Flywire at Morgan Stanley Conference: Navigating Growth and Challenges

On Wednesday, 05 March 2025, Flywire Corporation (NASDAQ: FLYW) participated in the Morgan Stanley Technology, Media & Telecom Conference. The discussion, led by Flywire’s CFO Cosmin Pedagloy, highlighted the company’s strategic positioning amidst both growth opportunities and macroeconomic challenges. While Flywire achieved notable revenue growth, it also faces hurdles in key markets.

Key Takeaways

• Flywire reported a 24% year-over-year revenue growth and over 500 basis points margin improvement.
• The company faces a 35% revenue decline in Canada due to restrictive student policies.
• The travel segment surged over 50%, now representing 13% of Flywire’s business.
• The acquisition of Certify is expected to add $35-40 million in revenue and enhance Flywire’s hospitality sector presence.
• Flywire remains profitable, with plans to continue margin expansion and strategic investments.

Financial Results

• Revenue Growth: 24% increase year-over-year, despite macroeconomic challenges.
• Margin Improvement: Over 500 basis points, indicating operational efficiency.
• Travel Vertical: Achieved over 50% growth, contributing significantly to overall business.
• Certify Acquisition: Expected to generate $35-40 million in revenue over ten months, with gross margins around 60%.
• Profitability: Exited the previous year profitable on a GAAP net income basis, with continued profitability expected.

Operational Updates

• Canada and Australia: Both markets are expected to decline by 30% due to policy changes affecting the education sector.
• U.S. and U.K. Markets: Positive growth, with a 13% increase in the U.S. education market despite visa challenges.
• Certify Integration: A strategic focus to enhance Flywire’s capabilities in the hospitality sector.
• Restructuring: Ongoing operational review to optimize business efficiency and reinvest savings in high-growth areas.
• Cross-Selling: Expanded efforts in the U.S. to leverage domestic products for international student clients.

Future Outlook

• Guidance: Flywire adopts a proactive and transparent approach, focusing on controllable factors amidst macro challenges.
• Certify Integration: A key priority, with a focus on monetizing its $3 billion payment volume.
• Revenue Synergies: Targeting $100 million from international expansion and $50 million from cross-selling efforts.
• Geographical Expansion: Continued focus on growth in EMEA, Asia, and expanding the agent network.

Q&A Highlights

• Canada’s Decline: Over half of the expected 30% decline attributed to changes in the tuition prepayment program.
• Certify Revenue Contribution: Anticipated to add $35-40 million for the year.
• B2B and Travel Margins: Lower gross margins due to credit card funding, but offset by operational efficiencies.
• Profitability Drivers: Emphasis on EBITDA margin expansion and reducing stock-based compensation as a revenue percentage.

In conclusion, Flywire’s strategic focus on integrating acquisitions and expanding its market presence positions it well for future growth. For more details, refer to the full transcript.

Full transcript - Morgan Stanley Technology, Media & Telecom Conference:

James Fawcett, Senior Analyst, Morgan Stanley: Morgan Stanley TMT Conference. And before we get started with Cosmin Pedagloy, CFO of Flywire, my name is James Fawcett, one of the senior analysts here at Morgan Stanley. I can lead the FinTech Research Group. And before we start our conversation with Cosman, please see the Morgan Stanley Research Disclosure website at morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales representative.

So, Codman, great to have you here for the first time. Maybe for those that aren’t familiar with Flywire’s business, can you provide a quick overview of the company and the pain points you’re solving for your customers? Of course, yes.

Cosmin Pedagloy, CFO, Flywire: And thanks, James, for having me here. It’s been great, great event, great conference. So yes, let me start with so Flywire is basically operates at the intersection of software and payments, which is quite unique on its own. If you think of sort of the poorly digitized kind of workflows and payments in particular, we solve those issues. So if you look at e commerce or point of sale or those types of workflows, those have gone through a multi year transformation.

We look at those areas that have not been digitized quite as well. And so especially around the verticals like education, travel, health care or B2B, where you have large payments that require what we’ve built a global payment network over twelve years plus. And it requires sort of the software to drive that value in payments. So you hear us talk a lot about software driving value in payments. Feel that that is a key component of that global network that we’ve built with capabilities in all those different verticals.

So that really is sort of the big differentiating factor. Certainly, we started in education. That was sort of our initial foray, but we’ve since expanded and are quite more diversified, I think, than maybe most people realize

James Fawcett, Senior Analyst, Morgan Stanley: in

Cosmin Pedagloy, CFO, Flywire: all those areas. And a big global company, over 70% of our business is outside The U. S. And strong growth with good growing margins.

James Fawcett, Senior Analyst, Morgan Stanley: Great. So let’s talk about Cosman. Just recap last year, maybe we can even just limit it to fourth quarter results in your ’25 outlook. I know there are a lot of moving pieces both from a geographic and vertical perspective. But given the ongoing regulatory volatility and some of the other things that could impact the business, Maybe you can outline for us what you were pleased with and what surprised you last year and how that translated into twenty twenty five’s initial outlook?

Cosmin Pedagloy, CFO, Flywire: Yes, a lot in there. But I’ll say, first, last year, one of the things that we had to navigate was a very complicated macro environment. We are because part of our business is cross border and is education, especially with international students, We saw a pretty big impact from countries like Canada, where restrictive student policy visa kind of impacted us. Even with that, obviously, we still ended the year growing revenue 24%, margins up over 500 bps. But yes, as we exited in Q4, we continue to see some of those pressures, especially in Canada, where we continue to see some of those pressures.

So let me talk through some of the things that I guess surprised us and then some of the things that are kind of we’re seeing positives there. So Canada, all of last year was down around 35% for us and that caused a pretty big impact both on our revenue, but also on the NRR metric. And while we saw exiting Q4, the assumption was that maybe that demand destruction that started sort of early in the year where Canada put caps in place, we obviously have a lot of cross border business there. The student caps was starting to already sort of destroy demand and the rhetoric kind of from the government was such that you saw demand destruction happening exiting the year that continued. And then towards the end of the year, you saw this prepayment sort of program that was in place that would allow students or actually require them to pay upfront a full year of tuition.

They canceled that program sort of middle late in the quarter. And so as we’re looking at that, which is obviously surprising that you would do that given that the education sector is under distress. And so that as it played out through January and February, that was sort of one surprise, I would say negative surprise that despite all of the pressures in the education sector in Canada, this adds even more pressure. So we saw that and we sort of it was part of the reason we were behind on revenue in Q4 and then as part of the reason why we had to adjust the guide into 2025. Australia, somewhat similar, I guess, in some ways, but different in others.

In Australia, the conversations with the government were actually quite positive and balanced. So it seemed like the education sector and the government sort of had agreed that they’re not going to put caps in place the same as Canada did. And then right at the end of the year, the government decided to put sort of soft caps in place.

James Fawcett, Senior Analyst, Morgan Stanley: Okay.

Cosmin Pedagloy, CFO, Flywire: And so that starts to then look a little bit like what was happening in Canada, which again, what we’ve what I’ve tried to do as I’ve taken over last year, I joined about a year ago, actually almost a year ago, taken over the guidance is really shift to a more just proactive approach to guidance, which is and also more transparent in terms of here’s all the assumptions we have in the guide. So taking Canada and Australia, last year, every single headline felt like it was a hit, a body blow almost. So said like let’s put Australia and Canada together around 15% of our business, assume both this year will be down about 30%.

James Fawcett, Senior Analyst, Morgan Stanley: Right, right.

Cosmin Pedagloy, CFO, Flywire: So that alone, obviously, even in a stable environment, that would not be pressure on our guide. Right. But we decided to assume that in the guide, assume that it seems like these are pressures and other demand destruction will probably continue in those markets, but be transparent about it and sort of explain to the market. So those are some of the negatives. On the positive side, look, I mean, there’s visa pressures in The U.

S, there’s visa pressure in Canada, but still we saw pretty good growth in The U. S, Thirteen Percent up despite what looks like F1 visas pressures there. In The U. S, we’re seeing the domestic cross sell, which you hear us talk a lot about. Yes.

That is very much resonating. So that is helping still grow. And U. K. Is incredibly high growth for us.

It’s been a great success story. So those are very positive. And then look, we have the other verticals. So travel is now our second largest vertical, 13% of the business last year growing over 50%. As you know, we started this travel business sort of just before COVID.

Arguably, in the middle of COVID is not travel may not seem like the best place to be, but our clients appreciate that the optimization of those workflows that we talked about. Automation is kind of a keyword and that’s exactly what our software does. And so it was great to see the travel business perform so well and that’s to some extent the acquisition that we made was basically investing alongside that strength in the travel business. And then of course B2B as you saw it, it’s a small part of the business. I think of it as kind of our innovation lab, but that was growing almost at 70%.

So really great It’s a great area of us to find other industries that look like these sort of poorly digitized workflow industry. So seeing good progress there. So and then you look at it overall, the team was very resilient. We came out of last year even more resilient, more optimized and obviously continuing to expand margins despite that pressure. So feel good that with the guidance in place, we’ve at least been very transparent and we’re going to get through the macro environment focused on what we can control and be emerge stronger through this.

But yes, it’s going to bumpy in the middle, but feel good about where we’re starting the year.

James Fawcett, Senior Analyst, Morgan Stanley: So can I ask you just and it’s an interesting point there on particularly as it impacted fourth quarter, the lifting of the requirement to pay a full year’s tuition upfront, does that mean that some of that will just naturally fall into 25% and that you’re getting at least some benefit from that? Or how does that work? Or is it not so significant that it moves the needle that much?

Cosmin Pedagloy, CFO, Flywire: I’ll tell you, if you look at the 30% decline for Canada this year, just over half of that is from that aspect. But you’re right, as far as the timing of it, think of it as in terms of that 30% down for the year is probably a bit more in the first half of the year or less as you see some of that shift between and so it depends when people end up with that. Right. When it pays. Yes.

So it may pay maybe full some of it could slip into next year depending on the timing of that one year tuition. But if

James Fawcett, Senior Analyst, Morgan Stanley: I looked at it from a payer’s standpoint and I know that there’s changes in tuition and then the FX on top of that, but if I looked at it from a payer’s standpoint, you’re really kind of building in kind of 15 ish percent, you said, sort of like half the decline in Canada. Am I thinking about that correctly?

Cosmin Pedagloy, CFO, Flywire: Yes, just over half is from this timing piece

James Fawcett, Senior Analyst, Morgan Stanley: of the company. Got it, got it, got it. Got it.

Cosmin Pedagloy, CFO, Flywire: The rest demand destruction continues. We continue seeing headlines even last week and now apparently a border agent can stop a student at the border and revoke their visas, which again it’s it just shows the level of demand destruction there continues. But at least this year, we’ve sort of tried to get ahead of some of those things. Right.

James Fawcett, Senior Analyst, Morgan Stanley: Yes, absolutely. So I want to come back on some of those other businesses and forward looking, but I don’t want to skip over kind of also last week, you announced that you were doing a $330,000,000 acquisition of Certify. Maybe you can just quickly explain to us what Certify does, talk about how you plan to monetize their volumes and how long you would expect it will take for monetization yields to come closer to your corporate average?

Cosmin Pedagloy, CFO, Flywire: Yes. So for those of you not familiar, it’s actually we’ve been watching the two brothers who started the company for a while. We’ve known them. We’ve looked at the company. It was a key target for us even as we raised funds a few years ago, we raised capital.

It was one of those acquisitions that we knew once it’s available that we wanted to be part of it. They are as I talked about earlier, they are at that intersection of software and payments. They’re great at software. They’re more kind of U. S.

They’re actually entirely U. S. Based pretty much, while our travel business is actually international. But there’s a natural sort of our M and A playbook there, if you’re familiar with WPM and others, where we take that software capability and then we go after, as you said, like that payment aspect of it. But so that’s hotel basically, it’s hotel software hospitality kind of workflows.

It’s the same sort of billing process where you’re trying to ensure that you get paid, you book it into a system of record, you automate that workflow, think of weddings or other events that are with very large clients. So the thing is for them, as you look at our business, we’re in luxury travel, so smaller operators where we’re solving again kind of a back office complexity. These are now the biggest brands in the world as far as hotels. So suddenly, we have a very different set of clients that we’re able to talk to. The software is something where you obviously have to have an MSA in place and a relationship with these large brands.

So it’s not something that you can build overnight, not a capability and relationships you can build overnight. And they’ve done really great building that relationship. And the way to think about the business is it’s about 70% software, 30% payments. So they’ve sort of started down the payments path. We have an opportunity to go further.

So the gross margins on the business are actually closer to our corporate gross margins, so 60% or so, which is actually higher than our travel business. And they have actually pretty healthy EBITDA margins. And in terms of revenue, they’ve been growing kind of faster, more in line with our historical growth. And as you look ahead, there’s sort of four different synergies that drive that revenue. So one is, as you said, it’s about $3,000,000,000 of payments volume, which they haven’t gone after.

That’s kind of our M and A playbook that we’ve gone before after. So we know there’s that opportunity going international. So they’re not we’re able to help them. That’s our workforce, our sort of sales force in travel is international. So they have an immediate kind of go to market angle there and that’s another $100,000,000 or so.

And then of course, we can cross sell now our solution into their existing 20,000 locations. So that’s another 50,000. So again, you look at all those, I think the business on its own in terms of revenue can sort of easily more than double over the next few years with, again, solid gross margins and increasing EBITDA. So we’re quite excited about the business together with our travel business. Next year could be almost a quarter of our core

James Fawcett, Senior Analyst, Morgan Stanley: revenue. And

Cosmin Pedagloy, CFO, Flywire: growing faster, I think, yes.

James Fawcett, Senior Analyst, Morgan Stanley: And I was just going to sorry to interrupt you there, Cosmos. I was just going to say, and so your thought is that Certify could contribute what $35,000,000 40 million dollars Is that what you’re trying

Cosmin Pedagloy, CFO, Flywire: to say? Yes. And that’s just for the ten months out

James Fawcett, Senior Analyst, Morgan Stanley: of the year. So it’s actually

Cosmin Pedagloy, CFO, Flywire: so it’s actually more than that if you kind of pro form a for the full year.

James Fawcett, Senior Analyst, Morgan Stanley: Right. Exactly. Got it. Got it. So just quickly and then I want to go back to the core business, but what’s the M and A pipeline look like in 2025?

You guys have always been active at least evaluators of potential acquisitions. So just give us a sense for what that looks like right now.

Cosmin Pedagloy, CFO, Flywire: Yes. I mean, obviously, we’re still our capital allocation priorities is organic investments, M and A and then buyback as far as M and A. Like the pipeline is still there. There’s still interesting targets. There’s always that.

But obviously, we’re going to be integrating and absorbing this acquisition, focusing on ensuring that we invest and we make it successful. So I’d say for now, we’re sort of focusing on that and integrating that successfully. And then, of course, we’ll always look at what’s best for shareholders and Right, right. But for now, I think it’s this will be our main focus is making sure this is successful.

James Fawcett, Senior Analyst, Morgan Stanley: Got it. So let’s dig into some of the different dynamics that are impacting the business on the education side, on the political side. You talked about Canada and Australia. How do you assess what’s happening globally maybe, and then picking out any specific other geographies besides Canada and Australia that are worth paying attention to?

Cosmin Pedagloy, CFO, Flywire: Yes. I mean, look, in this macro environment, what we’ve decided and what do you want to do when you’re so have this much uncertainty is one, of course, you focus on what you can control.

James Fawcett, Senior Analyst, Morgan Stanley: Right.

Cosmin Pedagloy, CFO, Flywire: And two, you communicate often. You’re as transparent as you can and you’re very much data driven. So the other markets, so besides Canada and Australia, where we know clearly those are negative, even though we’re continuing to retain clients, grow our portfolios there. The other two markets are U. S.

And UK, where in the let’s start with The U. S. So in The U. S. For us, what you’ve heard us in terms of the guidance in The U.

S. Is so last year, The U. S. Education market for us or revenue was around 23% of our business was up 13% despite looking at F1 Bs in The U.

James Fawcett, Senior Analyst, Morgan Stanley: S. Were down. Down, right. Exactly.

Cosmin Pedagloy, CFO, Flywire: So there’s a lot of sort of there’s a big negative and then there’s a big positive in many of these cases. In the case of The U. S, there’s a big sort of 10% down because it’s still a portion of our U. S. A good portion of our U.

S. Business is still international. So we’re still adding more domestic cross sells and the business is doing well. But you see going into the year, exiting last year, again, seeing visas down throughout the year, exiting the year, again, seeing new administration. It’s been tough to actually pinpoint What their priority is?

Yes. So you’re seeing some negatives, but there’s also conflicting you’re seeing some positives. I think H1B visas is one of the reasons why people come to The U. S. And it’s one of the reasons when people ask like how do you assess the macro environment.

Well, immigration maybe is hard to assess, but the need for student international students and the need for tech talent, I think is a little bit easier to assess because I don’t think that’s going away. And most of these markets, including The U. S, are not going to produce enough supply of tech talent now or probably for quite a long time. So I think the new administration hopefully I mean, I think understands that demand and putting even the AI sort of focus aside, I think that remains there. And U.

K, same thing actually. U. K. Even more so. I think U.

K. Visas were down probably in the mid teens year over year and we grew multiples faster than our average in The U. K. And the EMEA business was up sort of 55% or

James Fawcett, Senior Analyst, Morgan Stanley: so, and U. K.

Cosmin Pedagloy, CFO, Flywire: Is a big component of that. So that tells you where we have the team, we have the products and the capabilities, we’ll see how we can offset some of those. But those are the I’ll separate the sort of dynamic of immigration versus I think the need where we think for international students will remain in Tech Talent.

James Fawcett, Senior Analyst, Morgan Stanley: No, that makes sense. And I want to come back to The U. S. And the cross sell that you mentioned, but let’s talk about The U. K.

Really quickly. So visas were down, you still grew very rapidly there. A couple of questions that we get is, A, if there’s no change in U. K. Policy, what’s your pathway or ability to continue to grow at those rates or how quickly do we reach saturation?

And maybe I’ll just tag on a second question related to The UK. Did you build in or have you how would you contemplate potentially a turn similar to what we’ve seen in Canada politically that yes, they brought them down, but if they decide to ratchet down more aggressively in The UK for political reasons, how should we think about that?

Cosmin Pedagloy, CFO, Flywire: Yes, we still think even with the Australia sort of following that path, Canada, I think in particular is a bit of a unique case.

James Fawcett, Senior Analyst, Morgan Stanley: Okay. Got it.

Cosmin Pedagloy, CFO, Flywire: And not only because I think there’s some unique things that happened even sort of in the diplomatic relations with India last year.

James Fawcett, Senior Analyst, Morgan Stanley: Right, right, right, right, yes.

Cosmin Pedagloy, CFO, Flywire: They’re not in India being sort of a pretty important channel for Canada. So there’s some unique aspects about Canada that in general, I think are, even in Australia, the education sector, I would say, has a stronger voice. Right. And it’s an important export. In The U.

K, I think we’ve seen most of the government sort of changes that have already happened. So that’s a little bit behind. I think they’ve been a bit more balanced. Yes. Yes, there’s again immigration sort of narrative that may not be positive, but that seems to be somewhat separate than the fact that the, I guess, knowledge that they need those kind of tech capabilities.

Right, right, right. So that hopefully we’ll see. There’s a new student international policy sort of upcoming in The UK, but so far they’ve been a bit more balanced from a sort of allowing a graduate route, for example. Again, so in The U. S, you go to The U.

S. To get a visa because you think it would be an H1B. In UK, initially, I think they’re going to sort of put pressure on the graduate route and eventually they turn around. So it shows that they’re a bit more willing to not go against it. And like the we’ve been successful there.

We have unlike The U. S, in The U. K, when we go into one of our clients, you go and actually sell the full kind of suite of products.

James Fawcett, Senior Analyst, Morgan Stanley: Oh, okay.

Cosmin Pedagloy, CFO, Flywire: So it’s not like in The U. S, we start with that old sort of cross border kind of clients and now we’re cross selling them domestic. In The U. In The UK, it’s a full suite of domestic kind of product. We call it a one door approach, which is a bit different.

And it obviously with the addition of WPM a bit ago, it resonates and has tons of room to grow. And the team there is doing great firing on all cylinders. And so we’ve assumed some normalization of growth. I mean, obviously, it’s a very large business for us. So as you can see implied in the guidance, there’s some normalization in growth there.

So feel that we’ve kind of assumed some of that vis a pressure, but still much faster growth than the average.

James Fawcett, Senior Analyst, Morgan Stanley: Got it. And durability of that growth or durability potential of that growth in The UK, do you feel like you could there’s still a lot more doors to Yes, there’s still

Cosmin Pedagloy, CFO, Flywire: a lot more doors than the existing doors have a lot of cross sell opportunities with other products that we continue innovating around. Right. And so there’s the cross sell back into the existing is also there. So and again, it’s we grew that despite pressure. So hopefully, we’re not we don’t need we don’t need sort of things to be amazing.

We just need them to be stable to some extent to be okay.

James Fawcett, Senior Analyst, Morgan Stanley: Got it. We’ve been chatting here a little over twenty minutes. I want to see if anybody in the audience has any questions. Raise your hand and we’ll give you a mic. All right.

So I’ll continue on. So let’s go back to The U. S. And the cross sell. Talk a little bit about that cross sell process and then implementation process.

One of the questions that has always occurred to me is that as you get bigger and it seems like every one of these institutions’ sales motions is a little bit different

Cosmin Pedagloy, CFO, Flywire: and a

James Fawcett, Senior Analyst, Morgan Stanley: little bit customized and then the implementation similarly. So it seems like as The U. S. And your cross sell gets bigger to maintain those same growth rates like the amount of customization that you’re going to have to do both sales and implementation will also grow along with it. Is that right or wrong?

And how do you think about addressing that? And where are

Cosmin Pedagloy, CFO, Flywire: the best opportunities for cross sell in

James Fawcett, Senior Analyst, Morgan Stanley: The U. S? Yes. So maybe first, size up the

Cosmin Pedagloy, CFO, Flywire: opportunities for cross sell in The U. S? Yes. So maybe to first size up the opportunity for those of you who haven’t heard me say this before, but so we have about 1,000 or so educational institutions in The U. S.

Who have our existing sort of original cross border international student type product. Within those, we have almost 100 who have our domestic product. And that has been sort of over the years initially, a lot of our international sort of student clients were saying, hey, you guys should one should do the domestic side. So we built a while back, we built a domestic product, which and we’ve been competing with the same two or three kind of incumbents for throughout that time. There’s not the competition sort of is the same as it stands.

So that hasn’t really changed. The things that have changed on our side is what you realize is with the domestic cross sell is more of an enterprise sales motion. You’re selling to not just the Bursar office, now you’re talking to the CFO, because it’s sort of arguably a larger ERP ERP like sort of implementation, although maybe not quite that complex. So that’s one part of it. So think of it as more of an enterprise sales motion.

So what that means is what we’ve done over the last few years is changed over the sales team. So to your point, it’s a little bit of a different skill set working with the CFO along with the Versailles office together. So that’s one part. On the marketing side and the approach, we started putting some conferences together because the way you get someone like me or a CFO is to say, hey, look, here’s some reference clients and we have a number of large universities that have our domestic product and say, look, they’ve gone through this process successfully and they’ve benefited from it. So you have that.

So we’ve had a conference last year. We have another one now. So all those things are building up into a really good pipeline that we’ve seen this year, brought in a new sales leader to their enterprise sales. So really good progress, feel good. I was there with the team earlier this year to do the sales kickoff and they’re excited, they’re pumped.

And I think the opportunity is there and the clients want the product. And so we know that if we and these are big accounts. Once you win one of these, it’s a big one. Right, right. In terms of the timeline to actually do it, we actually gave an example last year where we had an opportunity where the incumbent actually basically was going to quit on them if they didn’t renew and we said, hey, we can renew in thirty days.

So we can do this quite quickly, if there’s kind of the willingness. So but to some extent, again, you kind of have to be there for the RFP process and be available and that’s something that we’re kind of working on. But it’s that enterprise sales motion is kind of is gone. But yes, it’s a little bit different than the old version, but it’s more in line with kind of how we were thinking of some of the other big clients like healthcare and others. Is that a similar kind of approach or it’s a bit more of an enterprise sale motion there.

James Fawcett, Senior Analyst, Morgan Stanley: Got it. So before we leave the education segment and I do want to spend a little time on some of the other areas, but how should we be thinking about the playbook that you ran with WPM and that seems to have been a really successful acquisition, but maybe touch on the strategic overlaps or at least the tactical approach that you can apply to the Certify integration process?

Cosmin Pedagloy, CFO, Flywire: Yes. I mean, WPM was the same maybe with Invoice, then now with Certify is that software kind of capability that then allows us to go monetize the payment volume. And so for us in terms of the WPM acquisition was obviously very successful, helped with kind of the success you saw in The UK. And it just kind of resonates again at that intersection of software and payments that we are kind of it is our kind of now it’s our M and A playbook is find the right software. It has some payment volume component to it that is currently not monetized.

And so kind of applying that same sort of thinking that we did with WPM and others, we continue to kind of execute on that. So feel good that we can follow that same playbook across the board.

James Fawcett, Senior Analyst, Morgan Stanley: Got it. Got it. Got it. So let’s turn to some of these other segments with Flywire and that you’re continuing to diversify into. If we talk about B2B and travel, how do you think about the OpEx leverage in those businesses versus education?

I mean, it would be great to get your thoughts in terms of your expectations for margin evolution, especially with the trimming of headcount that you’ve done and how this dynamic will affect the corporate margins beyond 2025?

Cosmin Pedagloy, CFO, Flywire: Yes. It’s a good question. Lots of components, but maybe I’ll start with gross profit, talk about EBITDA margins and then a little bit on profitability. But so on gross profit, what you’ve heard us talk about historically is B2B and travel structurally had lower gross margins because they’re credit card funded. And so those the mix of those growing faster was continues to be the thing that kind of puts pressure on our gross margins that you hear us talk about over time.

Now of course, the acquisition of Certify for travel actually improved those margins gross margins a bit for the travel business, which is good to see. But still those are going to be faster growing kind of verticals with kind of lower gross margins, while education and healthcare tend to have. Healthcare is mostly software, it’s in our platform revenue, so that is higher gross margin. So again, that’s on the gross margin. On the EBITDA margin side, think of the restructuring and the operational review that we have underway is those the savings from the restructuring at least, we’re going to invest about 10% of that in things like the faster growing parts of the business, so investing growth, investing continuing to accelerate growth in the parts of the business that we see the huge potential of not just travel B2B, but certainly EMEA, Asia, our agent network and others that we expect to continue to see growth in.

So it is a it’s about half of the, call it, mid teens million savings for the year. We’re going to reinvest and still expand EBITDA margins by about 300 bps there. So that’s the way to think about it. The other aspect is data. So data is something that I’ve taken over in the company, both the CIO organization and the data and the IT org reports into me.

And so I now look at all of that and say, look, we can be so much more efficient building our data architecture to optimize every single dollar and get into every little nook and cranny in the business and optimize every single dollar of investment. If you build the right data architecture, it helps you to do that. So that’s something that we’re investing in also. And then look, profitability, stock based compensation, also you will see it not just from the restructuring, but in general, I think last year was sort of the is a percent of revenue, right at the peak, and I expect that to start coming down. So as you think of then EBITDA and certainly GAAP net income profitability, expect to continue to see that strengthening going forward.

So feel good about, again, profitability, cash flow and then EBITDA margins from that mix, including the with the acquisition of Certify.

James Fawcett, Senior Analyst, Morgan Stanley: So let’s ask really quickly. So just remind us where you so we talked about like the inputs particularly in terms of the revenue growth on 2025. Remind us really quickly where you are from a profitability standpoint, what you’re targeting for 2025 and then how we should think about the medium to long range profit potential of the business?

Cosmin Pedagloy, CFO, Flywire: Yes. So we exited actually, we exited the year last year profitable on a GAAP net income basis. Expect this year to also be profitable. Obviously, there’s a bit less interest income in there, but from a sort of core operating sort of part of the business driving profitability with stock based comp coming down and growth in our EBITDA margins coming up 300 bps at the midpoint. Historically, we’ve gone above that.

We continue to see a longer path to expanding EBITDA margins. We’ve said that sort of range that we continue to expect to grow the EBITDA margins. And as stock based comp comes down, you can assume that basically profitability continues to improve just between those two drivers overall. Interest income and interest expense kind of we’ll see where that all lands given the Fed and other dynamics. But from an operating perspective, expect EBITDA margins plus stock based comp coming down as a percent of revenue to continue helping.

James Fawcett, Senior Analyst, Morgan Stanley: So in the last couple of minutes here, Cosman, I just want to try to put a bit of a recap and a bow on it is that clearly the political environment as it impacts the education business has been challenging in Canada and Australia particularly, noise elsewhere, but you’re still showing really good growth in these other geographies. You have in a lot of ways, I feel like the business is transforming very rapidly. You’re adding profitability very quickly. You are bringing down stock based compensation. So the and on top of that, you’re continuing to diversify the business.

So what are the key things that you’re focused on or kind of your top three to dos, if you will, for this year?

Cosmin Pedagloy, CFO, Flywire: Yes. I mean, we’re focused on as you can imagine in a complex macro, we’re focusing on what we can control. And obviously, that’s not just optimizing every dollar. We’re looking at sort of every part of the business as an operational on portfolio review implies, looking at every part of the business to optimize it, whether it’s that, whether it’s pricing, whether there’s looking at vertical geos and products. Again, everything that we can control, we’re going to try to take that comprehensive approach and improve.

And then expect us to emerge stronger and continuing we feel we are even more a strategic asset and a strategic business than we were a couple of weeks ago with the acquisition and with the diversification that we have in place. So we feel good that we’re going to focus control and emerge out of this stronger and eventually things hopefully start to normalize. But again, I don’t we don’t need them to be great. All right. We just need them to be stable and we’ll be doing well.

James Fawcett, Senior Analyst, Morgan Stanley: Yes, stability allows you to kind of, as you say, get back to doing what you do and focus on what you can

Cosmin Pedagloy, CFO, Flywire: control, right? Yes. But in the meantime, feel good about that. We will emerge stronger. You never get stronger to easy times.

So feel pretty good that the team will emerge stronger and so will the business.

James Fawcett, Senior Analyst, Morgan Stanley: Got it. Osman, thank you very much. Appreciate everybody sitting in with us today for Flywire. Have a good afternoon.

Cosmin Pedagloy, CFO, Flywire: Thanks, James. Thank you.

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