Flywire (FLYW)

Global payments company Flywire (NASDAQ:FLYW) reported Q3 CY2025 results exceeding the market’s revenue expectations, with sales up 27.6% year on year to $200.1 million. On top of that, next quarter’s revenue guidance ($147 million at the midpoint) was surprisingly good and 3.6% above what analysts were expecting. Its GAAP profit of $0.23 per share was 20.5% above analysts’ consensus estimates.

Company Overview

Initially created to solve the challenges of international student tuition payments, Flywire (NASDAQ:FLYW) provides specialized payment processing and software solutions that help educational institutions, healthcare systems, travel companies, and businesses manage complex 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.

Flywire competes with traditional payment processors like PayPal (NASDAQ:PYPL) and Stripe (private), global payment networks such as Western Union (NYSE:WU), vertical-specific payment solutions like TouchNet in education, and broader financial technology companies including Adyen (AMS:ADYEN) and Block (NYSE:SQ).

Examining a company’s long-term performance can provide clues about its quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Over the last five years, Flywire grew its sales at an exceptional 37% compounded annual growth rate. Its growth beat the average software company and shows its offerings resonate with customers.

We at StockStory place the most emphasis on long-term growth, but within software, a half-decade historical view may miss recent innovations or disruptive industry trends. Flywire’s annualized revenue growth of 24.6% over the last two years is below its five-year trend, but we still think the results suggest healthy demand.

This quarter, Flywire reported robust year-on-year revenue growth of 27.6%, and its $200.1 million of revenue topped Wall Street estimates by 7.7%. Company management is currently guiding for a 25% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 14.2% over the next 12 months, a deceleration versus the last two years. This projection is underwhelming and suggests its products and services will see some demand headwinds.

The customer acquisition cost (CAC) payback period measures the months a company needs to recoup the money spent on acquiring a new customer. This metric helps assess how quickly a business can break even on its sales and marketing investments.

Flywire’s recent customer acquisition efforts haven’t yielded returns as its CAC payback period was negative this quarter, meaning its incremental sales and marketing investments outpaced its revenue. The company’s inefficiency indicates it operates in a competitive market and must continue investing to grow.

For software companies like Flywire, gross profit tells us how much money remains after paying for the base cost of products and services (typically servers, licenses, and certain personnel). These costs are usually low as a percentage of revenue, explaining why software is more lucrative than other sectors.

Flywire’s gross margin is substantially worse than most software businesses, signaling it has relatively high infrastructure costs compared to asset-lite businesses like ServiceNow. As you can see below, it averaged a 62.6% gross margin over the last year. That means Flywire paid its providers a lot of money ($37.41 for every $100 in revenue) to run its business.

The market not only cares about gross margin levels but also how they change over time because expansion creates firepower for profitability and free cash generation. Flywire has seen gross margins decline by 0.1 percentage points over the last 2 year, which is slightly worse than average for software.

Flywire’s gross profit margin came in at 63.9% this quarter, down 1.3 percentage points year on year. Flywire’s full-year margin has also been trending down over the past 12 months, decreasing by 1 percentage points. If this move continues, it could suggest a more competitive environment with some pressure to lower prices and higher input costs.

Flywire has done a decent job managing its cost base over the last year. The company has produced an average operating margin of 1.1%, higher than the broader software sector.

Looking at the trend in its profitability, Flywire’s operating margin rose by 3.5 percentage points over the last two years, as its sales growth gave it operating leverage.

This quarter, Flywire generated an operating margin profit margin of 16.1%, up 3.2 percentage points year on year. The increase was encouraging, and because its gross margin actually decreased, we can assume it was more efficient because its operating expenses like marketing, R&D, and administrative overhead grew slower than its revenue.

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

Flywire has shown weak cash profitability over the last year, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 7.9%, subpar for a software business.

Flywire’s free cash flow clocked in at $147.5 million in Q3, equivalent to a 73.7% margin. The company’s cash profitability regressed as it was 46.7 percentage points lower than in the same quarter last year, but it’s still above its one-year average. We wouldn’t read too much into this quarter’s decline because investment needs can be seasonal, leading to short-term swings. Long-term trends are more important.

Companies with more cash than debt have lower bankruptcy risk.

Flywire is a profitable, well-capitalized company with $377.3 million of cash and no debt. This position is 23% of its market cap and gives it the freedom to borrow money, return capital to shareholders, or invest in growth initiatives. Leverage is not an issue here.

We were impressed by how significantly Flywire blew past analysts’ revenue, EPS, and EBITDA expectations this quarter. We were also glad its revenue guidance for next quarter outperformed Wall Street’s estimates. Zooming out, we think this was a solid print. The stock traded up 12.1% to $15.50 immediately following the results.

Updated: December 3, 2025 at 9:37 PM EST

A common mistake we notice when investors are deciding whether to buy a stock or not is that they simply look at the latest earnings results. Business quality and valuation matter more, so we urge you to understand these dynamics as well.

Flywire isn’t a terrible business, but it doesn’t pass our bar. Although its revenue growth was exceptional over the last five years, it’s expected to deteriorate over the next 12 months and its customer acquisition is less efficient than many comparable companies. On top of that, the company’s gross margins show its business model is much less lucrative than other companies.

Flywire’s price-to-sales ratio based on the next 12 months is 2.5x. While this valuation is reasonable, we don’t really see a big opportunity at the moment. We're pretty confident there are more exciting stocks to buy at the moment.

Wall Street analysts have a consensus one-year price target of $16.59 on the company (compared to the current share price of $13.95).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.