Flywire Corporation — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; unaudited. Comparisons are with the three months ended March 31, 2023 unless otherwise stated. Flywire operates a global payments platform and vertical-specific software business, with one reportable segment.
Financial performance and liquidity
| Metric | Q1 2024 | Q1 2023 / comparator |
|---|---|---|
| Revenue | $114.1 million | $94.4 million; up 20.9% |
| Total payment volume | $6.95 billion | $5.67 billion; up about 23% |
| Gross profit / gross margin | $70.4 million / 61.7% | $58.3 million / 61.8% |
| Adjusted gross profit / margin (non-GAAP) | $71.9 million / 65.2% | $59.9 million / 67.2% |
| Operating loss | $6.0 million | $6.6 million |
| Net loss / diluted loss per share | $6.2 million / $0.05 | $3.7 million / $0.03 |
| Adjusted EBITDA (non-GAAP) | $13.2 million | $7.0 million |
| Cash and cash equivalents at March 31 | $619.0 million | $654.6 million at December 31, 2023 |
| Operating cash flow | $(38.1) million | $(20.8) million |
| Investing cash flow | $(1.5) million | $(1.8) million |
| Debt outstanding | None | None at December 31, 2023 |
Revenue less ancillary services, a non-GAAP measure, was $110.2 million, up 23.7%; at constant currency it rose 23.5%. Transaction revenue increased 24.8% to $95.2 million, while platform and other revenue increased 4.4% to $18.9 million. By geography, Americas revenue declined to $57.9 million from $60.2 million; EMEA grew to $36.2 million from $21.7 million, and APAC to $20.1 million from $12.5 million.
Payment processing costs rose 23.0%, broadly in line with payment-volume growth, with higher credit-card usage also contributing. Total operating expenses increased 19.0% to $120.1 million. GAAP gross margin was nearly flat year over year, while adjusted gross margin fell 2.0 percentage points. Net loss widened despite the smaller operating loss, reflecting a $4.4 million foreign-currency remeasurement loss (versus a $1.5 million gain in Q1 2023) and higher income-tax expense. Interest income increased to $5.9 million from $1.9 million.
Operating cash use increased by $17.2 million year over year. The company cited $50.2 million of changes in operating assets and liabilities as a principal use of cash in Q1 2024, including an $86.8 million decrease in funds payable to clients, partly offset by a $37.7 million decrease in funds receivable from payment partners. Cash, cash equivalents and restricted cash declined $35.6 million during the quarter.
Current assets were $739.2 million and current liabilities $182.5 million at March 31, 2024. These include payment-related balances: funds receivable from payment partners of $76.2 million and funds payable to clients of $124.1 million. Flywire reported a $125 million five-year senior secured revolving credit facility, replacing the prior $50 million facility; no borrowings were outstanding, and the company was in compliance with its covenants. It stated that existing cash should fund expected working-capital needs and material cash requirements for at least 12 months from issuance of the statements.
Material changes and notable items
- StudyLink, acquired in November 2023, contributed $2.1 million of platform revenue in Q1 2024. The company completed purchase accounting during the quarter; acquisition-related contingent consideration was remeasured downward by $0.5 million.
- Stock-based compensation increased to $14.8 million from $8.6 million. Q1 2024 expense included $1.3 million from a modification of the former CFO’s equity awards.
- The company had approximately 1,235 full-time employees at March 31, up 18.2% from a year earlier. It appointed Cosmin Pitigoi as CFO effective March 2024.
- Remaining performance obligations were approximately $13.3 million; about 54% was expected to be recognized within a year and 46% over the following two to five years. Timing may change with contract modifications, renewals or terminations.
Outlook, risks and contingencies
The filing provides no specific revenue, earnings or other numerical guidance. Management expects to continue investing in technology, sales and marketing, international expansion and operating infrastructure; these expenses may rise in absolute dollars. It notes that it may continue to incur losses in the short term and may not achieve or sustain profitability. Results are subject to seasonality, especially education payment timing, and can vary with payment mix, foreign exchange, client activity and macroeconomic conditions.
Key disclosed risks include competition and pricing pressure; reliance on banking, payment and technology partners; operational, fraud and cybersecurity risks; foreign-exchange exposure; regulatory requirements for payments, money transmission, sanctions, AML and data privacy; and geopolitical developments. Management reported that the ongoing conflicts in Ukraine and Israel had not materially affected the business to date, but could do so. The filing also identifies potential indirect effects from the February 2024 Change Healthcare cyberattack on businesses involved in patient payments.
Flywire voluntarily reported certain payments that geolocation data suggested may have been initiated from Cuba, Iran or Syria to OFAC in August 2023 and submitted a supplement in April 2024. The company is continuing to evaluate the matter and stated that, based on its investigation to date, it does not expect any resulting loss to be material. It reported no other litigation that it believed would have a material adverse effect. Management concluded disclosure controls and procedures were effective as of March 31, 2024; no material change in internal control over financial reporting was identified during the quarter.
Important facts for investors to verify
- Whether transaction-volume growth converts into durable revenue and margin improvement, particularly given the lower adjusted gross margin and rising processing costs.
- How much operating cash flow reflects timing of client-fund settlement balances, and whether this pattern persists in subsequent quarters.
- The sensitivity of reported earnings and balance-sheet exposures to foreign-exchange movements; Q1 included a $4.4 million remeasurement loss.
- Progress and any outcomes of the OFAC review, including potential penalties, restrictions or compliance costs.
- StudyLink integration and milestone performance, as well as acquisition-related amortization and contingent consideration.
- Use of non-GAAP measures, including the adjustments in Adjusted EBITDA, and comparison with GAAP losses and stock-based compensation.
- Availability and concentration of company and client funds across financial institutions and payment partners; one partner represented 38% of funds receivable from payment partners at March 31.