follow up I mean, you continue to have this.

Speaker Change: A pretty rapid pace of new client signings I think it's over 200 again this quarter.

Speaker Change: But as I've asked I guess in the past like when you think about spooling them up in terms of the implementation team and the time to bring the clients up to revenue recognition.

Speaker Change: Do you feel like you've got enough investments behind that in order to.

Speaker Change: Continue to maybe accelerate the opportunity there or you feel like you've got to.

Speaker Change: Beef it up because I heard you on the comments about investing in the go to market, but I often wonder about the pace of which you can do these implementations. Thank you.

Speaker Change: Yes. This is Rob I can jump in on that lets the integration team is doing great. We are.

Rob Orgel: That makes sense. Thank you, Rob.

Rob Orgel: So this is Rob speaking. Again, hopefully, you took from my comments the strength of the overall education franchise around the world, right? We talked about strength in the UK, we talked about strength in Australia, and we talked about strength in the US. You look at the data to see sort of evidence of recapture. And even though there's strength in all these markets, it's not very obvious how you determine that that is recapture. And so again, we're seeing good strength across the business, but don't feel that we can call comfortably that that is recapture from Canada.

Speaker Change: We're very effective at deploying the clients the timelines from sort of signature or beginning of project too.

Speaker Change: Initial transactions and revenue are very satisfying for us and if anything we're getting even better at this so if you remember in one of our recent calls we've talked about how fast we got a full suite education client here in the U S lives that reflects improved sort of process and practice as well as adequately staffed teams.

Speaker Change: If you take my comments on us investing in go to market think of us as having an understanding of sort of everything it takes to make that revenue line.

Speaker Change: Sales through our M through servicing through implementation and us understanding how to sort of grow those teams proportionately appropriately.

Speaker Change: Great. Thank you.

Speaker Change: Thank you next question comes from the line of Ken So Husky with Autonomous research. Please go ahead.

Operator: Thank you. The next question comes from the line of Dan Perlin with RBC Capital Markets. Please go ahead.

Dan Perlin: Thanks. I was hoping maybe you could just spend a minute or two just kind of framing, you know, you've done a lot of deals in India recently, and I know you talk about it being a big outbound market. So I'm just trying to think about that as kind of an offset or a shock absorber to some of the stuff that's been happening in Canada and how quickly you think you can recognize, you know, incremental growth from that market.

Speaker Change: Hey, good afternoon. Thanks for thanks for taking the question maybe I'll ask on travel travel continues to grow quickly.

Dan Perlin: And then what do you say frame, I guess, the long-term expectations? It just seems like such a big opportunity. But, and again, you've been signing a ton of deals there. So anything around that would be helpful.

Speaker Change: Travel has lower gross margin. So can you talk about what drove the gross margin outperformance this quarter.

Speaker Change: And I guess, how are you guys thinking about the year over year change in gross margin and <unk> unfortunate. Thank you.

Speaker Change: Yeah. Thanks, Dan So yes, as you saw gross margins relatively flat, but what I would say if you look in our last quarter.

Speaker Change: A little bit lower so one of the things that we see.

Speaker Change: Obviously as from quarter to quarter, you have different mix the corridor countries and other factors that can move the gross profit up and down in gross margin. This quarter. It was a couple of things. So as you saw in my remarks first mix.

Speaker Change: As you pointed out mix usually for us means.

Speaker Change: <unk>, our beat to be growing a bit faster, where the credit card the more prevalent operating that way there are three things one was.

Speaker Change: We're seeing strength in some of the quarters and as you heard here and I'll just comment we're seeing strength there.

Speaker Change: Second.

Speaker Change: Our team here is always looking to optimize our cost across our payments.

Speaker Change: Different payment methods and third FX, which is that FX on settlement that one is sort of a kind.

Speaker Change: Last quarter. It was a big negative this quarter was a positive I would say that piece in particular is more of a.

Speaker Change: Kind of differs by quarter.

Speaker Change: Going back from that to.

Speaker Change: Look ahead I would say.

Speaker Change: We feel good about it for this quarter, but in general for the year and as we look in general trends I would stick with the same assumption that you've heard us say before which is gross margin percent goes.

Speaker Change: Declines a little bit in between 100 to 200 bps a year or so.

Speaker Change: In that same.

Speaker Change: Sort of trend over time.

Speaker Change: And again from quarter to quarter things can change in terms of the mix.

Speaker Change: Yeah, Okay. That's super helpful. And then maybe just my follow up just on Canada. I think you mentioned youre seeing lower application demand lower enrollments across a broad set of schools in Canada.

Speaker Change: Expand a little bit more on what's driving the lower demand and I guess, what youre hearing from schools.

Speaker Change: You mentioned some government actions, we're making it difficult to fill seats, but any additional color there would be great. Thanks, so much.

Speaker Change: Yes, Im not sure Theres, a whole lot more color to supply there other than to say whenever there's uncertainty that affects the students view of the market overall, Canada has.

Speaker Change: Great reputation and a desirable destination, but it does have this uncertainty right now about the work permit status for post studies and the expectation as I said is that Canada is going to clarify all that they will make clear what the qualification criteria are and that will help give comfort to the students and provide.

Speaker Change: Provide help to the demand side.

Speaker Change: Okay. Thank you.

Speaker Change: Yeah.

Speaker Change: Thank you next question comes from the line of Cris Kennedy with William Blair. Please go ahead.

Cris Kennedy: Good afternoon, and thanks for taking my question you guys have added a lot of new clients over the last several quarters is there any way to talk about the profile of those cohorts relative to history.

Speaker Change: Yes. This is Rob I can I can jump in there and we tried to give some color and flavor here. Obviously the accounts were very strong they were strong across the verticals and the key point that we tried to give there was that the average <unk>.

Speaker Change: Our projected also increased per client. So when you look at the overall <unk> for the business it was.

Speaker Change: Very much in line with our plan it was good and strong and the deal size.

Speaker Change: <unk> increased over prior quarters.

Speaker Change: Okay, Great and then just a quick follow up any way to frame the growth of Invoiced. Thanks.

Speaker Change: I would say.

Mike Massaro: This is Mike obviously.

Mike Massaro: I would say.

Mike Massaro: A business that has the foundries to understand taking it and bootstrap. It now with a ton of capital. So I would say theres, a great opportunity for us to invest in it. So it is growing but we think that we think we can even accelerate that growth rate, causing spoke a bit about what's positive EBITDA generation, we're going to invest behind it and use our go to market.

Mike Massaro: Marketing and sales prowess to to help.

Speaker Change: So to distribute that.

Speaker Change: Product that platform as quickly as we can.

Speaker Change: Great. Thanks for taking my questions.

Mike Massaro: Thank you next question comes from the line of Tim Chiodo with UBS. Please go ahead.

Speaker Change: Hi, Thanks for taking the question. This is Pat I know, Sean or Tim chatter.

Pat: I know you talked about some client wins on the domestic side, but with some of the headwinds and pressures around cross border revenues can you speak to maybe the success Youre seeing from a volume growth perspective on the domestic education side, and then maybe just share the economics to fly wire and what that looks like for those specific payments as it.

Speaker Change: Compared to a cross border transactions.

Speaker Change: Yes, I mean, I think we're very pleased with the result of the U S franchise across both cross border and domestic so if we Didnt Express net let me express that here.

Mike Massaro: Yeah, I mean, obviously, there's a whole bunch of innovation we've done there. I mean, those deals.

Unknown Executive: Unknown Executive, Akil Hollis, Michael Massaro, Robert Orgel, Cosmin Pitigoi, Tyler DuPont

Mike Massaro: What the team accomplished in the last year, related to

Speaker Change: When you talked about sort of the increased pace of wins on the domestic side. So we called out three.

Speaker Change: In my earlier comments and.

Mike Massaro: And again, we saw really good trends around China in Q2, so strength in China and feel good about both those entering Q3.

Speaker Change: These are great deals for US right. The economics comes to us in the form of increased transactional volume as well as platform volume one of the main drivers there is setting up things like payment plan that carry with them a very high margin for us they are very profitable business for us and a great platform and benefit to the schools and the clients. So.

Speaker Change: Overall, I feel like our pace in the U S is accelerating and the economics of those deals are great.

Speaker Change: Okay.

Mike Massaro: Thank you next question comes from the line of Darrin Peller with Wolfe Research. Please go ahead.

Dan Perlin: Okay. Just one other quick follow-up. I mean, you continue to have this pretty rapid pace of new client signings. I think it's over 200 again this quarter. But, as I've asked in the past, when you think about spooling them up in terms of the implementation team and the time to kind of bring the clients up to revenue recognition, like, do you feel like you've got enough investments behind that in order to continue to maybe accelerate the opportunity there?

Speaker Change: Okay.

Speaker Change: Yeah guys.

Dan Perlin: Or do you feel like you've got to beef it up? Because I heard you in the comments about investing in the go-to-market, but I often wonder about the pace at which you can do these implementations. Yeah, this is Rob.

Darrin Peller: Most of my questions have been asked I, just I want to understand a little bit more visibility again, just follow up on you mentioned a lot about Canada help.

Speaker Change: Help us understand exactly if you believe the conservatism in Canada is such that it's off of a preexisting enrollments and that there's very little uncertainty now in Canada first of all and then second of all I don't know Rob you talked about the other markets UK, Australia doing well, but just make sure were comfortable that theres not.

Rob Oracle: Other added potential for regulatory that you see is there anything else coming onto the market that could wake up and.

Rob Oracle: Surprise us that you're at least you know tracking let's call. It at this point in the day.

Speaker Change: And then I just have a follow up on new customer adds.

Speaker Change: So I'll start with sort of the U K and Australia, and then causing anything want to jump in on any further comments on the Canada piece. So the UK just put forward some fairly positive statements from from them in terms of actually clarifying students being welcome. The graduate route being affirmed there had been some uncertainty about that.

Speaker Change: Prior but that was hopefully.

Speaker Change: Sort of addressed properly and thoroughly by by the comments from the new Labour government. If you look at Australia, obviously, they've already done a bunch of things in terms of how they're handling student visas and alike, and we performed very very well in that market, we have great assets.

Speaker Change: Great opportunity in terms of customer growth in Australia, and feel like the team is executing very well against.

Speaker Change: The land and expand strategy in Australia, the new integrated offering study won't go lives and there's a lot of good stuff going on in Australia for us.

Speaker Change: <unk> foundation for that strength going forward and we expect that to continue caused me in order to address the candidate is yes.

Darren: So Darren just at a high level guidance, we feel it's relatively balanced including Canada, you can see from the supplement materials that we've adjusted based on the trends. We're seeing obviously will look through the rest of the quarter end.

Darren: We'll see we'll see how it progresses, but we feel like we've we've put in a pretty balanced outlook and Darren I know, it's not lost on you I mean, obviously, we think we're putting up great growth numbers of the business performing given a $30 million headwind on the year. So again I think.

Darren: I think we unlike anyone can't tell the future, but we feel like we've got a really good diversified business that has different industry different products different.

Speaker Change: <unk>.

Speaker Change: Industry data.

Speaker Change: Growth levels or just help us no matter, what kind of ahead of us.

Darren: No. There is no doubt that youre seeing the growth outside of the Canada show up well just a matter of making sure there's enough visibility in the guide coming off.

Speaker Change: Or is it down.

Speaker Change: And it sounds like you guys are trying to do as much as you can on that from just on the new customer adds again 200 is a good number I just wanted to make sure. We're clear last time around I think either two quarters ago or last quarter. You said it was a pretty good even split between education and health care I'm sorry in travel.

Speaker Change: Maybe you could just give us more color on where the source of the new customer adds are coming into size I guess I just want to make sure that are notable.

Speaker Change: When a client add that it could sustain strong trends in the year ahead in the years ahead.

Speaker Change: Yes.

Speaker Change: Yes, So first let me make a high level kind of thing.

Speaker Change: <unk> on our plan or even ahead of our plan in terms of the aggregate value of those deals signed.

Speaker Change: If you look at the.

Speaker Change: The composition of the deals. They started I think I said two quarters ago travel beat out education last quarter education be that travel at this time.

Speaker Change: Travel a bit ahead of education think of these as good five six figure deals with some seven figure deals in there as well.

Speaker Change: With a strong mix across our overall client adds.

Speaker Change: Okay.

Speaker Change: Thank you.

Speaker Change: Our final question comes from the line of James Faucette with Morgan Stanley. Please go ahead.

James Faucette: Great. Thank you so much just a couple of follow ups from me wanted to understand really quickly a little more detail on an IRR. Historically, we know that that's been in the low to mid twenties range or so its obviously very robust.

Speaker Change: And.

Speaker Change: And especially when looking at historical cohorts that are still growing in that high teens range, but that's that would be great to get your thoughts on an individual pair retention.

Speaker Change: Especially in the vertical space. If you for example, if you have a pool of 100 and coming first UFC University, how many are still using <unk>.

Speaker Change: By the time, they exiting and I guess more importantly, I'm just trying to understand how we should anticipate that phenomenon to impact on our R. Over the medium term, especially as you work to continue to upsell that existing base of education customers.

Speaker Change: Well first let me, let me address the NR <unk> straight on so obviously NR overall will be impacted somewhat by the Canada metrics, but we did do the work to go look at NRI, Excluding Canada and want to give comfort that that NR is right in the range. We've always reported strong performance through the other verticals and then the other mark.

Speaker Change: That's with NR results following right in line with what you are used to hearing from us so underneath all of that in our I guess your second question is about sort of underlying payer adoption. We continue to work on that as a priority for the company and continue to make progress on that we've talked about some of our initiatives in terms of the <unk> in terms of building.

Speaker Change: Longer term client relationships all of those factors that drive that utilization and we see that those numbers going in the right direction for us, meaning increasing transactions per payer over their lifetime and that is a metric that.

Speaker Change: That we seek to drive forward.

Speaker Change: Got it got it and then just last question for me is as you know when once again that ties to footprint expansion within your customers. How should we think about the customization and back backend integration work required at least for certain customers then.

Speaker Change: How that could or how should we anticipate that impacting your margins for better or worse.

Rob Orgel: Yeah, this is Rob. I can jump in on that. Look, the integration team is doing great. We are very effective at deploying the clients. The timelines from sort of the signature or beginning of the project to initial transactions and revenue are very satisfying for us. And, if anything, we're getting even better at this. So, if you remember, on one of our recent calls, we talked about how fast we got a full suite education client here in the U.S. live.

Speaker Change: I think we've built the business.

Rob Orgel: That reflects improved sort of process and practice, as well as adequately staffed teams. If you take my comments on us investing and going to market, think of us as having an understanding of sort of everything it takes to make that revenue live, you know, sales through RM, through servicing, through implementation, and us understanding how to sort of grow those teams proportionately appropriately.

Speaker Change: As you've come to know it today being very effective at implementations all of that is baked into our current sort of business model and cost profile and we don't see that changing certainly for anything that would be negatively impactful to any of those metrics. So if anything we believe we're getting better at the implementations. We continue to build into the platform automation to allow things to go faster.

Operator: Thank you. The next question comes from the line of Ken Suchoski with Autonomous Research. Please go ahead.

Ken Suchoski: Hey, good afternoon. Thanks for taking the question. Maybe I'll ask about travel. You know, travel continues to grow quickly, but I think travel has a lower gross margin. So can you talk about what drove the gross margin outperformance this quarter? I guess, what are you guys thinking about the year-over-year change in gross margin in 3Q and 4Q? Thank you.

Cosmin Pitigoi: Yeah, thanks, Dan. So, yeah, as you saw, the gross margin is relatively flat. But what I would say, if you look, you know, last quarter, it was, you know, a little bit lower. So, one of the things that, you know, we see, obviously, from quarter to quarter, you have different mixes of corridors, countries, and other factors that can, you know, move the gross profit up and down and the gross margin.

Cosmin Pitigoi: This quarter, it was a couple of things. So, as you saw in my remarks, first, mix. And as you pointed out, mix usually means travel or B2B growing a bit faster where those credit cards are more prevalent.

Cosmin Pitigoi: Obviously, there were those three things. One was, you know, we're seeing strength in some of the corridors. And as you heard here, in our comments, we're seeing strength there. Second, our team here is always looking to optimize our costs across our payments, you know, different payment methods. And third was FX, which is that FX on settlement.

Cosmin Pitigoi: That one is sort of a, you know, it kind of moved. Last quarter, it was a big negative. This quarter, it was positive. So, I would say that piece, in particular, is more of a, you know, it kind of differs by quarter. So, stepping back from that, you know, just look ahead. I would say, you know, I could feel good about it for this quarter, but in general for the year, and as we look at general trends, I would stick with the same assumption that you've heard us say before, which is that gross margin percent goes, you know, sort of declines a little bit between 100 to 200 bits a year. So, I would still assume that same, you know, sort of trend over time. And, you know, again, from quarter to quarter, things can change in terms of mix.

Ken Suchoski: Yeah, okay, that's super helpful. And maybe I should just follow up just on Canada. I think you mentioned you're seeing lower application demand and lower enrollments across a broad set of schools in Canada. Can you just expand a little bit more on what's driving the lower demand and, I guess, what you're hearing from schools? I think you mentioned some government actions were making it difficult to fill seats, but any additional color there would be great. Thanks so much.

Rob Orgel: Yeah, I'm not sure there's a whole lot more color to supply there other than to say, you know, whenever there's uncertainty, that affects students' views of the market. Overall, Canada has a great reputation and is a desirable destination. But it does have this uncertainty right now about the work permit status for post studies. And the expectation, as I said, is that Canada is going to clarify everything and will make clear what the qualification criteria are. And that will help give comfort to students and provide help to the demand side.

Operator: Thank you. Thank you. The next question comes from the line of...

Operator: Thank you. The next question comes from the line of Tim Chiodo with UBS. Please go ahead. All right, thanks for taking the question.

Chris Kennedy: Thank you. The next question comes from the line of Chris Kennedy with William Blair. Please go ahead. Good afternoon, thanks for taking the question. You guys have added a lot of new.

Tim Chiodo: Yeah, I mean, I think we're very pleased with the results of the U.S. franchise across both cross-border and domestic. So if we didn't express that, let me express that here. We talked about sort of the increased pace of wins on the domestic side, so we called out three in my earlier comments.

Rob Orgel: Yeah, this is Rob. I can jump in there. And we tried to give some color and flavor here. Obviously, the counts were very strong. They were strong across the verticals.

Rob Orgel: And, you know, these are great deals for us, right? The money comes to us in the form of increased transactional volume as well as platform volume. You know, one of the main drivers there is setting up things like payment plans that carry with them a very high margin for us. They're a very profitable business for us and a great platform and benefit to the schools and the clients. So overall, I feel like our pace in the U.S. is accelerating, and the economics of those deals are great.

Chris Kennedy: And the key point that we tried to give there was that the average ARR projected also increased per client. So when you look at the overall ARR for the business, it was very much in line with our plan. It was good and strong, and the deal size increased over prior quarters. Okay, great. And then just a quick follow-up, any way to frame the growth of invoiced? Thanks.

Operator: Thank you. The next question comes from the line of Darrin Peller with Wolf Research. Please go ahead.

Mike Massaro: You know, I would say, this is Mike, obviously, I would say, you know, it's a business that the founders have taken and, you know, bootstrapped it, now with a ton of capital. So, I would say there's a great opportunity for us to invest in it. So, it's growing, but we think we could even accelerate that growth rate. You know, Cosmin spoke a bit about it being positive, even a generation, we're going to invest behind it and use our go-to-market marketing and sales prowess to help further distribute that product, that platform as quickly as we can.

Darrin Peller: Yeah, guys, most of my questions have been asked. I just want to understand a little bit more visibility.

Mike Massaro: That product, that platform, as quickly as we can. Thanks for taking the question. Thank you. Next question comes from the line of Tim Chiodo with UBS. Please go ahead. Hi, thanks for taking the question. This is Pat.

Darrin Peller: Again, just follow up on what you mentioned about Canada. Help us understand exactly if you believe the conservatism in Canada is such that it's based on pre-existing enrollments and that there's very little uncertainty now in Canada, first of all. And then second of all, I know, Rob, you talked about the other markets, the UK, Australia, doing well, but just make sure we're comfortable that there's not, you know, other added potential for regulatory that you see.

Darrin Peller: Is there anything else going on in the market that could wake us up and surprise us that you're at least, you know, low tracking, let's call it at this point in the day? And then I just have a follow-up on new customer ads, please?

Rob Orgel: So I'll start with sort of the UK and Australia, and then Cosmin, if you want to jump in on any further comments on the Canada piece. So with the UK, I just put forward some fairly positive statements from them in terms of actually clarifying that students are being welcomed, and the graduate route being affirmed. There had been some uncertainty about that prior, but that was hopefully sort of addressed properly and thoroughly by the comments from the new labor government.

Rob Orgel: You know, I think we've built the business as you've come to know it today, being very effective at implementations. All of that is baked into our current sort of business model and cost profile, and we don't see that changing for anything that would be negatively impactful to any of those metrics. So, if anything, we believe we're getting better at the implementations. We continue to build into the platform automations to allow things to go faster.

Speaker Change: And so.

Rob Orgel: If you look at Australia, obviously they've already done a bunch of things in terms of how they're handling student visas and the like, and we performed very, very well in that market. We have great assets and a great opportunity in terms of customer growth in Australia, and feel like the team is executing very well against the land and expand strategy in Australia, the new integrated offering, study link go live. There's a lot of good stuff going on in Australia for us. That's the foundation for that strength going forward, and we expect that to continue. Cosmin, you wanted to address the Canada piece?

Rob Orgel: And so, we feel very good about sort of what implementations represent both in terms of time and cost to us. And, you know, for us, that lifetime valuable client is really excellent, and the implementations are only a very small part of that now. Thank you so much.

Cosmin Pitigoi: At a high level, we feel relatively balanced, including Canada. You can see from the supplement materials that we've adjusted based on the trend we're seeing. Obviously, we'll look through the rest of the quarter, and we'll see how it progresses, but we feel like we've put in a pretty balanced outlook. Darren, I know it's not lost on you. I mean, obviously, we think we've put up upgrade growth numbers with the business performing, given a $30 million headwind for the year. So, again, I think we, unlike anyone, can't tell the future, but we feel like we've got a really good, diversified business that has different industries, different products, and different industry-based growth numbers.

Speaker Change: We feel very good about sort of what implementations represent both in terms of time and cost to us.

Cosmin Pitigoi: , , , ,

Darrin Peller: Now, there's no doubt that you're seeing the growth outside of cannabis show up well, just the matter of making sure there's enough visibility in the guide coming off of, you know, the revised revision down. And sounds like you guys are trying to do as much as you can on that front. Just on the new customer ads, again, 200 is a good number. I just want to make sure we're clear.

Rob Orgel: Last time around, I think either two quarters ago or last quarter, you said it was a pretty good even split between education and healthcare, sorry, and travel. Maybe you could just give us more color on where the source of the new customer ads is coming from in terms of size. I guess I just want to make sure that those are notable, notable enough client ads that they could sustain strong trends in the year ahead and the years ahead. Thanks. Yeah, so first, let me make a high-level comment saying that this is exactly what I was thinking...

Rob Orgel: Yeah, so first, let me make a high-level comment saying that this is exactly on our plan or even ahead of our plan in terms of the aggregate value of those deals signed. If you look at the composition of the deals, they started, I think I said, two quarters ago, travel beat out education, last quarter, education beat out travel, this time, travel was a bit ahead of education. You know, think of these as good five, six-figure deals with some seven-figure deals in there as well. So, a strong mix across our overall client ads.

Operator: Our final question comes from the line of James Faucette with Morgan Stanley. Please go ahead.

Speaker Change: For us that lifetime value of a client is really excellent and the implementations are only a very small part of that now.

James Faucette: Great, thank you so much. Just a couple of follow-ups from me. I want to understand, really quickly, a little more detail on NRR.

Rob Orgel: Historically, we know that that's been a low to mid 120s range, which is obviously very robust, especially when looking at historical cohorts that are still growing in that high teens range. That said, it'd be great to get your thoughts on individual pair retention, you know, especially in the vertical space. For example, if you have a pool of 100 incoming first-years at university, how many are still using Flywire by the time they exit? And I guess more importantly, I'm just trying to understand how we should anticipate that phenomenon to impact NRR over the medium term, especially as you look to continue to upsell that existing base of education customers.

Rob Orgel: Well, first, let me address the NRR piece straight on. Obviously, NRR overall will be impacted somewhat by the Canada metrics, but we did do the work to look at NRR excluding Canada and want to give comfort that that NRR is right in the range. We've always reported strong performance through the other verticals and in the other markets, with NRR results falling right in line with what you're used to hearing from us. So, underneath all that NRR, I guess your second question is about sort of underlying payer adoption.

Rob Orgel: We continue to work on that as a priority for the company and continue to make progress on that. We've talked about some of our initiatives in terms of the pay acts, in terms of building longer-term client relationships, all as factors that drive that utilization. And we see those numbers going in the right direction for us, meaning increasing transactions per payer over their lifetime. And that is a metric that we seek to drive forward.

Rob Orgel: Got it, got it. And then just the last question for me is, you know, when once again, this ties to footprint expansion within your customers, how should we think about the customization and back-end integration work required, at least for certain customers, and how that could, or how should we anticipate that impacting your margins for better or worse?

Speaker Change: Great. Thank you so much.

James Faucette: Great! Thank you so much.

Operator: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Speaker Change: Okay.

Speaker Change: Thank you.

Speaker Change: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Speaker Change: Goodbye.

Speaker Change: Okay.

Speaker Change: [music].