What Happened:
Shares of cross border payment processor Flywire (NASDAQ: FLYW) fell 22.8% in the morning session after the company reported first-quarter earnings results. Its full-year revenue guidance fell short and was lowered. Its free cash flow was down from the previous quarter. Moving on, its second-quarter revenue guidance implied a sequential revenue decline. Baked into the sales forecast are near-term headwinds due to foreign exchange impacts and a shift in expectations stemming from the Canadian education business. As a quick recap, during the previous earnings call, management noted that the delayed allocation of study permits to schools was likely to reduce applications, admissions decisions, and payments for many international students. On the other hand, revenue topped Wall Street's estimates. Overall, this was a disappointing quarter for Flywire.
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What is the market telling us:
Flywire's shares are very volatile and over the last year have had 19 moves greater than 5%. But moves this big are very rare even for Flywire and that is indicating to us that this news had a significant impact on the market's perception of the business.
The biggest move we wrote about over the last year was 2 months ago, when the stock gained 26.4% on the news that the company reported fourth-quarter results that blew past analysts' revenue expectations. The topline results were driven by volume increase due to strong growth in international cross-border payment volumes. Notably, the company observed improved momentum in the education vertical, particularly in the U.K. and from some travel clients. Changes in F.X. rates were also considered a tailwind during the quarter. Looking ahead, its full-year revenue guidance came in higher than Wall Street's estimates, and free cash flow showed a strong trend.
On the other hand, revenue guidance for the next quarter missed analysts' expectations. The Canadian government's recent decisions to limit applications for international study permits influenced near-term growth projections, with provinces delaying the allocation of study permits to schools until late Q1 or early Q2. Overall, this quarter's results still seemed positive despite some of the anticipated headwinds, and shareholders should feel optimistic.
Flywire is down 28.3% since the beginning of the year, and at $16.30 per share it is trading 53.5% below its 52-week high of $35.05 from July 2023. Investors who bought $1,000 worth of Flywire's shares at the IPO in May 2021 would now be looking at an investment worth $464.96.
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