Cross border payment processor Flywire (NASDAQ: FLYW) reported Q1 FY2023 results that beat analyst expectations, with revenue up 46.2% year on year to $94.4 million. On top of that, guidance for next quarter's revenue was surprisingly good, being $78.5 million at the midpoint, 12.4% above what analysts were expecting. Flywire made a GAAP loss of $3.68 million, improving on its loss of $10.1 million, in the same quarter last year.
Is now the time to buy Flywire? Access our full analysis of the earnings results here, it's free.
Flywire (FLYW) Q1 FY2023 Highlights:
- Revenue: $94.4 million vs analyst estimates of $82.9 million (13.8% beat)
- EPS: -$0.03 vs analyst estimates of -$0.06 ($0.04 beat)
- Revenue guidance for Q2 2023 is $78.5 million at the midpoint, above analyst estimates of $69.8 million
- The company lifted revenue guidance for the full year, from $382.5 million to $389 million at the midpoint, a 1.7% increase
- Free cash flow was negative $21.3 million, down from positive free cash flow of $31.3 million in previous quarter
- Gross Margin (GAAP): 64.1%, up from 62.4% same quarter last year
"Our excellent results in the first quarter are a testament to our ability to balance top line growth with ongoing efficiency initiatives," said Mike Massaro, CEO of Flywire.
Originally created to process international tuition payments for universities, Flywire (NASDAQ:FLYW) is a cross border payments processor and software platform focusing on complex, high-value transactions like education, healthcare and B2B payments.
Consumers want the ability to make payments whenever and wherever they prefer – and to do so without having to worry about fraud or other security threats. However, building payments infrastructure from scratch is extremely resource-intensive for engineering teams. That drives demand for payments platforms that are easy to integrate into consumer applications and websites.
As you can see below, Flywire's revenue growth has been impressive over the last two years, growing from quarterly revenue of $45 million in Q1 FY2021, to $94.4 million.
And unsurprisingly, this was another great quarter for Flywire with revenue up 46.2% year on year. On top of that, revenue increased $21.3 million quarter on quarter, a strong improvement on the $22.2 million decrease in Q4 2022, and a sign of acceleration of growth, which is very nice to see indeed.
Guidance for the next quarter indicates Flywire is expecting revenue to grow 38.8% year on year to $78.5 million, slowing down from the 52.9% year-over-year increase in revenue the company had recorded in the same quarter last year. Ahead of the earnings results the analysts covering the company were estimating sales to grow 20.7% over the next twelve months.
In volatile times like these we look for robust businesses with strong pricing power. Unknown to most investors, this company is one of the highest-quality software companies in the world, and their software products have been the default standard in critical industries for decades. The result is an impressive business that is up an incredible 18,152% since the IPO. You can find it on our platform for free.
What makes the software as a service business so attractive is that once the software is developed, it typically shouldn't cost much to provide it as an ongoing service to customers. Flywire's gross profit margin, an important metric measuring how much money there is left after paying for servers, licenses, technical support and other necessary running expenses was at 64.1% in Q1.
That means that for every $1 in revenue the company had $0.64 left to spend on developing new products, marketing & sales and the general administrative overhead. While it improved significantly from the previous quarter this would still be considered a low gross margin for a SaaS company and we would like to see the improvements continue.
Key Takeaways from Flywire's Q1 Results
With a market capitalization of $3.28 billion Flywire is among smaller companies, but its more than $327.1 million in cash and the fact it is operating close to free cash flow break-even put it in a robust financial position to invest in growth.
We were very impressed by the strong improvements in Flywire’s gross margin this quarter. And we were also excited to see that it outperformed Wall St’s revenue expectations. Zooming out, we think this was a great quarter and shareholders will likely feel excited about the results. The company is up 6.74% on the results and currently trades at $30.9 per share.
Flywire may have had a good quarter, so should you invest right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.
One way to find opportunities in the market is to watch for generational shifts in the economy. Almost every company is slowly finding itself becoming a technology company and facing cybersecurity risks and as a result, the demand for cloud-native cybersecurity is skyrocketing. This company is leading a massive technological shift in the industry and with revenue growth of 70% year on year and best-in-class SaaS metrics it should definitely be on your radar.
The author has no position in any of the stocks mentioned.