Flywire Corp at Morgan Stanley US Financials, Payments & CRE Conference Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: James Faucette - Morgan Stanley & Co. LLC - Analyst : <_ALACRA_META_ABSTRACT>Maybe for those that are newer to the Flywire story, can you give us a brief overview of your background, prior to Flywire, who Flywire is, and what initially attracted you to Flywire?

Question: James Faucette - Morgan Stanley & Co. LLC - Analyst : Three-part question.

Question: James Faucette - Morgan Stanley & Co. LLC - Analyst : Love it. So as you said, you've been in the seat for a few months now. You've already gone through a learning cycle. I'd love to hear just what your thoughts are on your early learnings thus far. And clearly you had a lot of conviction, as you just said, to join the firm. But what have you learned thus far? What's been different than what you expected and some of the key items you've decided are worthy of your focus on a day-to-day basis?

Question: James Faucette - Morgan Stanley & Co. LLC - Analyst : Got it. So I'm going to ask you, we get a liner and I'm sure you get the same questions from investors and we get a lot of hemming and hawing and a lot of -- on the one hand, it seems good on the other hand, I'm worried about these other things, et cetera. The fundamental performance of the business has been pretty resilient and healthy in terms of net retention and net new wins but as I said, there's always this other hand, it seems like there are other things that see people are worried about, including the prospect of student visa growth, the potential impact of upcoming presidential elections, or not even in the US there's also elections in other key markets that are coming up in the next year or so. I'm in a handful of things that we could consider to be exogenous. How do you think about these factors and specifically whether or not additional disclosure or non-region-specific commentary can be provided to to really help reassure investors and address some of these concerns?

Question: James Faucette - Morgan Stanley & Co. LLC - Analyst : I'm giving you a road map.

Question: James Faucette - Morgan Stanley & Co. LLC - Analyst : Right. So those are kind of the big picture questions that we get. Some of the more specific questions we get are around NRR versus payer retention. I think it's well known that you're NRR and a the low to mid 20s range is robust, particularly when we looking -- when we look at historical cohorts that are still growing in that high 10s range. What are your feelings about NRR over the long term? And what are the building blocks to get to that low to mid 120s range?

Question: James Faucette - Morgan Stanley & Co. LLC - Analyst : Got it. So I do want to touch on each of the verticals quickly. Can you speak about what you're seeing thus far in terms of some of your existing customers offering alternative payment mechanisms from some of your education competitors. This is something that we get a lot of questions about as well. I think there's this perception -- there's an increase in competitive intensity with some of your education customers and partners starting to offer alternative payment schemes. How much are you seeing that? And how much is that impacting your growth from your seat, if at all?

Question: James Faucette - Morgan Stanley & Co. LLC - Analyst : So what do you think are the biggest threats within the education vertical? I mean, what would cause that vertical as a whole to maybe underperform on a performance basis, if things do go poorly there for something vertical for, let's just say?

Question: James Faucette - Morgan Stanley & Co. LLC - Analyst : Got it. Talking about health care, you mentioned that briefly there. Can you speak what you're seeing in that from a health care utilization perspective, the business declined slightly in '23, but do you think that the business has troughed or that segment has troughed?

Question: James Faucette - Morgan Stanley & Co. LLC - Analyst : Interesting. So let's talk about travel. I know you recently added ocean experiences to that vertical. What's the overall opportunity and competitive environment like for traveling? And what do you think about its -- what its growth rate should be?

Question: James Faucette - Morgan Stanley & Co. LLC - Analyst : Got it. I want to make sure to open it up to questions from the audience. If anybody has any, I can grab those. You mentioned margins once again, recognizing that you're early in the sea, but it'd be great to hear your perspective surrounding the long-term margin and earnings power of the business. 2023 adjusted EBITDA margins were close to 10%, and the company has talked about being a 25% adjusted EBITDA margin business by '26 or '27. Walk us through some of the key drivers of that margin expansion. What has to happen to get us to that kind of mid-20s range?

Question: James Faucette - Morgan Stanley & Co. LLC - Analyst : So let's talk about the another metric beyond just cash flow and adjusted EBITDA is by GAAP. Investors are increasingly focused on trying to find -- identify long-term earnings power when we're kind of at a more mature level within the overall profitability of the business. I know there have been periods where the company historically has been profitable on a GAAP EPS basis, but what are you thinking about a timeline to achieve that consistently and where GAAP EPS can trend if you are successful in getting to your 25% adjusted EBITDA margin target?

Question: James Faucette - Morgan Stanley & Co. LLC - Analyst : So what is your philosophy around capital allocation? And how do you balance that potential returns at least offset some of the dilution from stock-based comp versus M&A? I know that you've hired some senior corporate development personnel to help prosecute that effort. So what's the balance for you do you think?

Question: James Faucette - Morgan Stanley & Co. LLC - Analyst : So -- all right. So you came in you had an initial to do this. I mean, you've outlined after three months a few things. You're kind of evaluating how do you want to formulate the outlook or at least give benchmarks to people? You talked about an hour on, you're still figuring out capital allocation. What's the to-do list though that's most urgent for you right now between now and the end of the year, let's call it.