Flywire Corporation — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023; comparisons are with Q1 2022 unless otherwise stated. Flywire operates a global payments platform and vertical-specific software business, with one reportable segment.
Financial performance and position
| Metric | Q1 2023 | Q1 2022 | Change |
|---|---|---|---|
| Revenue | $94.4 million | $64.6 million | +46.1% |
| Transaction revenue | $76.3 million | $48.7 million | +56.7% |
| Platform and usage-based revenue | $18.1 million | $15.9 million | +13.8% |
| Gross profit / gross margin | $58.3 million / 61.8% | $38.8 million / 60.1% | Margin +1.7 percentage points |
| Adjusted gross profit / margin (non-GAAP) | $59.9 million / 67.2% | $40.0 million / 67.5% | Margin −0.3 percentage points |
| Operating loss | $(6.6) million | $(7.1) million | Loss narrowed $0.5 million |
| Net loss / diluted loss per share | $(3.7) million / $(0.03) | $(10.1) million / $(0.10) | Loss narrowed $6.5 million |
| Adjusted EBITDA (non-GAAP) | $7.0 million | $1.9 million | Increased $5.1 million |
| Operating cash flow | $(20.8) million | $(17.0) million | Cash use increased $3.8 million |
| Cash, cash equivalents and restricted cash, period-end | $329.1 million | $369.7 million | Down $40.7 million year over year |
Payment processing costs were $33.9 million, up 39.5%, partly reflecting 36% payment-volume growth and greater credit-card usage. Technology and development, selling and marketing, and general and administrative expenses rose 31.8%, 38.6%, and 49.5%, respectively. Stock-based compensation was $8.6 million, up from $5.5 million.
Q1 operating cash use reflected working-capital movements, notably a $34.3 million cash source from funds receivable from payment partners, offset by a $60.3 million reduction in funds payable to clients. Investing cash use was $1.8 million; financing provided $1.8 million. These payment-related balance movements are important when interpreting quarterly cash flow.
At March 31, cash and cash equivalents were $327.1 million, with $2.0 million restricted. The company had no borrowings outstanding under its $50 million revolving credit facility and reported compliance with its covenants. Management said existing cash should cover expected working-capital needs and material cash requirements for at least 12 months from issuance of the financial statements.
Material changes and business developments
- Total payment volume increased 36% to $5.7 billion. Revenue less ancillary services grew 50.3% to $89.1 million, or 56.7% on a constant-currency basis; the filing attributes the difference partly to foreign-exchange effects.
- Revenue growth was led by transaction services, reflecting higher volumes from existing and new clients and Cohort Go. Revenue mix shifted toward transaction revenue, which was 80.8% of revenue versus 75.4% in Q1 2022.
- Geographic revenue mix changed: Americas 63.8% (75.5% prior year), EMEA 23.0% (19.5%), and APAC 13.2% (5.0%).
- Cohort Go, acquired in July 2022, contributed $6.0 million of Q1 2023 revenue. Flywire paid $1.7 million of contingent consideration in March; no further Cohort Go contingent payment is due.
- Foreign-currency remeasurement moved from a $2.3 million loss to a $1.5 million gain. Interest income was $1.9 million versus none in Q1 2022, partly offsetting the operating loss.
Outlook, commentary and risks
- The filing provides no specific numerical revenue, margin, earnings or cash-flow guidance. Management expects near-term losses to continue and says profitability is not assured; it anticipates continued investment in technology, sales, marketing and growth.
- Management identifies seasonality and quarterly volatility, including education-payment timing, payment-method and revenue mix, foreign exchange, and client volumes. The company historically experiences stronger first and third quarters and a weaker second quarter.
- Foreign exchange reduced reported Q1 revenue by approximately $3.8 million versus a constant-currency comparison. Flywire uses foreign-exchange forwards, but hedging may not fully offset currency movements.
- Key risks include dependence on banking and payment partners, potential disruption or loss of access to funds held above FDIC insurance limits, cybersecurity and fraud, intense competition, regulatory and licensing requirements, and execution in newer travel and B2B verticals. The company reported no material impact to date from the Russia-Ukraine conflict or inflation.
- No material pending legal matter was identified. The company reported no material indemnification claims or related accruals. A May 1, 2023 Boston headquarters lease amendment will extend the lease and reduce space; it is expected to increase the right-of-use asset by about $1.7 million and lease liability by about $1.6 million.
- Management concluded disclosure controls and procedures were effective at the reasonable-assurance level as of March 31, 2023; no material change in internal control over financial reporting was reported during the quarter.
Investor verification priorities
- Reconcile reported revenue growth with payment-volume growth, currency effects, acquisition contribution and the shift in revenue mix; assess the sensitivity of margins to higher credit-card usage.
- Review operating cash conversion and payment-related working-capital balances, especially funds receivable from partners and funds payable to clients.
- Assess the quality and sustainability of the $7.0 million adjusted EBITDA result, including exclusions such as stock-based compensation, foreign-currency remeasurement and contingent-consideration revaluation.
- Confirm liquidity and counterparty exposure across banking and payment partners, including uninsured cash balances, and monitor revolving-facility availability and covenant compliance.
- Track growth and profitability trends, seasonality, FX exposure, and progress in healthcare, travel and B2B, alongside regulatory, cybersecurity and fraud risks.