Q3 2025 Flywire Corp Earnings Call
Speaker #1: Good day and thank you for standing by . Welcome to the Flywire Third Quarter 2020 Earnings Conference Call . At this time , all participants are a listen only mode .
Speaker #1: After the speaker's presentation , there will be a question and answer session . To ask a question during the session , you will need to press star one on your telephone .
Speaker #1: You will then hear an automated message advising your hand is raised . To withdraw your question , please press star one one again .
Speaker #1: Please be advised that today's conference is being recorded . I would now like to hand the conference over to your speaker today , Masha Kahn , Vice President of Investor Relations .
Speaker #1: Please go ahead .
Speaker #2: Thank you , and good afternoon . With us on today's call , I'm Mike Macera , chief executive Officer . Robert Orgel president and chief operating Officer and Cosmin Pitigoi chief financial officer .
Speaker #2: Our third quarter 2020 earnings Press release presentation was filed form 10-q can be found at IR Flywire . Com . During the call , we'll be discussing certain forward looking information .
Speaker #2: Actual results could differ materially from those contemplated by this forward looking statements . We'll also be discussing certain non-GAAP financial measures . Please refer to our press release and SEC filings for more information on the risks regarding these forward looking statements that could cause actual results to differ materially and required disclosures and reconciliations related to non-GAAP financial measures .
Speaker #2: 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 .
Speaker #3: Thanks , Marcia . This quarter reinforced Flywire leadership as a trusted partner for modern payments . Our results
Speaker #3: underscore Flywire strong execution , resilient business model , and , supplemental expanding client demand across markets , supported by macro conditions that were better than expected .
Speaker #3: We signed more than 200 new clients across our four verticals a clear sign of both the consistency of our execution and the global relevance of our products and platform , Flywire continued to win where it matters the most .
Speaker #3: Winning new clients , expanding existing client relationships , and doing so across verticals and across geographies . Our focus remains on three priorities optimize .
Speaker #3: Go to market excellence . Accelerate product innovation and cultivate high performing teams . And in Q3 , we delivered across all three our sales client success and operations teams executed at a high level , keeping us on track to exceed our IRR contract signing goals for the year .
Speaker #3: Flywire is increasingly the partner of choice for organizations looking to modernize complex payment flows , consolidate vendors , and drive measurable ROI . Our diversification strategy is delivering results with education growth now extending well beyond our traditional big four markets .
Speaker #3: More than half of our new education wins this year came from outside those markets , reflecting the strength of our global reach within education .
Speaker #3: Our student financial software platform was a major growth driver in Q3 , as institutions continue to consolidate all payments with Flywire to improve collections and protect revenue .
Speaker #3: Our collection management solution within SFS has helped institutions recover more than $360 million in past due tuition , deliver $72 million in Pre-collection savings and preserve over 177,000 student enrollments .
Speaker #3: Demonstrating our impact on both institutional health and student success . Our value proposition is clear and differentiated . We bring together industry specific software and deep expertise in payments into one integrated offering .
Speaker #3: This unique combination positions Flywire as a comprehensive solution partner with our ability to solve the most complex domestic and international payment challenges, often becoming the entry point to deeper client relationships in our travel vertical.
Speaker #3: Client momentum remains strong , helping to grow this business into a meaningful contributor to total company revenue . Our integration of certified continues to unlock new workflows , cross-sell opportunities , and incremental monetization potential in healthcare revenue growth .
Speaker #3: Approached our organic corporate average in the third quarter , driven by recent wins with large enterprise customers . B2B continues to grow at multiples of overall company revenue growth , reflecting strong demand for our invoice to cash capabilities , product innovation remains a key priority as we continue to leverage technology across the business to deliver results .
Speaker #3: Our teams are using AI to drive greater scale , efficiency and precision from automated prototyping and code conversion that reduce migrations from months to weeks to data driven insights that enhance the client experience .
Speaker #3: We are also seeing growing interest from clients and expanding their use of Flywire solutions as they look to streamline more of their payment operations through a single trusted partner .
Speaker #3: Our success reflects years of investment in go to market execution , product innovation and a culture built on relentless client focus . Flywire evolution from a cross-border payments company to a diversified global software and payments leader is well underway , and the opportunity ahead is significant as we aim to deepen client relationships , expand market share and drive durable , high margin growth .
Speaker #3: Finally , none of this happens without our fly mates . There creativity , discipline and focus on results drive our performance and client success every day .
Speaker #3: Together , we have built a culture that values accountability , impact and growth reflected in the high engagement and talent across our teams .
Speaker #3: Flywire is built for the long term , resilient , scalable and positioned to lead . With that , I'll turn the call over to Rob to share more on our operational performance for the quarter .
Speaker #4: Good evening everyone . We are delighted to share the results of a strong third quarter of 2025 , reflecting Flywire resilience , disciplined execution and continued global competitive momentum , all amid a macro backdrop that was better than expected .
Speaker #4: Starting in global education , we continue to see strong momentum driven by strategic upsells , geographic expansion and deepening partnerships . We just completed our peak quarter with excellent execution , helping clients streamline payment operations and delivering great payer experiences .
Speaker #4: Our deeper integrations with China's UnionPay Indian loan providers and agent networks are enhancing retention and engagement across key markets . Now , let me zoom in .
Speaker #4: Key geographies , starting with our largest market , the U.K. . We continue to see strong demand from international students choosing to study in the UK and Flywire is expanding its presence with several new client wins , including Heriot-Watt University and Royal Holloway .
Speaker #4: Together representing roughly 39,000 students with around 11,000 international students . We also signed a new Studylink deal with De Montfort University . Further strengthening our regional footprint momentum continues with our US federal loans disbursement offering for UK universities .
Speaker #4: Seven new UK clients signed this quarter , bringing the total to 15 since launch . Our SFS pipeline for Agresso unit for institutions remains strong , with all three development partners for our unit for integration now live and delivering excellent results .
Speaker #4: This differentiated capability positions Flywire as the only comprehensive platform serving both domestic and international payment needs , enabling us to win broader institutional relationships and capture significantly greater wallet share .
Speaker #4: Our UK strategy focuses on deeper integrations that position us as the sole channel for all significant university , domestic and international payment flows , either through a unified payment portal powered by our SFS solution or by integrating into existing portals for tuition and accommodation .
Speaker #4: Billing the UK represents approximately one quarter of Flywire total revenues and grew above the organic corporate average growth rate in the third quarter .
Speaker #4: We see substantial runway ahead across three key areas first , domestic payment expansion with only 12 UK clients currently at what we believe to be 90% plus Flywire adoption , there is considerable room to capture a higher share of payment flows at existing institutions .
Speaker #4: Second , we see runway for SFS for Finance systems integrations , a large portion of UK universities managed student invoices and systems like unit four without student facing portals Flywire , SFS fills this critical gap , enabling real time payment reconciliation and consolidated billing across all student charges .
Speaker #4: Third , we see runway for optimizing international payment flows , billions in tuition payments currently appear as domestic transactions . Despite being funded by parents abroad .
Speaker #4: By improving the payer journey , we can shift more of these flows to cross-border transactions through our network , capturing higher margin revenue .
Speaker #4: Note that we've included additional detail on UK strategies in the earnings supplement . Turning to the United States , financial pressures continue to weigh on US educational institutions as schools look to improve cash flow and efficiency .
Speaker #4: Demand for Flywire's full suite of solutions continues to accelerate. We are deepening partnerships with leading universities, notably Penn State University, which is expanding its relationship by now adopting our full suite of SFS platform for billing, payments, payment plans, and third-party invoicing.
Speaker #4: Our collection management module of SFS also helps institutions streamline receivables and reduce administrative workload with clients like DePaul University calling Flywire invaluable to their business .
Speaker #4: This expansion reflects the value Flywire delivers in improving financial operations and enhancing the payment experience for students , families and staff and importantly , opportunity for growth isn't just coming from long standing relationships .
Speaker #4: There are more than 3000 US institutions that aren't Flywire clients , and we've recently signed two full suite SFS deals with community colleges that don't have many international students , but want to modernize their domestic payments for them , it will bring the full benefits of SFS , and for us , it's an emerging path to securing more software and domestic revenue in a large and mostly new segment .
Speaker #4: For Flywire , our SFS pipeline remains very strong through Q3 2025 , we've signed more than double the IRR versus the full prior year cohort .
Speaker #4: We just hosted our second annual fusion conference , bringing together nearly 100 US higher education institutions . When finance leaders from universities get on stage and talk about the ROI achieved through Flywire suite of products , it sends a strong message to the broader market .
Speaker #4: Universities must embrace change and technical innovation to stay competitive . Turning to Australia and Canada in Australia , Q3 performance was significantly better than expected , growing above our organic corporate average growth rate during the quarter , driven by resilient demand at top universities that continue to attract students despite visa fee increases , new and upsell wins through Studylink , including Swinburne University and Flinders University further strengthened our position .
Speaker #4: Studylink is helping institutions accelerate offer letter turnaround times and enhance the student experience . As a result of our expansions with Studylink alongside our direct selling efforts , Flywire Higher Education market share and Australia's total Education payment sector has expanded significantly over the past 12 months .
Speaker #4: In Canada , existing Flywire clients that previously used our platform primarily for cross-border payments are increasingly expanding into domestic payment flows . This trend is helping diversify revenue and offset softer international volume .
Speaker #4: During the quarter , Flywire successfully enabled domestic processing for clients such as Fanshawe College and Georgian College , deepening relationships with these institutions and broadening payment coverage across their campuses .
Speaker #4: Moving on to our progress outside the big four markets , Flywire continues to see students applying to a broader range of study destinations as students hedge against potential policy changes in traditional English speaking markets .
Speaker #4: As a result , we anticipate sustained growth outside the big four . Australia , Canada , the UK and the US , with strong momentum already underway across APAC and EMEA .
Speaker #4: These regions are driving diversified expansion as institutions attract more international students and modernize their payment ecosystems in Asia. Flywire is accelerating growth in Singapore, Japan, and South Korea.
Speaker #4: In Singapore , our one door model continues to gain traction with Nanyang Technological University or NTU . And the Singapore Institute of Management , or SIM , both live on Flywire for domestic and cross-border payments in Japan and Korea .
Speaker #4: We are expanding beyond language providers into public higher education institutions , aligning with government initiatives to significantly increase international student enrollment over the next several years .
Speaker #4: In EMEA , Flywire continues to broaden its education ecosystem , deepening its footprint in higher education and adjacent segments such as private K-12 sports academies and student housing .
Speaker #4: A landmark partnership with inspired Education Group , one of the world's largest private K-12 networks , underscores our ability to combine local expertise with global scale to manage complex cross-border payment flows beyond academia .
Speaker #4: Flywire is enabling leading sports academies and student housing providers across Europe to manage tuition , training and living expenses through a single seamless platform .
Speaker #4: Across these regions . Flywire is combination of local market expertise , integrated technology and trusted partnerships continues to drive strong , diversified growth and reinforce our leadership in international education payments .
Speaker #4: Moving on to our travel vertical , the travel vertical continues to grow through targeted client integrations and tailored payment solutions to give a few client examples .
Speaker #4: Quasar Expeditions integrated Flywire with peak 15 , simplifying bookings , payments and reconciliation . While offering transparent , multi-currency pricing in Indonesia , Bali Superhost went live with Flywire , benefiting from lower card fees , local currency payments and dynamic 3DS to boost international bookings in Australia .
Speaker #4: Southern world's DMC integration reduced FX fees , highlighting Flywire global payment capabilities . Bigger picture Travel delivered a standout quarter significantly exceeding Q3 bookings plan and achieving strong year over year revenue growth , driven by continued momentum in destination management companies and luxury accommodations , and robust performance across APAC , supported by new wins in Thailand , Australia and Indonesia .
Speaker #4: Moving on to certify . Certify provides hotels and travel operators a streamlined way to capture incremental revenue by reducing payment friction and operational inefficiencies .
Speaker #4: It is designed to decrease turnaround times on payments and contract signatures , lowering reconciliation and manual data entry reduces chargebacks and improves transparency between sales and finance teams .
Speaker #4: Features like secure online portals , ACH payments fraud prevention , multi-currency support , and automated reminders enhance efficiency and the guest experience . As an example from among many client wins , one key upsell was a master services agreement with Aimbridge , the world's largest property management company , covering over 1400 locations .
Speaker #4: A strong validation of certifies value . Our strategy to expand globally and cross-sell is progressing with Flywire scale . Reassuring enterprise clients like Marriott , Hilton , Hyatt , IHG and choice that we can drive revenue growth , operational improvements and broader adoption outside the US .
Speaker #4: I'd also like to provide an update on healthcare . Healthcare continues to build momentum as we expand our integrated payments financing and affordability platform , a key driver of growth during the quarter was the early ramp of our new payment processing capabilities .
Speaker #4: On behalf of Cleveland Clinic , a previously referenced new marquee client that we can now share the name with . Nearly 6 million patient visits per year across more than 200 locations worldwide , Cleveland Clinic is now live with initial phases of implementation in the US and the UK , including Mychart payments with point of sale rollout underway across its US locations .
Speaker #4: We're also seeing strong new client activity this quarter . Cook County Health selected Flywire Healthcare Affordability and Integrated Payment solution to consolidate vendors , accelerate cash collections and improve yield .
Speaker #4: These wins underscored the strength of our value proposition and our ability to drive measurable financial and operational outcomes for leading health systems . Our new payment processing offering will operate at lower gross margins than the rest of the healthcare solutions , but it is helping us win deals , establish scale and add long term revenue , durability in B2B , Flywire has evolved beyond a global payments network offering into an all in one invoice to cash platform with leading integrated payments capabilities .
Speaker #4: We unify receivables and invoicing across more than 140 currencies , provide transparent pricing , flexible payment options and seamless ERP integration backed by dedicated support and compliance teams .
Speaker #4: At the same time , the software Plus payments proposition is so compelling that it is well suited for an entirely domestic businesses as well .
Speaker #4: And we are winning nicely in those opportunities as well . It's been one year since we acquired invoiced , a move that opened the door to over 1 billion in payment volume opportunities within the invoiced , installed base .
Speaker #4: Since then , we've delivered meaningful synergies by combining invoice automation and billing tools with Flywire global payment rails , driving strong growth across clients .
Speaker #4: A great recent example of success with invoice this quarter is no . Before a global leader in human risk management operating in more than 200 countries with Flywire invoice platform , no expects to achieve over 95% auto reconciliation .
Speaker #4: Centralized global billing and enterprise-grade compliance. One year later, we feel really good about Invoiced and how it has served as a catalyst.
Speaker #4: Accelerating Flywire transformation into a leading global invoice to cash and payments platform . It's another great example by Flywire of software drives value in payments .
Speaker #4: I will now pass it over to Cosmin to talk about our financial performance and outlook . Cosmin .
Speaker #3: Thank you , Rob , and good evening everyone . Today I'll provide .
Speaker #5: An overview of our third quarter results and share our outlook for the fourth quarter . We exceeded the top end of our revenue and adjusted EBITDA guidance , supported by better than expected macro conditions across key education markets , including Australia and the US , as well as a stronger peak in the UK .
Speaker #5: Upside in B2B early go lives and operational excellence in our payments network . As a result , we're raising our full year revenue and EBITDA guidance .
Speaker #5: Turning to our performance in the third quarter , revenue . Less ancillary services was 194 million in Q3 , representing a 26% year over year FX neutral growth , or 28% on a spot basis .
Speaker #5: Certified contributed almost 13 million in Q3 , adding approximately eight points of growth . Our Q3 results once again exceeded expectations , demonstrating our ability to thrive in a dynamic macro environment .
Speaker #5: This To further unpack the drivers , Australia significantly outpaced organic corporate average revenue growth in Q3 as resilient demand for top universities , new client wins and upsells drove substantial market share expansion .
Speaker #5: performance was driven by better than expected macro conditions across Australia and the US . A stronger peak in the UK , along with continued robust underlying growth across the rest of the business .
Speaker #5: Despite an increased $2,000 visa fee and soft caps affecting broad visa trends , the UK market had a strong peak season driven by demand from India , China , the US , South Korea and Mexico .
Speaker #5: Early wins and integrations like tribal ERP helped outperform visa trends . Some Q4 activity possibly shifted into Q3 due to the extended October Golden Week holiday in China , so a more normalized view of growth comes from combining Q3 and Q4 results .
Speaker #5: Our US education business exceeded our expectations with first year international peers declining by slightly less than 20% . Visa decline that we anticipated .
Speaker #5: The trends in the US underscore solid demand for undergraduate programs in the past , academic year , especially at academically rigorous institutions . However , trends were uneven across different corridors .
Speaker #5: For example , we saw strong performance in China , Latam , South Korea and Hong Kong , but weaker numbers from Indian students , which could be attributed to visa issues .
Speaker #5: Canada higher education headwinds shaved two points of growth due to continued weak demand . However , this weakness was baked into our guide and will continue to remain prudent in our expectations for Canada .
Speaker #5: Given weak demand , especially from Indian students , B2B healthcare and travel were all slightly stronger than our expectations . Thanks to go live and stronger than expected ramp up in volumes fuelled by a robust education peak season , total payment volume climbed to 13.9 billion , 26% higher year over year , and almost double the average of the last two quarters , highlighting the growing strength and scalability of our platform from a monetization standpoint , our spreads have remained relatively consistent and in line with the last several reporting quarters .
Speaker #5: Operationally , we're scaling smoothly without proportional cost increases . Our contact rate dropped in the mid-teens year over year , meaning fewer escalations despite processing significantly more volume .
Speaker #5: This efficiency is driven by AI automation , which pushed our self-service rate to 41% , up 28% year over year . We're successfully decoupling growth from support costs , protecting margins as we scale , breaking down our revenue streams , transaction revenue is largely derived from fees tied to payment volume , while platform and other revenues mainly reflect softer subscription and usage based fees .
Speaker #5: Starting with transaction revenue . We saw a 24.4% year over year increase , approximately four percentage points of which were attributable to certify transaction related payment volume was up 30.9% , three percentage points of which were attributable to certify primarily in our education vertical , as well as travel platform and other revenues increased 56% year over year , primarily driven by the platform fees that do not carry payment volumes .
Speaker #5: Specifically , revenues associated with certify , which were $7.8 million , and improving growth in our health care revenues . Platform related payment volumes of 2.4 billion were up 9% year over year , lower than platform revenue growth .
Speaker #5: As some of our software revenues do not have associated TPV volumes , adjusted gross profit increased to 127.5 million during the quarter , up 25% year over year .
Speaker #5: Adjusted gross profit margin was 65.7% for Q3 , 2025 , which is a decline of about 170 basis points compared to Q3 2024 .
Speaker #5: Our business mix continues to exert downward pressure , driven by travel and B2B verticals , growing faster , which have higher credit card usage along with domestic transaction growth in the education vertical , foreign exchange fluctuations during transaction settlements , including the positive effect of less than $1 million seen this quarter in gross margin , are largely counterbalanced by FX hedges recorded in operating expenses , softening the overall impact on adjusted EBITDA .
Speaker #5: Adjusted EBITDA increase was approximately $5 million , above the midpoint of our guide , and grew to $57.1 million for the quarter , compared to 42.2 million in Q3 2020 .
Speaker #5: For adjusted EBITDA margin was up 155 . Bips year over year , beating the high end of our previous guidance range . We continue to balance top line growth with long term productivity and margin expansion by focusing on optimizing operations and support functions in Q3 , sales and marketing spend was 32 million , or 16.6% of revenue , improving approximately 120 Bips year over year .
Speaker #5: As we maintain go to market investments in travel and B2B . While streamlining for stronger LTV to performance . G&A spend was 27 million , or 13.9% of revenue , improving modestly year over year , but meaningfully lower as we compare year to date trends driven by operating leverage and continued investment in automation and systems , including certify integration technology and development .
Speaker #5: Spend was $12 million , or 6.4% of revenue , improving approximately 160 year over year . As we scale our platform and enhance engineering productivity .
Speaker #5: While the majority of the gross profit flowed through to adjusted EBITDA this quarter , we continue to drive operating leverage while making targeted Reinvestments in platforms , including certify integration systems and automation initiatives .
Speaker #5: Data architecture and analytics , and go to market expansion to close out the income statement . GAAP net income in Q3 was $29.6 million , down roughly 9 million year over year due to lapping of a one time tax benefit in the third quarter of 2020 .
Speaker #5: For and timing of tax provision reversals . We expect full year GAAP net income to remain positive around the high single digit millions .
Speaker #5: Our balance sheet remains strong . We ended the quarter with $212 million of cash . Cash equivalents and investments with just $15 million of outstanding debt .
Speaker #5: We intend to pay down soon . Turning to capital allocation , we generated strong cash flow in Q3 and repurchased 0.8 million shares for approximately $10 million under our share repurchase program , keeping total fully diluted share count within our guided range below 3% for the year .
Speaker #5: Having passed the peak of our post IPO stock based compensation vesting schedule , stock based compensation expenses as a percent of revenue are trending down on track to be approximately 12% for the year .
Speaker #5: We expect stock based compensation growth to remain below gross profit margin growth as the business continues to scale in the near term and expect to continue managing dilution in a disciplined manner .
Speaker #5: Now , shifting towards guidance for Q4 2025 . And our early thoughts around next admission cycle for the education vertical , some context as we enter Q4 2025 .
Speaker #5: As noted previously , tuition payment patterns can shift slightly from year to year around major holidays . In 2025 , the October Golden Week holiday extended to eight days due to the overlap of China's National Day and the Mid-Autumn Festival , which was longer and later than in prior years , causing some payment activity to be concentrated in Q3 .
Speaker #5: Prior to the start of the holidays, rather than in Q4, we do not expect this temporary shift in payment timing to have a material effect on our overall annual results. However, it may impact comparisons between the affected quarters for a clearer and more normalized view of growth.
Speaker #5: It's best to evaluate performance across the second half , combining Q3 and Q4 results . Hence , for full year 2025 , we expect FX neutral revenue to grow in the range of 23 to 25% year over year , including certified excluding certify , we expect revenue less ancillary services , growth in the range of 14 to 16% year over year for 2025 .
Speaker #5: We're updating our full year adjusted EBITDA margin expansion outlook to a range of 330 to 370 Bips this reflects OpEx efficiencies and cost discipline across the organization , supporting our trajectory towards sustained GAAP net income , profitability growth as we move into next year and beyond .
Speaker #5: On FX, with weaker U.S. rates as of September 30th, we now expect the FX impact on full-year revenue to be around a positive 1.5%, and about 3% for the fourth quarter.
Speaker #5: Turning to Q4 2025 , we expect FX neutral revenue to grow 23 to 27% year over year on a reported basis , or 13 to 15% when excluding certified an expect adjusted EBITDA margin to increase 50 to 200 Bips year over year on gross margin expectations into Q4 .
Speaker #5: Just a couple of dynamics to note . First , last year's Q4 gross profit margin benefited from 2.7 million in FX on settlement gains , which should be normalized for a comparable view .
Speaker #5: And secondly, we previously indicated that the gross profit margin would decline in the range of 100 to 200 basis points annually due to mix.
Speaker #5: As we see our newer verticals growing faster , along with strong domestic expansion . These mix shifts are expected to create further margin pressure towards the higher end of that range .
Speaker #5: Looking ahead to 2026 , while we are not yet guiding and we are still going through our usual detailed planning process , we wanted to provide some preliminary thoughts .
Speaker #5: Agents tell us that students are applying to more destinations , but demand from Indian students for US and Canadian institutions remain under pressure .
Speaker #5: We're gaining great traction with clients outside the big four . However , it is important to note that tuition differences across different geographies .
Speaker #5: Macro related headwinds are expected to persist , driven mainly by US policy uncertainty . Creating a mid-single digit pressure into 2026 . Relatively similar to our current full year and Q4 2025 exit growth assumptions .
Speaker #5: We also expect both Canada and Australia revenue growth to run below organic corporate average, with Canada particularly impacted by ongoing demand softness.
Speaker #5: In closing , we remain agile and disciplined in managing our costs while leveraging the strength of our diversified business model . This diversification allows us to balance investments , allocate capital to the high ROI projects , and scale the business .
Speaker #5: Even amid volatility of headlines and government policies , we're confident in our differentiated products . The breadth of our growth opportunities across all verticals , and our ability to deliver meaningful and sustained shareholder value .
Speaker #5: I'll now turn it back over to operator for questions . Operator .
Speaker #1: Thank you . As a reminder to ask a question at this time , please press star One on your telephone and wait for your name to be announced .
Speaker #1: To withdraw your question , please press star one one again . Please stand by while we compile the Q&A roster . Our first question comes from the line of Chris Kennedy with William Blair .
Speaker #1: Your line is now open .
Speaker #6: Yeah . Good afternoon . Thanks for taking the question . Rob , you mentioned 12 clients in the UK are at 90% penetration .
Speaker #6: Can you just provide a little bit of more perspective on that metric relative to the US or any other market you want to talk about ?
Speaker #4: Yeah . Hi , Chris , good to hear from you . So in what we've described in our U.K. strategy for some time now has been about trying to move all the money .
Speaker #4: And so we have a set of potential methods that we use for achieving that objective . You can see there's a slide in the earnings supplement that sort of outlines how all that works .
Speaker #4: And and thus far we've managed to get at least 12 clients in our view over that mark . And we view that as sort of one of the core elements of our strategy going forward .
Speaker #4: And it's a strategy that works both for our clients and for us in that by consolidating with us , they get all the benefits of our platform serving their efficiency .
Speaker #4: They their administrative efficiency . They get cost savings . And we deliver a superior quality experience for the students . So whether we accomplish that through SFS , whether we accomplish that through things like integration , through tribal , it's all part of that same objective of moving all the money .
Speaker #4: And we see a lot of opportunity to do that for more clients .
Speaker #6: Got it . Thank you for that . And then just as a follow up , can you just talk about the preliminary , you know , initial outlook for 2026 .
Speaker #6: Again, I think you talked about mid-single digit pressure relative to the fourth quarter run rate. Or is that consistent with the fourth quarter run rate?
Speaker #6: Thank you .
Speaker #5: Yeah . Thanks , Chris . Yeah . So pretty consistent with the fourth quarter . I would say in general with , you know , that mid-single digit , you know , growth impact to growth , I would say , however , think of that as more coming from the US is obviously Canada is going to be a , you know , still still somewhat negative , but not as big of an impact .
Speaker #5: So we feel that mid-single digit growth, with kind of that exit growth rate that you see in our Q4 guidance around 14%, is the right way to think about it.
Speaker #5: But think of the mid-single digit headwind is more us with Canada and Australia being , you know , still still negative . But a little bit less of an impact .
Speaker #5: In addition to , again , we're watching the UK numbers , but you , as we think about as you think about the mid-single digit feel that it's quite a prudent approach .
Speaker #5: And we feel feel good about sort of where we are , you know , in terms of , you know , adjusting for what we're seeing in the environment out there .
Speaker #6: Great. Thanks for taking the questions.
Speaker #1: Thank you . Our next question comes from the line of John Davis with Raymond James . Your line is now open .
Speaker #7: Hey . Good afternoon guys . Mike , I kind of want to follow up a little bit on Chris's question , but just taking a big step back .
Speaker #7: It feels like we're past geopolitical headwinds yet you're time implying similar headwind in 26 versus 25 . Maybe just talk a little bit about that .
Speaker #7: What's conservatism versus what are you worried about in the US? Obviously, there's a lot of unknowns, but it does feel like we're hopefully over the hump.
Speaker #7: But we would just love to square being past geopolitical headwinds with a similar headwind to growth in 26 .
Speaker #8: Yeah . Hey JD thanks for the question . I mean , I think you know , obviously , you know , as Cosmin has always said , we're trying to be very data data centric .
Speaker #8: In how we look at the future and have a level of prudence in it . You know , I think if you look at Australia and the US , there are two good examples of where headlines didn't quite jive with what we saw play out in in those two markets .
Speaker #8: Right . Things were more positive than probably with the headlines . Looked like a few months back . You know , if you look at Canada , I think it played out obviously over the last 18 months in a very similar way .
Speaker #8: You know , quite , quite negative . And so I think we've seen both sides of it . I said , if you if you just start looking out right from my perspective over the next multiple years , like we're really excited to keep building the company , right ?
Speaker #8: We just see a huge opportunity . I think we've proven our ability to navigate complex times between Covid , between some of this macro geopolitical risk in the last 18 months , you know , we have a diversified business , multiple industries , multiple sectors , products , revenue streams , and we just continue to win .
Speaker #8: So I think , you know , as I sit here , I just think we keep continuing to prove we can navigate this environment .
Speaker #8: We're going to do so with a level of prudence regarding what Cosmin said. But I couldn't be happier with how things are going and the opportunity I see ahead.
Speaker #7: Okay . And then just new ones , pretty consistent . 200 clients plus or minus a quarter here . It feels like that's been the run rate for a while now .
Speaker #7: So clearly having having success . But Mike , just talk a little bit about I'm just trying to think things forward . It feels like in RR should probably get a little bit better .
Speaker #7: Geopolitical headwinds pass . Maybe talk about new logo growth . Are these as we think about kind of ACV or size of client , or are there any kind of material changes there .
Speaker #7: Maybe where those 200 new clients concentrated from a vertical perspective ?
Speaker #4: JD it's Rob . I'll step in on this one . The growth continues to be strong and diversified . So if you look at this quarter , you'd see that .
Speaker #4: Edu beat out travel in RR sign . But travel beat out Edu in total deal signed . If you look across geographies they're diverse in both .
Speaker #4: We called out that more than half the wins in edu space were outside the big four markets . But that obviously means there's lots of good traction inside the big four as well , some of which we called out in talking about SFS and similar wins .
Speaker #4: If you look over on the travel side , particular strength across APAC , across EMEA , across Dmcs , across accommodations . So again , nicely diversified .
Speaker #4: Average deal size is going up over the comparable prior period. I feel very good about our achievement against our RR goals for the year.
Speaker #4: So overall the team continues to execute very , very well , nicely diversified wins across all the verticals .
Speaker #7: Okay , I'll squeeze one more in for Cosmin if I can . I think year to date incremental margins have been roughly 40% for the fourth quarter .
Speaker #7: Guided . Our math is incrementals of roughly 20% . Are there any sort of incremental investments planned in the fourth quarter or anything seasonally that we should think about as we think about fourth quarter margins ?
Speaker #7: Yeah .
Speaker #5: I think , you know , stepping back , I look at the full year margins , incremental margins , as you said , sort of being well above that 30% .
Speaker #5: And , you know , as you know , Q3 , Q4 , there seasonality . But in the first half , obviously , we were very prudent as we as we looked at OpEx and investments , given the macro .
Speaker #5: And so , as I said in my prepared remarks , we've invested in targeted ways in Q3 . But as you look ahead in terms of a normalized kind of incremental margins , again , that being EBITDA over revenue , you know , Q3 is probably a good a good way to look at it .
Speaker #5: So think of it as kind of in the mid 30s , kind of range , you know , looking ahead and also for the year in terms of where we are in terms of normal incremental margins .
Speaker #5: And again , with opex being very sort of disciplined , as always growing well below what I look at as gross profit growth is what I compare it to .
Speaker #5: So that's the way I sort of look at it: operating expenses to gross profit growth to ensure we continue driving that sort of mid-30s incremental margins growth.
Speaker #7: Okay, great. I appreciate it. Thanks, guys.
Speaker #1: Thank you . Our next question comes from the line of Nate Simpson with Deutsche Bank securities . Your line is now open .
Speaker #9: Hi guys . Nice results . Wanted to ask about SFS . Obviously continues to chug along . I think I heard seven new clients signed in the UK .
Speaker #9: I think in the past you said each of these should be maybe in the low single digit millions of annual revenue . I guess my question is more just on the time it takes to implement these wins and get them to ramp .
Speaker #9: I guess for the deals you just announced , to wait until the next academic year for them to start hitting the PNL . Or can they go live quicker than that ?
Speaker #9: Just understanding those dynamics would be helpful.
Speaker #4: Hey Rob here . So let me let me jump in . Let me first just start with a couple of numbers . Just to make sure we level set on sort of the deal .
Speaker #4: Hey Rob here . So let me let me jump in . Let me first just start with a couple of numbers . Just to make sure we level set on sort of the deal .
Speaker #4: The deal counts . So for the US we're at 11 SFS for the year . Some of those are live . Some of those continue and we'll ramp either later this year or into next in the you have UK we have four SFS clients live at this point and we're what I announced on this call was the live count for the US loan disbursement product .
Speaker #4: So that's a that's a different product that helps support our UK universities . So in terms of average deal size , what we always talk about is the opportunity to grow at a given institution .
Speaker #4: So you'll see in the earnings supplement there's a slide there that talks about the gross profit multiplier that these schools all represent . And so I think the last part of your question , the timing of that is often going to focus around where those semester and due dates are .
Speaker #4: So our goal and typically our clients goal is to get live comfortably ahead of whatever their next peak or their next enrollment period is going to be just like , no retailer will launch a new platform in the middle of Christmas holidays , a school wants to get a platform in ahead of that .
Speaker #4: You know , peak period . So that's what we're always working towards . And been very successful in doing that . So what you'd see from those next batch of deals and things that we do in the future , we'll always be working to get those live in time for , for typically their next peak period .
Speaker #9: Yeah , that's super helpful . Appreciate it . I guess for the follow up , this is going back again to the macro .
Speaker #9: I know we've touched on it in a bunch of calls , but I just I just want to understand the mechanics of the flow through how lower international students coming into the US or any other particular country in one year , impacts the financial metrics for Flywire in the in the outer years .
Speaker #9: Right ? So maybe some sort of breakdown or unpacking of the revenue impact here model from first year students versus second , third or fourth year students .
Speaker #9: Just how that flows through , how we should think about things like our stuff like that as we move forward . As one of the prior questions implied , hopefully get past the worst of these macro headwinds .
Speaker #5: Yeah . So let me try to approach that . Assume from a US perspective what we've told you before is if you look at US , international revenue , call it roughly $80 million , roughly just half or less of that is first years .
Speaker #5: So as we look at it from new cohorts versus existing , that gives you a sense for the dynamics there . And so when we assume for this year , for example , before and that 20% decline , if that continues into into the future , as , as you can imagine , some of that impacts the second , third and fourth , fourth year .
Speaker #5: And so forth . Graduating classes , however , in that mid-single digit , you know , headwind that I mentioned for this year , but also into next year , and sort of looking at Q4 exit that already basically accounts for that graduating class being smaller as that , that kind of decline flows through .
Speaker #5: So we've already accounted for that . And actually assumed an even larger decline than that into next year . So we've already taken that view into the numbers and still feel pretty good again , that the rest of the business is growing fast enough to offset that .
Speaker #5: As you can see , for example , for the Q4 guide , you know , in that 14% and then full year this year on the mid-teens growth , but again , the way the way we look at it is obviously that first year and the graduating classes , we've we've accounted for that , but that's that's a little bit of the dynamics there overall .
Speaker #5: And look , in terms of gnrh-r question , you know , obviously , you know , with where we are in terms of growth , you know , in the mid-teens and R will be below that .
Speaker #5: But again, I still feel, you know, quite good about where we’ve kind of assumed in terms of being very prudent around the guide overall.
Speaker #5: And as we look ahead accounting for all those dynamics , including the future graduating cohorts .
Speaker #9: , thanks, Cosmin. I appreciate it.
Speaker #1: Thank you . Our next question comes from the line of Dan Perlin with RBC Capital Markets . Your line is now open .
Speaker #10: Thanks . Good evening and nice results here . I wanted to just I don't know , maybe reconcile a little bit . So you got 50% of the new education wins that are coming outside of the big four .
Speaker #10: And presumably, obviously, those types of transactions might, you know, be smaller institutions, maybe not quite the same level of revenues and so forth.
Speaker #10: But it does sound like you're having a lot of success . Australia was one of the markets you talked about where you're really seeing pretty material market share gains .
Speaker #10: So maybe can you just help us understand , like the maybe weighted average contribution that we should be expecting ? Like you've got all these new wins that are coming from maybe smaller markets , but at the same time , it does seem like you're you're having some pretty material success expanding into , you know , into these , these same existing big four markets with deeper penetration and kind of wallet share .
Speaker #10: So just trying to weigh the two , two pieces of that .
Speaker #4: Yeah . Maybe I can help a little bit with that . So obviously we did call out success in Australia qualifies as one of the big four .
Speaker #4: But as you focus on outside the big four , you know there's a trend out there for sure where people out in the education ecosystem are now calling it sort of the Big Ten or even the big 14 , as they talk about adding more schools to that group , as we look for us and we sort of define sort of the group that way , we're now sort of talking about what's a mid-teens percent low to mid teens percent of our education business and growing at a pace that sort of significantly exceeds the corporate average .
Speaker #4: So you're right in calling out that while some of those deals are smaller in sort of they're absolute size , we're winning a lot of them and they are good deals .
Speaker #4: And as a result, they are contributing meaningfully from what is a good piece of the business and growing very quickly.
Speaker #8: Yeah . And Dan , this is Mike . I'd just add that , you know , having come back from multiple client events , international trips , there's a lot of good interest in just doing more with Flywire around the world .
Speaker #8: And so I think we have this huge footprint of clients in many geographies . And it's really up to us to introduce the right software products and the right payment solutions in those markets .
Speaker #8: Over time . And there's a lot of room to run in that opportunity . So we're excited . We're seeing the traction . But really excited about just what that means for the future roadmap .
Speaker #8: And growth in the future .
Speaker #10: Yeah , no , it looks great . I guess a quick question for Cosmin . So on the sales and marketing , as we just kind of think about kind of framing the context of of what that might , you know , materialize into in the current environment versus maybe where you were so like , that number clearly is getting optimized .
Speaker #10: To your point , at 16.6% . And you look at that on a year over year comparison , it's obviously down , but at the same time , it does sound like you've kind of maybe hit trough periods with some of these international cross border accounts .
Speaker #10: You got a lot of new business really , across all of your segments . And I'm just wondering how do you think about spending into the go to market motion , to the extent that maybe we are past the worst .
Speaker #10: Thank you .
Speaker #5: Yeah , I think , you know , in general , look , we've we've invested in this area and we're being very targeted around balancing .
Speaker #5: Obviously , you know , not just the top line and the Tam opportunity with the profitability side . And so , you know , as you look at the kind of overall , the 16.6% , this quarter , you know , we're driving productivity in those areas .
Speaker #5: But that we are definitely investing in the areas in the GEOs and verticals where we see the opportunity . We talked about , you know , domestic UK travel , you know , outside the US .
Speaker #5: So I would say we're certainly investing in those areas , but we're also being more efficient . You know , one of the investments you saw around data and our , you know , the data architecture , analytics allows us to , you know , sort of , you know , be very , very targeted around how and where we invest and , and so that's , that's one of the areas , again , that you'll see us continuing to invest in , but also be more efficient .
Speaker #5: We don't need to grow the same level . Gross profit . I'm certainly not with revenue in terms of investments , but yet still , you know , find those areas of growth and go after it .
Speaker #5: You know , ambitiously . So , you know , we feel pretty good . And the sales team , as you heard is executing quite well .
Speaker #5: And you know , the pipeline remains quite large . So we're feel pretty good about those investments even with , you know , efficiencies that we're seeing driven in the sales and marketing areas .
Speaker #10: That's great. Thank you all.
Speaker #1: Thank you. Our next question comes from the line of Jeff Cantwell with Seaport Research. Your line is now open.
Speaker #11: Hey , thanks a lot . I wanted to follow on some of the earlier questions . We'll take a shot . Your education business , the change right now , we're international students .
Speaker #11: Are increasingly attending schools outside your core . Four is that temporary , or do you think that's the new paradigm going forward ? And how do you size that opportunity ?
Speaker #11: I'm just curious if you talk about volumes or revenue as you maybe start to see less international students in the US , for example , but those students are now attending schools outside the US .
Speaker #11: Any additional color there would be great . Thanks .
Speaker #5: Yeah . Thanks , Jeff . So I'll start and then we can see if anyone wants to pile on . But I would say , look , if you look at overall us , as I said , about $80 million , you of overall revenue in cross-border with about half of that being first years .
Speaker #5: And so we've , you know , we've assumed a decline in that . And I think , you know , as you look at our , my you know , my stated assumption for next year , I would assume that that decline continues to , to be in that range or larger .
Speaker #5: Again , we've assumed the other cohorts similarly being impacted , but we do know that those students will generally want to go somewhere else .
Speaker #5: So we've we've talked about the demand for other geographies . You know , certainly outside the US , but outside the big four .
Speaker #5: And we have products and we have footprint in all those markets . So even with , you know , lower tuition in those markets , we feel good that we can again capture that that volume .
Speaker #5: But it would be obviously , you know , at a different tuition rate . But again , as you look longer term , well , again , we feel good that we've captured those dynamics quite well for this year and into next year .
Speaker #5: You know , the the longer term opportunity for us is certainly , you know , remains quite large . You know , again , outside the US , as those trends , we feel , especially for Indian students , as we talked about coming to the US and looking at other destinations , for example , specifically , we feel that that will that will continue to play out .
Speaker #8: And Jeff , I would just say this is Mike . Over the long term , you know , I just continue to say student interest in education is not is not waning .
Speaker #8: Right ? You know , as different levels of affluence happen around the world , I think , you know , people want to see their their children educated .
Speaker #8: They want to have them get the best education and the best environment . And a receptive environment . And so , you know , I think there's still strong interest in the United States .
Speaker #8: I think there's some lack of clarity in some of the policy. And hopefully, as that stuff clears up, you'll see those numbers continue to come in over the long term.
Speaker #8: And I think at the same time, Flywire is positioned well because we've got clients in 40-plus countries, and we'll be there.
Speaker #8: Where students choose to go. In the meantime.
Speaker #11: Okay, great. I appreciate it. And then, regarding your commentary about 2026, combine that with what you've stated about your GAAP profitability going forward.
Speaker #11: And question is , are you saying that every quarter next year should be GAAP profitable ? The reason I'm asking is because typically your Q2 , GAAP net income , for example , it's negative just due to seasonality .
Speaker #11: But I would think perhaps, maybe with certifies future impact and the operational excellence for highlighting today, that now can maybe swing positive.
Speaker #11: Do you mind just confirming that or giving us any additional color there ? And then lastly , Mike , when you think about the next dollar of investment of Flywire these days , I'm curious , where does it go next ?
Speaker #5: I'll be quick on my on my side before I pass it to Mike . But yeah , I'd say , you know , look , we're not guiding 26 yet , but you know , for now , I would say still , you know , seasonality will lean towards Q3 , but we feel good that , you know , we'll continue to see increased profitability .
Speaker #5: And again, we'll update you, you know, early next year as part of our regular guidance around the seasonality of that.
Speaker #8: And , Jeff , just on your last one , for me , you know , we we're so fortunate to have the choices that we have , right ?
Speaker #8: We see great areas of opportunity to invest organically in the business . You know , the payback in our go to market investments is great .
Speaker #8: The opportunities our product and tech teams see in developing new products or enhancing existing products are strong. Cosmos called out some of the automation and AI work we're doing to improve and scale the company.
Speaker #8: Those are all great areas of potential dollar investment for us. It makes the choices a little more difficult, but they're all great choices.
Speaker #8: You know , we continue to obviously think that , you know , we're not quite valued properly . And I think that gives us an opportunity when it comes to buyback .
Speaker #8: And Cosmin will be opportunistic . There . And then , you know , hopefully people are seeing we just have a track record of finding great targets .
Speaker #8: And so, although not our primary focus, we're focused on integrating in the deals we have. You know, we're still active and looking.
Speaker #8: And so we get those hard choices to make across those areas. But we have lots of great organic investments. And that's kind of the number one priority for us.
Speaker #11: Great. Thanks very much. And congrats.
Speaker #1: Thank you. Our next question comes from the line of Tenzin Wong with J.P. Morgan. Your line is now open.
Speaker #7: Hi .
Speaker #12: Thanks so much . Good . Great sales execution here . I get the question a lot , and I may have made discussed this before , but just on the on the domestic payments opportunity within Edu .
Speaker #12: Just remind us of the general area there and what's the pitch to win. I mean, is it price? Is it increasingly more payment design that bursar offices are caring about just because of things being complex?
Speaker #12: And you bring something different to the table than what an incumbent solution might offer. Just trying to better understand why your right to win is there.
Speaker #12: Thanks .
Speaker #4: Hey , Jen , it's Rob here . I you know , I feel this very strongly having just come back from our fusion conference where we had clients up on stage telling the story of their experience with Flywire and speaking to the audience there of their peers .
Speaker #4: And in that conversation, they really focus on a couple of things, right? There is absolutely a sort of back office efficiency and benefits that they get from software that just reconciles better, offers more flexible payment plans, and services their students better in terms of things that help the back office efficiency.
Speaker #4: But they really do care about the student experience . They really do care about affordability . There's a lot of pressure out there on students and the kinds of things we can do with payment plans , really matter , and then you put all of that in the context of our full suite , and it's helping them on things like overdue payments , which are served by our collection management platform .
Speaker #4: And it's all in one integrated sort of modern tech platform. I think what we saw at the Fusion event was folks standing up saying this was a great experience deploying it.
Speaker #4: This is a great experience operating it . And the benefits are very real for clients . So it is it is not about sort of the the cost saving on the payment .
Speaker #4: It's about the overall benefit of all the things I just said.
Speaker #12: Great. Thanks for going through that, Rob. That's all I had.
Speaker #1: Thank you. This concludes the question and answer session. Thank you all for your participation on today's call. This does conclude today's conference.