Flywire Corp Q4 2024 Earnings Call Transcript

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

Question: Chris Kennedy - William Blair & Co LLC - Analyst : Can you talk a little bit about the NRR? I mean, historically, it's been over 120%. It was 114% and you expect another downtick in 2025. Just talk about the levers there.

Question: Andrew Schmidt - Citigroup Inc - Analyst : Guys, thanks for taking my questions this evening. Maybe just start off on the portfolio review. Maybe just why now? Obviously, policy-related impacts you're seeing show up in the financials. But maybe you could touch on perhaps other reasons for the timing. And then when we think about just the review in general, you mentioned verticals. So is there opportunity to streamline to focus on a fewer number of verticals? Or is there a different way of thinking about that? Any help there would be helpful.

Question: Andrew Schmidt - Citigroup Inc - Analyst : Got it. Thank you for that, Mike. And then maybe I could ask about Canada. I think the previous assumption was for flat in 2025. And obviously, there's the SDS impact. Could you maybe just strip out what's SDS versus what's perhaps underlying visa impact, if that's possible? And then just to be clear, correct me if I'm wrong, SDS could be timing, meaning that once you kind of flow through this, the revenues normalize based on the timing of the payments, meaning less accelerated, more typical payment schedule. Any help there would be great.

Question: Tien-Tsin Huang - JPMorgan Chase & Co - Analyst : Hey, thanks so much. Just a follow-up on Andrew's question on the portfolio review. Mike, are you trying to solve for efficiency? Or is it a look at the overall sort of coverage that you have? Is there opportunity for enhancing growth? Just trying to think about how you're prioritizing or what you're solving for really?

Question: Tien-Tsin Huang - JPMorgan Chase & Co - Analyst : Understood. No, I think it's a good exercise to go through. Just my quick follow-up, the 30% assumption for Australia and Canada, anything else you can share in terms of how you arrived or landed at the 30% and how conservative or aggressive that might be?

Question: Tien-Tsin Huang - JPMorgan Chase & Co - Analyst : Got it. And I'm sure your team is thoughtful about it.

Question: Kenneth Suchoski - Autonomous Research - Analyst : Hey, good afternoon. Thanks for taking the question. I was wondering if you could talk about what you're seeing in the education markets outside of Canada and Australia. I think I heard some commentary around softening of visa trends across the big four. So is there any softness, I guess, outside of Canada and Australia? And then I guess maybe related to that, the slower revenue growth in 2025 that's embedded in the outlook, is the entire slowdown within the education vertical? Or are you also embedding some slower growth in the noneducation businesses as well?

Question: Kenneth Suchoski - Autonomous Research - Analyst : Great. And then I guess maybe just a question on the gross profit margins. I think those came in really strong. I think you called out an impact around FX settlement. I was wondering if you could just size that in the quarter. Sorry if I missed that. And then I guess for the outlook on 2025, just any thoughts on how gross profit margins should trend throughout the year? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 25, 2025 / 10:00PM, FLYW.OQ - Q4 2024 Flywire Corp Earnings Call

Question: Timothy Chiodo - UBS Group AG - Analyst : Great, thank you for taking the question. I wanted to ask a little bit about how you would characterize the broader global student population, meaning are the students simply staying more at home and going to more domestic institutions? Are they going to markets outside of your core for education markets? And is this more of a temporary pause in your view? And as soon as some of the visa issues clear up, there's more clarity that we should see some sort of a return in the next 12 to 18 months?

Question: Timothy Chiodo - UBS Group AG - Analyst : Great. And as you've said in the past, and I apologize if I missed it tonight, but did you mention any kind of a recapture assumption that's worked into the guide for some of those students moving to other markets where you do have some degree of presence?

Question: William Nance - Goldman Sachs & Co - Analyst : I was wondering if you could expand a little bit on the comments around the US and seeing some softening visa numbers. Just curious if there's any specific policies that are driving that or if there's anything that we should be watching externally to measure if there is a potential change in the market dynamic kind of happening in real time? And then I have a follow-up.

Question: William Nance - Goldman Sachs & Co - Analyst : Got it. Appreciate that. And then I guess one for Mike on the review. I totally understand the focus on efficiency. You kind of mentioned several times looking internally and making sure that everything is being done in the most efficient way possible. You also mentioned something around are we in the right verticals? And so I'm just -- could you maybe talk about the strategic aspect? How broad is the aperture of a strategic review of the company? And would that include an outright sale of the company if that opportunity presented itself? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 25, 2025 / 10:00PM, FLYW.OQ - Q4 2024 Flywire Corp Earnings Call

Question: Darrin Peller - Wolfe Research LLC - Analyst : Hey, guys. Is it possible just given the noise in the outlook and the numbers around the different geographies, maybe just give us a little bit more granular expectation for segment growth rates for the year. Just really more specific numbers would be helpful in terms of what your specific percentage growth should be in education versus health care versus travel and B2B, et cetera. And then maybe just kind of diving into that a little bit. I mean, in the education side, we understand that you're expecting Canada and Australia to be down 30% on a year-over-year basis. So what does that mean for the remainder, not just -- like what is the underlying growth of the business from your perspective, I guess, outside of that?

Question: Darrin Peller - Wolfe Research LLC - Analyst : That's helpful, Cosmin. Guys, just one more follow-up. When you think of the pushback that universities in these markets must be giving to their own governments, I mean I just -- do you have any insight or maybe for Mike or Rob, I mean, any thoughts on what are the kind of catalysts that REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 25, 2025 / 10:00PM, FLYW.OQ - Q4 2024 Flywire Corp Earnings Call we should keep an eye out for from a regulatory standpoint that could impact visa decisions? Is there anything on the horizon in Canada, Australia or any other markets we should keep in mind?

Question: Chris Svensson - Deutsche Bank AG - Analyst : tI just wanted to follow up on the U.S. and that top of funnel comment you made, Rob, and you also made the comments on the demand destruction in Canada. So I just wanted to tie those two together with what's going on in the U.S. I mean it seems pretty clearly correlated that the change in administration and the tone on immigration there is having an impact on U.S. visa. So just wondering how you're thinking about that internally and what visibility you have that things could eventually get better? Because I think from my perspective, it is a policy issue that's destroying demand, it seems like the earliest that could change or get better would be January of 2029. So just wondering how you're thinking about that internally and how we should think about it as well.

Question: Chris Svensson - Deutsche Bank AG - Analyst : And then for my follow-up, I want to circle back to the very first question in Q&A that Cris asked on NRR. So obviously, when you think about sort of like the long-term growth profile of the company, if we go back to the 2022 Analyst Day, a big part of that guide that you had laid out was underpinned by your very strong NRR north of 120% historically. Totally understand the dynamics in '24 and '25. But I guess it would be helpful to help level set expectations for what the right normalized NRR for the business is going forward if and when we move past these macro headwinds. I just think it's going to be important to help investors underwrite what the long-term growth potential of the company is, particularly given the issues in the core, et cetera.

Question: Andrew Bauch - Wells Fargo Securities LLC - Analyst : Hey, thanks for taking the question. I guess I just wanted to -- not to belabor the point, but looking at the US education market in 2024, the growth being below company-wide average at, I believe, 13% here. Was that in line with what you were previously anticipating for 2024? And if it's not, I guess, what were the variables that kind of led you to that growth rate that was below the overall average?

Question: Andrew Bauch - Wells Fargo Securities LLC - Analyst : Got it. And then my follow-up -- go ahead.

Question: Andrew Bauch - Wells Fargo Securities LLC - Analyst : Got it. And then my follow-up was around capital allocation and really the rationale around the recent deal. Is there any way that you can provide us a path to when this could start to be accretive? And then how you're kind of assessing capital allocation in light of where the stock is and where you want to put dollars to work?