Flywire's (NASDAQ:FLYW) Q4: Beats On Revenue, Stock Jumps 20.4%

Full Report / February 27, 2024

Cross border payment processor Flywire (NASDAQ: FLYW) reported results ahead of analysts' expectations in Q4 FY2023, with revenue up 37.6% year on year to $100.5 million. Revenue guidance for the full year also exceeded analysts' estimates but next quarter's guidance of $113.5 million was less impressive, coming in 1.2% below expectations. It made a GAAP profit of $0.01 per share, down from its profit of $0.02 per share in the same quarter last year.

Flywire (FLYW) Q4 FY2023 Highlights:

  • Revenue: $100.5 million vs analyst estimates of $88.73 million (13.3% beat)
  • EPS: $0.01 vs analyst estimates of -$0.07 ($0.08 beat)
  • Revenue Guidance for Q1 2024 is $113.5 million at the midpoint, below analyst estimates of $114.9 million
  • Management's revenue guidance for the upcoming financial year 2024 is $518 million at the midpoint, beating analyst estimates by 6.6% and implying 28.5% growth (vs 40.9% in FY2023)
  • Free Cash Flow of $58.83 million, up 31% from the previous quarter
  • Gross Margin (GAAP): 63.4%, up from 59.5% in the same quarter last year
  • Market Capitalization: $2.93 billion

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.

Over the past two decades, digitization of payments has seemingly permeated most aspects of the global economy - which is relatively true when thinking about digital commerce or banking. But certain sectors, with very high value transactions, can’t adopt a “one size fits all” approach, often due to currency impacts. As a result, many organizations with the greatest need to facilitate online digital payments either have to resort to building their own processing solution from the ground up or stick to cashing checks, and the customer service headaches that come with them.

Flywire was created to facilitate cross border tuition payments for the global education market, international students studying in the US, or attending elite boarding schools. It has since found similar use cases internationally in healthcare, travel, and B2B payments, but education still remains its core market, accounting for the majority of its revenues.

Flywire has spent over 10 years developing a proprietary global payment network that operates in almost every country in the world, supporting more than 130 currencies and connecting all of the key global banks, as majority of Flywire’s high value transactions payments are not card-related and rely on bank transfers. The benefit of owning the network is that Flywire has full visibility over its fund flows and can better manage currency exchange risks on transactions for both itself and its customers, as managing FX rates on large dollar payments is particularly important.

Payments Software

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.

Flywire’s competitors in the education space are largely in house legacy systems and legacy cross border payment systems like Western Union’s GlobalPay (NYSE: WU) along with many next generation B2B payment providers like Bill.com (NYSE: BILL) or Coupa Software (NASDAQ: COUP).

Sales Growth

As you can see below, Flywire's revenue growth has been impressive over the last two years, growing from $51.39 million in Q4 FY2021 to $100.5 million this quarter.

Flywire Total Revenue

Unsurprisingly, this was another great quarter for Flywire with revenue up 37.6% year on year. However, the company's revenue actually decreased by $22.78 million in Q4 compared to the $38.45 million increase in Q3 2023. Regardless, we aren't too concerned because Flywire's sales seem to follow a seasonal pattern and management is guiding for revenue to rebound in the coming quarter.

Next quarter's guidance suggests that Flywire is expecting revenue to grow 20.3% year on year to $113.5 million, slowing down from the 46.2% year-on-year increase it recorded in the same quarter last year. For the upcoming financial year, management expects revenue to be $518 million at the midpoint, growing 28.5% year on year compared to the 39.3% increase in FY2023.


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's left after paying for servers, licenses, technical support, and other necessary running expenses, was 63.4% in Q4.

Flywire Gross Margin (GAAP)

That means that for every $1 in revenue the company had $0.63 left to spend on developing new products, sales and marketing, and general administrative overhead. Flywire's gross margin is poor for a SaaS business and it's dropped significantly since the previous quarter. This is probably the exact opposite of what shareholders would like to see.

Cash Is King

If you've followed StockStory for a while, you know that we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can't use accounting profits to pay the bills. Flywire's free cash flow came in at $58.83 million in Q4, up 91.6% year on year.

Flywire Free Cash Flow

Flywire has generated $74.61 million in free cash flow over the last 12 months, a solid 18.5% of revenue. This strong FCF margin stems from its asset-lite business model, giving it optionality and plenty of cash to reinvest in its business.

Key Takeaways from Flywire's Q4 Results

We were impressed by how strongly Flywire blew past analysts' revenue expectations this quarter. We were also glad its full-year revenue guidance came in higher than Wall Street's estimates and free cash flow shows a strong trend. On the other hand, revenue guidance for next quarter missed analysts' expectations. Overall, this quarter's results still seemed positive and shareholders should feel optimistic. The stock is up 20.4% after reporting and currently trades at $29.52 per share.

Is Now The Time?

When considering an investment in Flywire, investors should take into account its valuation and business qualities as well as what's happened in the latest quarter.

We cheer for everyone who's making the lives of others easier through technology, but in case of Flywire, we'll be cheering from the sidelines. Although its , Wall Street expects growth to deteriorate from here. And while its strong free cash flow generation gives it re-investment options, the downside is its customer acquisition is less efficient than many comparable companies. On top of that, its gross margins show its business model is much less lucrative than the best software businesses.

Given its price-to-sales ratio based on the next 12 months is 6.5x, Flywire is priced with expectations of a long-term growth, and there's no doubt it's a bit of a market darling, at least for some. While we have no doubt one can find things to like about the company, we think there might be better opportunities in the market and at the moment don't see many reasons to get involved.

Wall Street analysts covering the company had a one-year price target of $31.06 per share right before these results (compared to the current share price of $29.52).

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