Q1 2025 Flywire Corp Earnings Call
[inaudible] I don't know.
STAND OUT
This is a work of fiction. Any resemblance to actual persons, living or dead, is entirely coincidental.
Speaker Change: Council on Foreign Affairs Center, Friendly District, Geneva, November 18, 1945
Speaker Change: Greetings, and welcome to the Flywire Corporation first quarter 2025 earnings conference call.
At this time, our participants are the list and only mode. [inaudible]
Speaker Change: A question and answer session will follow the formal presentation. If anyone wants to require operator assistance during a conference, please press zero on your telephone keypad.
Speaker Change: As a reminder, this cost has been recorded. It is now my pleasure to introduce your host, Masha Kahn, Vice President Investor Relations. Thank you, you may begin. Thank you and good afternoon.
Speaker Change: During the call, we'll be discussing certain forward-looking information. Afterall, results could differ materially from those contemplated by this forward-looking statement.
Speaker Change: We will also discuss in certain non-GAAP financial measures. Please refer to our press release on SEC filing for more information on the risks regarding the forward-looking statements that could cause actual results to different materially, and the required closures and incompletions related to non-GAAP financial measures.
Speaker Change: 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.
Michael Massaro: Thank you, Masha. And thank you to everyone who is joining us here today. We know there's a lot on everyone's mind, particularly regarding the broader economic landscape and various other external factors.
Michael Massaro: While we acknowledge the challenging macro environment, I have never felt more proud of our performance or more confident in the future of Flywire. Let me take a few moments to tell you why.
Michael Massaro: First, at Flywire, we remain laser focused on what we can control, driving innovation, delivering exceptional value to our clients, and executing on our strategic initiatives.
Michael Massaro: We are not just weathering headwinds, we are using them to become stronger and fuel our future growth. We continue to see huge demand for flywire solutions, as evident by our signing of 200 new clients this past quarter.
Michael Massaro: Our pipeline is strong, our solutions drive results, our team is focused.
Michael Massaro: Second, we have built a resilient business, one that has proven its ability to adapt and thrive in challenging times.
Michael Massaro: Deshifting and uncertain macroeconomic conditions are creating unique opportunities, and our flymates are capitalizing on them.
Michael Massaro: as our clients and prospects increasingly focus on ROI enhancing initiatives in vendor consolidation. Flywire stands out by delivering a suite of products, clear cost savings, and operational efficiencies.
Michael Massaro: Our clients consistently express their appreciation for our solutions and we are proud to maintain a very low turn rate. Reflecting the strong partnerships we have built.
Michael Massaro: This resilience is rooted in our core strength. Our software-driven payments platform that sets us apart and enables us to deliver significant value, efficiency, and superior experience.
Michael Massaro: Third, Flywire's unique position in the market is driven by our powerful combination of specialized, vertical specific software, our proprietary global payment network, and comprehensive payment platform.
Michael Massaro: Thanks to this combination, we can go to market in our core industries with a robust product suite that offers clients a single source solution to manage all their payments, pricing in support while providing their customers a superior payment experience. [inaudible]
Michael Massaro: We have powerful software integrations that seemlessly fit into our clients back in system, making us fast to implement in deepening our mode.
Michael Massaro: And because we control our network, we provide our clients with daily settlement reconciled to the penny for both international and domestic payments.
Michael Massaro: Flywire's unique approach enables us to power the vertical ecosystems that we serve, and helps us stand out from standard payment processors in horizontal competitors.
Michael Massaro: And finally, we believe in the long-term success of our core verticals, and we believe there will be continued demand for our solutions.
Take International Education, for example. [inaudible]
Michael Massaro: The desire for international education is driven by more than academics. It is about gaining global perspective, experiencing new cultures and pursuing opportunities often unavailable at home.
Michael Massaro: Top talent-seek environments where their skills are valued and rewarded in international students are key drivers of innovation, economic growth, and future leadership.
Michael Massaro: We believe that long-term trends like global skill shortages and aging populations, especially in developed countries, will continue to fuel demand for global education for years to come.
Michael Massaro: International students also generate significant economic value for local communities and sustain the institutions that educate them.
Michael Massaro: In short, the global competition for talent in the enduring appeal of international education remain powerful forces shaping the future.
Michael Massaro: Now moving on to something we announce last quarter, our operational and portfolio review. As part of this review, the organization is streamlining its structure, removing management layers across various areas. This involves consolidating reporting lines within payments and product, data and analytics, IT systems, and strategy and business operations functions.
Michael Massaro: We'll also optimize investments in capital allocation across products, geographies and verticals to drive greater efficiency and impact.
Michael Massaro: Under the direction of our newly appointed chief payments officer, Flywire is accelerating its payment strategy in technical alignment across all verticals, driving significant product
Michael Massaro: Dischange centralizes strategy, business development, operations, monetization, and product management for all payment related aspects under one team.
Michael Massaro: We are actively utilizing data analytics and fostering initiatives to build new acceptance rails, increase localization, expand domestic payment capabilities, and leverage AI to streamline onboarding support in KYC processes.
Michael Massaro: From these efforts, we are already seeing results with the launch of our enhanced recurring payment capabilities introduced in the first quarter and improved cost and speed of payments in the United States. We are also happy to announce yet another partnership in India to support flows to further expand loan acceptance solutions in this key pair market.
Michael Massaro: We believe our global payment network and payment capabilities are truly differentiated and this is an important step to take a competitive advantage in the verticals we serve.
Michael Massaro: As part of the operational and portfolio review, we are tackling several areas to ensure continued op-ex discipline in efficient capital allocation.
Michael Massaro: We are investing in procurement and vendor management functions in reviewing our global footprint
Michael Massaro: Our team continues to refine pricing strategies across our portfolio to maintain competitiveness and profitability, reflecting the unique value proposition of our integrated global payment network shared platform and our growing suite of software products.
Michael Massaro: We are optimizing performance across our teams, reprioritizing the utilization of resources for key projects, increasing productivity with new technologies, aligning our investments to value creation, diligently measuring results to ensure accountability and continuous improvement.
Michael Massaro: And we are further aligning hiring and compensation to drive a high performance culture, minimizing duplicate roles, enhancing geographic alignment. These efforts ensure that our platform is supported by a highly motivated, skilled and efficient team of climates.
Michael Massaro: Additionally, we are progressing with a digital transformation initiative to create a more focused approach to data, analytics, and system transformation.
Michael Massaro: Re-investing in our data architecture, leveraging structured data across our unique verticals, which will enable us to generate real-time insights, predictive capabilities, and generating unique and innovative AI use cases for our teams and our clients.
Michael Massaro: Using data and AI to drive more efficient processes and insights into maximize long-term value, we are also investing in the foundational work to truly set up for speed, accuracy, and enterprise-wide AI deployment.
Michael Massaro: At the same time, we are optimizing our systems and tools, consolidating our vendor footprint and automating processes.
Michael Massaro: For example, we accelerated the process to onboard new clients, driving significant improvement in the client experience while reducing internal manual processes.
Michael Massaro: These initiatives collectively demonstrate flywire's commitment to driving productivity, optimizing investments, and streamlining operations. This digital transformation will further enhance our platform's capabilities and provide deeper insights for our teams and our clients.
Michael Massaro: To close, I want to highlight some of the powerful fundamentals that position Flywire for long-term growth and success.
Michael Massaro: We are building something truly differentiated, combining vertical tailored software and modern payments, helping to digitize global payment flows.
Our solutions are not simply bolted on.
Michael Massaro: We are deeply integrated with our clients core business processes enabling them to operate more efficiently at scale.
Michael Massaro: This is at the heart of how we solve complex problems for our clients. Whether it is managing receivables, streamlining their back office, or delivering seamless payment experiences across borders.
Michael Massaro: We are also innovating quickly. Our strong land and expand motion is proving that when clients experience the value of one flywire product, they often grow with us, adopting additional solutions like student financial services software or our payables product. [inaudible]
Michael Massaro: That organic expansion is accelerating recurring revenue and deepening our long-term client relationships.
Michael Massaro: In education, we continue to gain traction in new markets and with top institutions globally. In B2B and travel, our recent acquisitions like invoice and certify are unlocking new capabilities in creating powerful cross sell opportunities.
Michael Massaro: Robble speak more about the momentum we're seeing in areas like SFS and StudyLink globally.
Michael Massaro: Our business is growing, we are profitable and we continue to win new clients and deliver significant value to them.
Michael Massaro: Flywire success is driven by deep industry knowledge and the passion of our team. In the face of a tough macroeconomic climate and geopolitical uncertainty, our team has shown grit, agility, and unwavering focus. In the face of a tough macroeconomic climate and geopolitical uncertainty, our team has shown grit,
Michael Massaro: And it's you are flymates, the product managers, the engineers, operational and corporate teams, and many customer facing champions who are making it happen.
Speaker Change: You are the ones delivering real value, solving hard problems, helping to win client trust all over the world. Thank you for your continued hard work and dedication. Now, I would like to turn the call over to Rob Orgel, our president and COO to discuss vertical and operational performance. Rob?
Rob Orgel: Good evening. I'll share operational and client highlights today, focusing on how our strategy drives performance across key verticals and markets. Let me jump right in with education first.
Speaker Change: I know what top of mind question is the macro trend for international education and what's happening around the world. In particular, how important destination markets are managing policies that relate to international student numbers.
Speaker Change: Our strong results in Q1 occurred in the climate with meaningful visa and macroeconomic pressures. Our continuing view is that the underlying value and underlying demand for international education remains strong but that the rapidly changing landscape means it's a very dynamic international education market. [inaudible]
Speaker Change: As I'll outline, Flywire is leveraging our global footprint to capture the movement between destination countries, leveraging our full solution platform to support clients and grow revenue, and deepening our agent and banking network to capture an increasing share of international students.
Speaker Change: In terms of how our global footprint helps us, an emerging trend is that international education is expanding beyond traditional markets, with Germany, France, Japan, and Singapore experiencing significant growth.
Speaker Change: Flywire is capitalizing on this shift by making strategic investments and local payment capabilities and focusing sales efforts to capture the expansive client opportunities in these and similar countries.
Speaker Change: While the traditional big foreign markets of the US, UK, Canada, and Australia are approximately 40% of global international students, there are still another almost 40% going to Flywire's next 20 addressable markets.
Speaker Change: and we can continue to expand in those markets and potentially add more.
Speaker Change: A few examples include our New Domestic Contract in Mexico with International House Mexico.
Speaker Change: Growing success in France, including deeper integrations with college to Paris and American University in Paris.
Speaker Change: and the addition of two new education clients in Singapore, East Asia Institute of Management and Singapore University of Technology and Design.
Speaker Change: These demonstrate the importance of being local and offering compelling value on both domestic and cross-border payments.
Speaker Change: In terms of how our platform helps us, we continue to push to do more for our clients for pushing to handle more and more of their payment volume, and we are handling broader aspects of the student experience.
Speaker Change: For example, we continue to make progress expanding steady-link globally with our recent win at the University of Niagara Falls in Canada, following last quarter's Berkbeck expansion in the UK.
Speaker Change: In times when absolute student numbers are uncertain, these significant expansions of software capability enable us to capture more opportunities in the market.
Now, focusing on the UK.
Speaker Change: Our UK education segment is experiencing remarkable momentum, driven in part by the successful launch of our student financial software last year.
Speaker Change: We have four new SFS clients signed and committed to roll out in Q2.
Speaker Change: These UK universities will leverage SFS to manage a comprehensive range of student fees, including applications, deposits, tuition, accommodation, and payment plans. Streamlining the entire student financial journey.
Speaker Change: Our recent flagship UK education conference generated significant interest from new clients and we're excited about our pipeline for SFS in the UK market.
Speaker Change: A key recent win was securing the University of Greenwich in a competitive RFP. Our success was driven by our unique software capabilities that seamlessly integrate domestic, cross-border, and collections management into a single user-friendly system.
Speaker Change: Diswin positions us to capture all the main payments throughout the student's academic life cycle.
Speaker Change: Beyond new client acquisitions, we're expanding our footprint with prestigious institutions like Oxford and Cambridge by adding new colleges and successfully upselling our payables and refunds capabilities to our existing UK clients.
Speaker Change: with the addition of SFS, study link and payables to our product suite. We've solidified our market presence in the UK and our sales and customer teams continue to capitalize on this strong momentum.
Moving on to the U.S.
Speaker Change: While the US education sector presents some forecasting complexities in part due to recent news regarding visa revocations and restorations as well as questions on overall long-term immigration policy, we are proactively monitoring this situation and quickly adjusting our strategies accordingly.
Importantly our focus extends beyond just international students. [inaudible]
Speaker Change: We are deeply invested in software integrations and solving complex pain points for all students, regardless of their origin.
Speaker Change: whether it's domestic payment processing, tuition management, or collections, our solutions are designed to enhance the overall student experience.
Speaker Change: This means that even with potential visa fluctuations, we are confident in our ability to thrive by delivering critical value to our education clients.
Speaker Change: We're generating strong results with our U.S. strategy to capture additional payment flows, accelerate SFS adoption and displace legacy incumbents.
Speaker Change: In Q1, U.S. education had its most successful quarter in terms of signed ARR from full suite SFS deals, securing five new deals in the first quarter along with several additional deals for our collections management and third party invoicing solutions.
Speaker Change: We'll be working hard to get these clients live and generating revenue within the year.
Speaker Change: The domestic SFS offering also presents a significant land and expand opportunity, with only an estimated 10% that can't attach rate among our existing U.S. cross-border education clients.
Moving to Australia and Canada
Speaker Change: Both Australia and Canada have just had elections, and while this may help bring some clarity to policy, there's some continuing market uncertainty around potential policy shifts [inaudible]
Speaker Change: While the sector waits for more policy clarity, we are focused on our clients and their students.
Speaker Change: As an example, the University of Niagara Falls adoption study link in Canada was a notable product expansion for the study link and for us in Canada.
Speaker Change: In Australia, we have seen the market be more resilient to this point in the year than we previously anticipated. But we are also fresh off an election that occurred just days ago.
Speaker Change: We believe we outperform the overall market as measured by incoming international student volumes based on the same factors I mentioned above. More wins, more product adoption and more agent assisted payment volume. [inaudible]
Speaker Change: Adding new wins like Charles Stewart University and Federation University help our performance alongside our portfolio that has a favorable weighting towards top tier institutions.
Speaker Change: While Australia continues to exhibit strong demand, universities are rapidly filling available seats in the first half of the year. Their second half enrollment rates may be adjusted downward to reflect their observing of the Visa Caps, which we have already assumed in our full-year guidance.
Speaker Change: You can see there's a lot of very positive client and product activity from our education team globally. Now, let me shift gears to our travel vertical.
Speaker Change: We are replicating the success of our education vertical expansion in the travel sector, where we continue to see strong momentum in both customer acquisition and revenue growth.
Speaker Change: Our differentiated approach featuring advanced integration capabilities, competitive pricing, and solutions tailored to the needs of travel businesses, positions us as a true partner to our clients.
Speaker Change: In Q1 2025, notable new clients include Hamam Group in Norway, a leading inbound tour operator in Scandinavia, which selected Flywire for our seamless booking system integration, multi-currency payment capabilities, and diverse payment options.
Speaker Change: and Resurven the Maldives also joined our climate base, joined by strong referrals and our cost effective solutions further establishing flywire in the luxury travel market.
Speaker Change: We also saw promising early traction with luxury and boutique accommodation providers onboarding 21 new clients in Q1.
Speaker Change: The Certified Acquisition is transformative, unlocking opportunities with luxury and boutique hotels and monetizing payments tied to critical workflows.
Speaker Change: We also anticipate substantial growth through significantly enhancing certified payment upselling efforts, leveraging Flywire's extensive payment infrastructure and network, which has the potential to unlock billions in incremental volume.
Speaker Change: This strategic acquisition provides us with both breadth of geographic reach and depth of product offerings positioning us to build the highly scalable and substantial business within the travel sector.
Speaker Change: In Q-1 2025, Certify Achieve Notable Milestones, including a large US-based hotel management company that operates a broad portfolio of branded properties across the country.
Speaker Change: The client expanded its use of certified pay to include credit card and ACH processing at 65 properties, aiming to lower fees and expedite payments.
Speaker Change: Furthermore, we are actively developing plans to leverage Flywire's global go-to-market expertise to accelerate certified international expansion.
Speaker Change: Integration efforts between Flywire and Certify are progressing well with both teams energized by the cross-selling opportunities and the better together value proposition.
Speaker Change: While the broader travel sector is sensitive to macroeconomic conditions, we are currently not observing significant macro-driven headwinds impacting our business.
Speaker Change: With strong marketing and sales efficiency and travel and great customer retention, we continue to invest in growing our client base and serving our clients.
Speaker Change: Combining our existing travel business with Certify, we now have an over $100 million travel business in Flywire based on the last 12-month run rate. It's a platform that serves across multiple segments, multiple geographies, and increasingly diverse use cases with our clients.
Speaker Change: We provided more details in this quarter's earning supplement and we encourage you to look those over to see how we continue to grow a sizable business with attractive unit economics.
Speaker Change: Moving on to our B2P Vertical. In our B2P Vertical, we're seeing payment volume monetization as well as cross-selling opportunities and increased client adoption thanks to our invoiced attached and embedded payment solution.
Speaker Change: This joint software and payments value proposition led to a significant win with Sojourn, a leading marketing technology company for hospitality.
Speaker Change: Sojourn aims to benefit from Flywire's invoice software, ability to reduce time to pay and customer turn due to nonpayment, along with automated payment reconciliation for bank transfers, a key value proposition for them.
Speaker Change: Flywire's B2B solution addresses pain points like a lack of customer portals, payment reconciliation issues, and customer turn.
Speaker Change: Key wins with companies like Nine-Round Kickboxing, Insurance for Students, and Only Life, Highlight Flywire's ability to streamline invoicing, automate cash application, reduce FX fees, and offer local payment options.
Speaker Change: Peace Solutions integrate with systems of record, manage chargebacks, and enable local payments without our clients requiring a local entity.
Speaker Change: Wrapping up with healthcare, we believe Flywire's healthcare business is preparing to enter a period of strong growth, validated by Akidio Closure and robust integrations with major EHR systems.
Speaker Change: We won this deal due to our unique ability to offer a comprehensive solution.
Speaker Change: While many companies compete in specific areas like financing, engagement, or payments, Flywire is the only provider that integrates all of these functionalities into a single, seamless offering.
Speaker Change: This success has significantly expanded the 2025 pipeline, driven new wins and increased demo requests due to our comprehensive offering and the recent major client win.
Speaker Change: In conclusion, I am pleased with the resiliency of our teams and alignment on strategy. I am confident we are building a stronger business for the long term. Now, let me turn the call over to Cosmin, who will take us through the numbers in more detail.
Cosmin: Good afternoon, everyone. Today I'll walk you through our Q1 2025 financial performance and then discuss our outlook for the rest of the year.
Turning to our performance, this quarter, let's start with revenue.
Cosmin: Revenue, Less, Ancillary Services, was $128.7 million in Q1, representing a 16.8% year-of-year growth rate, or 18.6% on an fx neutral basis.
Cosmin: Excluding Certify, Revenue was 124 million in Q1 representing a 12.6% year-of-year or 14.4% on an FX neutral basis.
Cosmin: This was above the high end of our guidance, primarily driven by outperformance in flywires, travel, and Australian education businesses.
Cosmin: Certified contribute at $4.7 million since acquisition in late February , which was approximately 1 million above the midpoint of our $3.4 million range.
Cosmin: Canada Higher Education Revenue Results continued to be impacted by macro headwinds, shaving three points of growth this quarter.
Cosmin: Looking at the two components of a revenue, transaction revenues based on fees is a percent of transaction value, while platform and other revenue consists of software like fees.
Cosmin: Starting with transaction revenue, we saw a 14% year-of-year increase, approximately two percentage points of which were attributable to certify. This was driven by a 28% increase in transaction-related payment volume.
Cosmin: One percentage point of which was attributable to certifying, primarily in our education vertical, as well as travel.
Cosmin: Our domestic education business in the UK is growing strongly, including the launch of SFS products.
Cosmin: Similarly, the US education business is seeing strong growth in domestic payment volumes.
Cosmin: And while the modernization rate is lower compared to cross-border, our cross-border spreads remain relatively stable. And we see domestic payments as a substantial market opportunity globally.
Cosmin: Platform and other revenues increased 35% year-of-year, primarily driven by platform fees that do not carry payment volumes.
Cosmin: Specifically revenue associated with the contribution from certify of approximately $3 million and invoiced of approximately $1.5 million and improvements in our healthcare business.
Cosmin: Adjusted Gross Profit, increased to 82.5 million during a quarter, up 14.6% year-of-year
Cosmin: Adjusted gross margin was 64% in Q1 2025, which represents a decrease of about 110 basis points compared to Q1 2024.
Cosmin: Excluding certify, adjusted gross profit grew 10 percent to 79 million, with margins down by approximately 150 bips due to mixed effects from higher growth of the travel vertical and some effects on settlement losses.
Cosmin: The Jocity Beta was above the midpoint of our guide and grew to 21.6 million for the quarter.
Cosmin: Excluding Certify, adjusted EBITDA Margin was up nearly 480 basis points year of year.
Cosmin: This split adjusted but at $20.6 million up 56% compared to the 13.2 million in Q1 2024. The strength in Adesity, Rita Margin was driven by a gross profit growth and a supply and expense management.
Cosmin: We aim to continue achieving meaningful operating leverage as non-GAAP op-ex grows significantly slower than gross profit.
Excluding Certify, non-GAAP Hoppix was slightly down year of year in Q1. [inaudible]
Cosmin: Arnon Gap, GNA Cost, as a percent of revenue decreased by 443 basis points in the first quarter, and by approximately 8 percent.
Cosmin: In further terms, as we continue to streamline the automated manual processes.
Cosmin: We continue to also take a very disciplined approach to stock based compensation based on employee performance and including the recent restructuring.
Cosmin: Including certifying, we expect stock based compensation to be in the range of 12 to 13% of revenue for fully or 2025, which is lower compared to 2024.
Cosmin: To close out the income statement, in Q1, we had a gap net loss of $4.2 million, representing a year-of-year improvement of approximately $2 million.
Cosmin: Restructuring costs of $7.3 million and $2.5 million in acquisition related expenses weighed on net income this quarter but we still expect slightly positive gap net income results on a full year basis
Cosmin: Turn into capital allocation. In the first quarter of 2025, we re-purchased $3.6 million. Flywire shares under a previously announced FOC repurchase program for approximately $49 million.
Cosmin: with $57 million remaining in the current buyback program. Flywire has consistently high free cash flow conversion and a strong balance sheet which enables us to continue to return capital to shareholders.
Moving on to guidance.
Cosmin: While current visibility remains limited due to the evolving global landscape, we are confident in our strong product portfolio, client retention, and established product market fit.
Cosmin: We are a proactively investing in automation and product development to further enhance our offerings with a focus on scale and productivity across all areas.
Cosmin: to drive strong growth profit growth, expand margins, and strong cash flows.
Cosmin: Andrew will continue to lean in to emerge stronger from market downturns
Cosmin: The news flow around US education markets specifically around international students in China, US
Cosmin: We will be data dependent as we approach our peak Q3 season including engaging with both universities and agent networks
Cosmin: watching cross-border trends and observing external data such as the US visa trends in the crucial summer months to lead up to our peak Q3 quarter.
Cosmin: Our current expectation is that U.S. revenue growth will be in the low single digits.
Cosmin: and expect F1 visas to be done slightly more than last year. [inaudible]
Cosmin: This compares to last year US education revenue up 13% and visas down approximately 10%.
Cosmin: To frame the potential scenarios in US education, it is important to keep in mind a few dimensions. First, only a portion of the students in the US are first-year students.
Cosmin: In addition, US tuition payments are generally split across the second half of the current year and early 2026 depending on tuition timing.
Cosmin: Before discussing guidance, please note that while we split out certify in Qon guidance, given the acquisition timing, going forward, we'll plan to combine and report adjusted EBITDA for total company only.
Cosmin: However, we will plan to continue to provide revenue separately for certify this year.
Cosmin: Now, onto full-year revenue guidance following a strong Q1 start with better than expect a trend in Australia education, healthcare, and travel sectors.
Cosmin: Balance by cautious growth assumptions in our US education business. We are maintaining our full year 2025 revenue guidance for FX neutral revenue less than salary services growth in the range of 10 to 14% excluding certify.
Cosmin: With certify, we are guiding to 17-23% FX Neutral Revenue Growth.
Cosmin: As you see in this supplement, this now assumes a U.S. education revenue growth of low single digits, Australian Canada education assumed to be down in the high 20% year by year, and healthcare growing in the high single digits.
Cosmin: with the rest of the business growing above the midpoint of the guide on average.
Cosmin: On travel, we are not flowing through the recent outperformance of our travel business for the remainder of the year, as we believe it is prudent given the potential softer macro.
Cosmin: Similarly, certified revenues expected to remain in the range of $35 to $40 million, even as we have exceeded the Q1 estimate.
Cosmin: On FX, with the weaker US rates we not expect the FX impact on a full year revenue to be around a negative 1%.
Moving on to four-year EBITDA guidance.
Cosmin: We are not changing our prior guidance and maintaining our plans to drive operational efficiencies across the year, starting with the restructuring announced last quarter.
R.Core, Flower, Margin Expansion Guidance, Remain Unchanged
Cosmin: An adjusted for the addition of certify, our full year guidance implies 100 to 300 bips of margin expansion.
Cosmin: However, as we highlighted last quarter, we've reduced op-ex growth after the last few years of high investment cycles, and we plan to reinvest a portion of our cost savings from the restructuring efforts back into the business.
Cosmin: And selectively, continue hiring to the second half of the year.
Cosmin: However, all this will be data dependent, as we balance hiring and additional optics levers from the operational review, giving us confidence in managing our margin commitments, even in a more difficult macro scenario.
Cosmin: Just into Q2 guidance, as communicated last quarter, following a higher growth in Q1, we expect some tougher laughing in Q2 and Q3 this year.
Cosmin: As a result, we expect FX neutral revenue growth, excluding certify, to be in the 7-11% range year of year.
Cosmin: Including Certified Revenue of $10 to $12 million in Q2, we expect FX neutral revenue growth to be in the 17 to 23% range year of a year.
Cosmin: Note that we are estimating no effects headwinning Q2 based on spot rates as of March 31st, 2025.
Cosmin: Adjusting some margins are expected to continue to expand year of year, albeit at a slower pace compared to Q1, and we anticipate a 150 to 350 bips margin improvement in Q2
Cosmin: In closing, we're focused on strategic investments in data and AI to improve operational efficiency and pursuing geographic expansion in travel and education, where returns are attractive.
Cosmin: While our guidance doesn't account for a global recession, we are prepared to adjust investments and hiring to maintain financial flexibility and continue driving strong cash flows. I'll now turn it back over to the operator for questions. [inaudible]
Operator,
Cosmin: Thank you. We will now conduct a question and answer session. If you would like to ask your question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue.
Cosmin: You may press star two if you'd like to remove your question from the queue. For participants using speak equipment, it may be necessary to pick up your handset before pressing the star keys. Once again, that's star one to ask a question at this time. One moment while we pull for our first question. Thank you very much.
John , your line is live.
John: Sorry, I don't want to meet there. Cosmin, just wanted to start with the FX guide, FX neutral guide, X sort of five for the second quarter at 9%. I think the full year guide would imply at the midpoint you're going to accelerate.
Masha Kahn: back to 12% in the second half. So I just really want to understand the drivers there. I know the comps get easy, but I was a very uncertain kind of macro backdrop. So I really want to understand the slowdown in 2Q and then the reacceleration in the back half. [inaudible]
Masha Kahn: Yeah, hey, thanks, JD. So let me walk you quickly through the shape of the year. So as you saw from Q1 into Q2 and Q3, it is lapping the way to think about Q2 also. There's that sort of Easter holiday effect.
Masha Kahn: As you think about sort of starting with Q2 and Q3 building back up to Q4, there's a few things. The most notable one we've talked about, which is Canada. So you heard me in my prepared remarks, that's about a three point. [inaudible] I'm sorry, I'm sorry, I'm sorry, I'm sorry
Masha Kahn: In fact, in the first quarter, that sort of carry, then actually gets a little bit. [inaudible]
More into Q2, just given the timing of Canadian payments.
Masha Kahn: And then in the second half, because of that first year, Payment Dynamically talked about [inaudible]
Masha Kahn: That's expected to come back. So that's roughly three points there that would build towards that second half and two four accelerations.
Masha Kahn: The other two or three points that go toward the sort of the Q4 acceleration are one obviously there's an easier lap as you think about Q4 where we had a significant lowering of the growth rate going from Q3 to Q4.
Masha Kahn: And then we talked about the headcount, the sort of the healthcare sort of large client that is ramping in the second half.
Masha Kahn: But we also have a number of other clients. You heard Rob talk about a number of SFS clients, and we're again excited about the B2B business is doing really well. So there's a number of clients ramping also into the second half. So really, you know, all those give us comfort around the overall 12% at midpoint, excluding certifying. [inaudible]
Masha Kahn: Okay, that's helpful. And then Mike, maybe bigger picture if we just take a step back.
Mike: You know, obviously there's been a lot of conversation around demand of international students to go abroad. For school, I'm curious if there's any impact on conversations with the schools themselves. You know, are they less than a hurry? Do they, you know, there's less willingness? Yes.
Masha Kahn: for them to have a conversation to find a new cause or just curious how the sales cycle has been impacted by what's going on on the demand side.
Masha Kahn: Yeah, I mean, on the, on the two sides, I mean, obviously we've put up great the client acquisition numbers as Rob highlighted. We're not seeing any kick out in demand. We're going to be next week.
Masha Kahn: Remember, we've been around for well over a decade. We've seen multiple macroeconomic climates. Our clients look to our software and our solution. It's helping them digitize, helping them. [inaudible]
Perform Better, Do More With Last
Masha Kahn: And so we don't see anything, it's people looking at opportunities to re-platform or use technology better. I think that's a general trend in tech.
Masha Kahn: And when it comes to the actual student demand side of it too, I think people need to remember international students, their families, it's often been a lifelong plan to study abroad.
Sometimes they're continuing the legacy, sometimes they're...
Masha Kahn: You know, both the generational ambition of the family to have someone kind of seek that next level of higher education. So, you know,
The students, these families, they have multiple choices. [inaudible]
Masha Kahn: They can go to various geographies, but I think the US is still the number one market for international students.
Masha Kahn: We've not seen any data that we think that's going to change.
Masha Kahn: And a lot goes into that family and that student's decision to choose a country and a market. So, you know, we think in any scenario, international students are going to be resilient, and they're going to pursue kind of a better life and improvement. And we think, you know, our clients keep looking for ways to just improve and automate what our legacy outdated tech systems.
Masha Kahn: that they have in a lot of their software stack and we're here to help them do that.
Okay, appreciate the call. Thanks, guys.
Timothy Chiodo: Next question comes from Timothy Chiodo with UBS, please proceed.
Timothy Chiodo: Great. Thank you for taking the question. I want to talk a little bit about the UK mix. So, you made some comments around the momentum in the UK. At least in our estimates, I believe the UK business is just shy in terms of its mix of revenue relative to the US. So, it's a pretty important market. If you could talk just broadly around kind of a rough range around the type of growth you're seeing in the UK. The reason for this is we can kind of get a sense of the growth contribution. So, if it's roughly 20% of revenue growing, roughly x, y, percent. [inaudible]
Timothy Chiodo: Fish, we can kind of get a sense of what the Revenue Growth Contribution is. Thanks.
Rob Orgel: Yeah, thanks. And maybe I'll start now, best of all to Robert, if there's any follow-ups. But just in terms of overall UK is now actually our largest market. We don't necessarily break it out. It is in the media numbers in the in the 10 queue, but it is one of and it is not our largest market. And we're going to start now. We're going to start now.
Rob Orgel: in Education. And so we've obviously seen very strong growth you've heard us talk about it last year. You saw to me, that part of the business is going up to 60%.
Rob Orgel: Now, obviously that's a very large business, so there's sort of a natural law of large numbers in that as you continue growing at that scale, but we're excited about
Rob Orgel: Of course, a lot of products that have been driving that growth in the past and now we've got new products as you heard from Rob. The domestic component of it is growing and we're excited about it and obviously the clients are interested in it and the same with the US, but hopefully that gives you a little bit of a framing.
Rob Orgel: And it's Rob all just add on quickly that the products we were bringing to the UK is really quite distinctive and unique. You heard me comment on the four SFS clients already. That's a product that we only recently introduced in the UK market and I was at our UK conference earlier in the quarter in Q1 and believe we have a very bright future in terms of SFS. It's not the only product that we're bringing to the UK right we brought a study link to the UK and shared our first win on that. I'm sorry. I'm sorry. I'm sorry. I'm sorry. I'm sorry.
Rob Orgel: Platform, as well as payables, third party invoicing and other capabilities that we have there. So a lot of seeds of growth being planted for the future.
Excellent, thank you both.
Speaker Change: The next question comes from 10th Scene 1 with JP Morgan, please proceed.
Ten-Hsin Wong: Thanks so much, good, good results, and I'll come here. I'm just curious, just thinking about the...
Speaker Change: The sources are upside this quarter. It sounds like it was Australia, of course, travel. But is there a way to maybe to rank in your minds what what came in a little bit? It hasn't [inaudible]
Speaker Change: The plan and where do you have a little bit more conviction on growth versus the last time we got the call together we are heard where the visibility is tough and curious where you have maybe a little more more conviction on the on the upside thanks.
Speaker Change: Masha Kahn, Allison MacLeod, Robert Orgel, Michael Massaro, Akil Hollis, Cosmin Pitigoi
Speaker Change: Yes, Cosmin. So I think for us, it's been, you know, traveled, been consistent and now with Certify, we saw that across both Certify and our existing travel business. And so, of course, there's, you know, with all the questions around the macro, you know, we've seen very strong growth in both in both the sites that they travel is.
Speaker Change: The number one driver. And again, very excited about that vertical overall Australia, you know, was was the other component a little bit less, but sort of less negative than we expected. And you know, as you saw from Rob's comments.
Speaker Change: We had the elections and we're going to have to watch the performance there, but we're losing encouraging at least that the year didn't start as low as we thought, and that's what we...
Speaker Change: We reduced a little bit on the Australia impact that we thought we would see as you saw from down 30% to down in the high 20s.
for Travel Hiverly. [inaudible]
Speaker Change: Felt it was prudent not to flow through that upside until we watched the map row a bit more but it's only very very excited about the trends there to start out the year.
Speaker Change: Yeah, the only thing I'd add in this is Mike is obviously US higher ed and we continue to layer in just more software there and I think that's something that when you look at us consistently just taking business from incumbents in that space.
Speaker Change: We think that's something that we're excited about, happy with the team's performance in Q1, and really excited to see what they can do in the future.
Speaker Change: That's great. I'm happy to see it. Just really quick, but I know it's probably not on the minds of everyone since healthcare is doing a little bit better in terms of your outlook there as well. Feel like you're sort of turning the corner and getting to a good place because it does feel like it's very insulated from everything that everyone's worried about. [inaudible]
Speaker Change: Pipeline, growth in demos, growth in all the activity inside that business. So we do feel we've turned the corner in an interesting way.
Thank you for watching!
Thank you, guys.
Speaker Change: Next question comes from Dan Perlin with RBC Capital, please proceed.
Thanks.
Dan Perlin: Michael made a comment about education, you know, shifting this in maybe non-traditional markets. I think he said you get the big four, it's 40% of the global education but can't like 20 other markets that represent another another 40%. So my question is
Dan Perlin: How much of those, let's say, 20 markets today is flywire addressable? And then if there's, you know, not the case, there's something that you can, you know, bring to bear in that market, let's say in the next six to nine months.
Dan Perlin: Hey, Dan, it's Rob here. That was actually my comments a lot. I'm sorry. I know where it's nowhere. So, so when we, when I, when I sort of presented that detail, that's talking about the next 20 markets that we do address, right? And so there's sort of two vectors of growth ahead of us. So within those 20 markets in which we have existing clients and volumes, we have an opportunity to go penetrate those markets further. We also, if we do see those markets continue to grow in popularity, we're going to be able to do that. So let's see.
Dan Perlin: We have the opportunity to capture sort of more share in those markets as their popularity increases.
Dan Perlin: So that's within that sort of next 40% that I addressed. There are still obviously markets in that remaining call it 20% that are opportunities for us to go and enable for growth. That's not what we're calling out today. My point was to focus on the next 20, which are the maturity markets and the bigger markets that we can make progress in, but know that those are good opportunities for us to go land more clients and capture more payments.
Speaker Change: Got it. That's great. Thanks for the clarity. Just a quick follow up on the travel customer growth on one of the slides. I mean you put up some interesting dynamics there and you also put the revenue growth kind of contributions over kind of a year on your perspective. I guess the question is when we think about like. We can.
Speaker Change: The Implementation Backlog, how big is that today and kind of what time frame would you be taking about doing that to convert it? Thank you.
Rob Orgel: Rob again here. So one of the beautiful things about the travel businesses they tended to deploy far faster. So that's true both on the flywire side as well as on the certified side. You know as compared to some of the conversations we have in the other verticals where the enterprise nature means it takes a little longer. These go very very quickly and we've talked about sort of an average duration that's measured in a small number of weeks or even less and not sort of these longer periods. So the conversions quick.
Great. Thank you.
Rob Orgel: The next question comes from Jason Cufferberg with Bank of America, please proceed please proceed.
Rob Orgel: Good afternoon, this is Tyler DuPont, I'm Fredration, thanks for taking our questions. I want to start by asking about the competitive positioning within education, you know, and whether there have been any changes to the landscape due to the current geopolitical environment. You know, it was encouraging to hear your SFS solution is beginning to gain more traction among higher ed institutions, but sort of given where we are today, you'll be great to hear your thoughts.
Rob Orgel: For example, are you seeing competitors competing more aggressively on price to win, or is it more steady as she goes? Just in a more muted demand environment? Is there any clarity around competitive dynamics given the market that we're in right now?
Speaker Change: Yeah, you know, I would think, you know, we've always kind of competed off of, you know, product performance, slash results in our people. And I don't think that's really changed in education. If anything, we're, you know, we still have a global footprint of clients.
Speaker Change: You know, the competitive landscape that we have in the United States with the incumbents is very different than what we see around the world, right?
Speaker Change: We are not seeing those similar players in the other 40 plus markets.
when we think about the software assets we have. [inaudible]
Speaker Change: to take to these other markets as Rob highlighted on the call. We can actually introduce products from Australia into the UK, the U.S. products into Canada and the UK, and really help grow the revenue.
Speaker Change: and so we've always had a great reputation of solving problems in higher ed, and I think what we're just seeing is now multiple products we offerings.
Speaker Change: and getting lots of client references. And I think that's a flywheel that will benefit us. You know, I said earlier that we've taken business from incumbents. We continue to do it, and we compete very well. Our team is very competitive and nature and wants to win, and that's what we do. And that's what we're going to do, and that's what we're going to do.
Speaker Change: Great, that's super helpful. And then just any update regarding the operational and business portfolio review mentioned. I know you mentioned it a bit in the prepared remarks, but just to clarify how far along in the process we are, how we should be thinking about margin implications, you know, I see F-25 margin expansion guide is now 200 bits at the midpoint. I think it was 300 bits as a last quarter. Is any of that due to the review, you know, what sort of investments are you making there to? Yeah, that's it.
Speaker Change: that's driving that just any clarity around the review and budget implications. [inaudible]
Speaker Change: Yeah, yeah, sure. This is Mike. I'll start it. I'm sure Cosmin would jump into. You know, I had a whole bunch of areas in my prepared remarks that I called out. I mean, you know, we're looking at, you know, everything's on the table and I think, you know, management, the board is, you know, everything from how do we structure ourselves, the, you know, restructuring, we announced prior, and that is everything from how we organize departments. [inaudible]
Speaker Change: You know, how we're using dollars to reinvest in certain areas like automation, you know, I called out things like procurement as being something that had never really been fully consolidated and been an aggressive area where these sought, you know, large cost savings opportunities. There's more we can do there.
Speaker Change: Price Properly for the value that's being delivered in that product. [inaudible]
Speaker Change: And so, you know, looking at all areas of, you know, operating costs and everything to just run the best business we can in control, we can control in Cosmin and data. Yeah, so I'm from, you know, from a sort of cost perspective, obviously Q1, you saw overall, you know, objects to the percent of revenue was bouncing significantly, you know, DNA was down in particular, I called that out. [inaudible]
Speaker Change: And that was really even before we got started with kind of the restructuring and some of the operational reviews, so I feel good that
Speaker Change: You know, the rest of the year we have those levers and we can continue to drive operating leverage not just on
Speaker Change: The non-gapped cost also, as you heard me start talking about Stockplace Comm too, and so we're looking at it together, Natswood.
Speaker Change: Well, I look at margins, you know, for the year, you know, as we sort of plan for any scenarios, we feel quite good that we have enough, you know, lovers and capabilities to ensure that we can meet those commitments on the marginside and drive that free cash flow that we talk about.
Great. Thanks, Cosmin. Thanks, Mike.
Speaker Change: The next question comes from Chris Kennedy with William Blair. Please proceed.
Chris Kennedy: Good afternoon. Thanks for taking the questions. The disclosures comparing the education versus the travel vertical are interesting. Is there any way to think about the NRR opportunity between the two verticals?
Thank you. Thank you. Thank you.
Yeah, Chris, this Cosmin, maybe I'll start. [inaudible]
Speaker Change: Yeah, it's going to be a little bit different than what we've looked at before. Obviously the travel business has, although it has a very similar characteristic of land and expand, which drives that vertical. You also have a different market growth dynamic, but the way I would think about it is in the same disclosure, if you want to sort of understand a bit of the components of growth. [inaudible]
Speaker Change: The slide that has this year's growth for travel, so last year, sorry, growth for travel, you can see that a lot of the growth comes from new signs and from client-gramp.
Speaker Change: and a little bit less from volume growth from the market itself.
Speaker Change: and continuing to see, again, we have Opsle and Procell, and as we build out the capabilities and the synergies, we'll certify.
Speaker Change: That bucket then can grow even more. So, you know, I point you to that chart to give you a sense, you know, we don't disclose NRR just for travel, but it is, you know, it is a healthy number.
Speaker Change: But that chart gives you a sense for at least the growth algorithm the way the thing about the travel business going forward which again it will be an important one for us since it'll be almost a quarter of our business.
Speaker Change: We have a track record of adding software products, right? And so if you look at not only the certify acquisition, heavily software-based revenue stream, but also our clients tell us all the time what additional problems we can help them solve. And so that's part of the product in engineering and tech investment we're making, right? Is to identify those other things similar to what we've done in education, layer in additional products, solve more value, drive additional growth. And so that's what we've done in engineering and tech investment. And so that's what we've done in engineering and tech investment.
Speaker Change: Got it very helpful and then just I guess a follow-up to that when you think about NRR for the company, we historically it's been over 120 percenten.
Speaker Change: and you know, it's one-fourteen last year, gonna come down a little bit, but when you think about the long-term, can you kind of talk about where you think this business should be at?
Thank you for watching!
Speaker Change: Yeah, look, obviously, as you saw, even last year, Canada alone put 10 points of pressure on NRR, you know, we have Australia and others. So the market itself is, you know, is swimming up river if you, if you will, obviously we're getting stronger and still moving quite fast despite all of that will growing quite well.
Speaker Change: But I think the way to think about the long-term growth, even if you were to take Canada and Australia which were down on
Speaker Change: High 20s percent, those two markets alone this year.
Speaker Change: put, you know, almost four points of pressure on the growth rate. [inaudible]
Speaker Change: So, versus if you would assume to just them being clapped so you know you've heard of stock before about you know we don't need the headwinds to turn into tailwinds even in a more normalized environment for a couple of these markets. [inaudible]
We would be crowding obviously much faster than we are.
And so, and again, with healthcare kind of recovering. [inaudible]
Speaker Change: The travel business, becoming a bigger portion and growing faster. Obviously there's a lot of hope in that. And as we look into the second half and into the future, obviously that's where we're hoping to be. [inaudible]
Speaker Change: I'll see what's the background environment that's been the biggest pressure. Sure.
Speaker Change: on that NRR number, which again, if you look at it excluding some of these headwoods, it would be...
Speaker Change: and that same region. But again, we're dealing with the Svens right now. So many, many of the levers as we've talked about that help us get there and increasingly even more. We've talked, you know, several new products.
Speaker Change: The Domestic Opportunities and so forth, which again would build into that NRR algorithm.
Understood. Thanks for taking my questions.
Speaker Change: The next question comes from Charles Nabhan with Stevens, please proceed.
Charles Nabhan: Hi, good afternoon, and thank you for taking my question. Just had a modeling question about EBITDA for the back half of the year, and I understand that things are very fluid and subject to change, but
Charles Nabhan: If my math is correct, it's coming out to about 40 bips of expansion in the second half of the year. I'm just curious how we should think about that from a cadence standpoint in the third and the fourth quarter as it stands today, how you're thinking about the timing of investments or any other puts and takes there. Let's take a look at the first quarter quarter quarter quarter quarter quarter quarter quarter quarter quarter quarter
Charles Nabhan: Yeah, so the way I would think about it is obviously a bit more expansion in the first half partially is just the timing of the restructuring and some of the costs we talked about.
Charles Nabhan: Some of the mixed components that I think you've noticed, obviously, bring in certified in and investing behind that. That part also comes in later in the year.
Charles Nabhan: And we're, you know, to some extent, again, I would, I would think of it as us reallocating some of the savings and into into areas that Mike talked about, sort of, you know, think of the data analytics and other areas that help us grow. . . .
Charles Nabhan: Scale. So that's why you're seeing sort of a little bit lower expansion in the second half. However, again, all of that is sort of data dependent, we're watching the macro and we have. [inaudible]
Levers to enable us
to ensure that we can meet those commitments. [inaudible]
and lastly I'll say historically obviously that's...
Charles Nabhan: One area where we've been able to manage last year, as you recall, we had a, you know, almost a 30 million dollar egg one day, we have to work against and
Charles Nabhan: Landed up exceeding on the margin side. So we do have levers but also we will look to invest in the areas where we see future potential especially in times like this where our customers need us most.
Speaker Change: Got it. And as a follow-up, I wanted to ask about the gross profit for a customer slide.
Michael Massaro, Akil Hollis, Cosmin Pitigoi
Speaker Change: How that expands over the course of a travel customer relationship.
Speaker Change: It seems to be a little different from what we're used to within the education vertical.
Speaker Change: Yeah, I can start so as Cosmin. Yeah, so the year one for us, you know, because, you know, people ask, you know, about the travel of macro, we started the travel business.
Speaker Change: in the middle of COVID. So the first year there and the dynamics there are mostly sort of the plea and during COVID years and that's why I would say that's what you're seeing Matt.
Speaker Change: sort of depth, and then the take up in the future. So that hopefully that helps. It's a little bit of a bit.
Speaker Change: sort of a one-off I would say hopefully because obviously that was an extreme case. But otherwise, you know, we feel pretty good about the overall profitability of those customers and growing positive for profit dollars, especially now with the addition of
Speaker Change: Certified with software, as you saw, you know, 70% of the business, you know, that that definitely improved the overall growth margin profile for the travel business.
Got it. I appreciate that clarification. Thank you.
Speaker Change: At this time, I would like to turn the floor back to management for closing comments.
Speaker Change: Thanks everybody for the time today and I appreciate you joining the call.
Bye-bye.
Speaker Change: Thank you. This thus concludes today's teleconference. You may disconnect your lines this time. Thank you for your participation and have a great day.