Cross border payment processor Flywire (NASDAQ: FLYW) reported Q2 FY2022 results that beat analyst expectations, with revenue up 52.9% year on year to $56.5 million. On top of that, guidance for next quarter's revenue was surprisingly good, being $96 million at the midpoint, 10.6% above what analysts were expecting. Flywire made a GAAP loss of $23.7 million, down on its loss of $18.1 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) Q2 FY2022 Highlights:
- Revenue: $56.5 million vs analyst estimates of $47.6 million (18.7% beat)
- EPS (GAAP): -$0.22
- Revenue guidance for Q3 2022 is $96 million at the midpoint, above analyst estimates of $86.7 million
- The company lifted revenue guidance for the full year, from $274 million to $288.5 million at the midpoint, a 5.29% increase
- Free cash flow was negative $12.7 million, compared to negative free cash flow of $18.3 million in previous quarter
- Gross Margin (GAAP): 61.4%, down from 64.5% same quarter last year
“I'm really pleased to report another strong quarter for Flywire, where we delivered strong revenue, adjusted gross profit and better than expected adjusted EBITDA, which is a reflection of our continued execution of our growth strategies," 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 exceptional over the last year, growing from quarterly revenue of $36.9 million, to $56.5 million.
This was another standout quarter with the revenue up a splendid 52.9% year on year. But the revenue actually decreased by $8.01 million in Q2, compared to $13.1 million increase in Q1 2022. However, Flywire's sales do seem to have a seasonal pattern to them, and considering management is guiding for revenue to rebound in the coming quarter we wouldn't be too concerned.
Guidance for the next quarter indicates Flywire is expecting revenue to grow 41.6% year on year to $96 million, slowing down from the 61% 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 20.3% 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 61.4% in Q2.
That means that for every $1 in revenue the company had $0.61 left to spend on developing new products, marketing & sales and the general administrative overhead. This would be considered a low gross margin for a SaaS company and it has been going down over the last year, which is probably the opposite direction shareholders would like to see it go.
Key Takeaways from Flywire's Q2 Results
With a market capitalization of $2.59 billion Flywire is among smaller companies, but its more than $360.5 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 impressed by how strongly Flywire outperformed analysts’ revenue expectations this quarter. And we were also glad that the revenue guidance for the next quarter exceeded analysts' expectations. On the other hand, there was a deterioration in gross margin. Zooming out, we think this was a fantastic quarter that should have shareholders cheering. The company is flat on the results and currently trades at $23.62 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.
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The author has no position in any of the stocks mentioned.