Good afternoon and welcome to the Flywire Corporation First Quarter 2022 Earnings Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Akil Hollis, VP of IR and FP&A. Please go ahead.

Thank you and good afternoon. With me on today’s call are Mike Massaro, Chief Executive Officer; Rob Orgel, President and Chief Operating Officer; and Mike Ellis, Chief Financial Officer. Our first quarter 2022 earnings press release, supplemental presentation and, when filed, associated quarterly report on Form 10-Q can be found at ir.flywire.com. During the call, we will be discussing certain forward-looking information. Actual results could differ materially from those contemplated by these forward-looking statements. We will also be discussing certain non-GAAP financial measures. Please refer to our press release and SEC filings for more information on the risks regarding these forward-looking statements that could cause actual results to differ materially, risk factors associated with our business and required disclosures related to non-GAAP financial measures. This call is being webcast live and will be available for replay on our website. I would now like to turn the call over to Mike Massaro.

Thank you, Akil, and thank you to everyone that is joining us today. We are excited to share our Q1 2022 results with all of you and appreciate the interest you continue to show in Flywire. In short, 2022 has started out strong for Flywire. In a few minutes, Rob Orgel, our President and COO as well as Mike Ellis, our CFO, will go into greater detail about our operating and financial performance during the quarter. But first, let me start with a few financial highlights from the quarter. Revenue less ancillary services was $59.3 million, representing a year-over-year revenue growth of 47%, driven predominantly by strength in our education and travel businesses. Total payment volume for the quarter increased 46% compared to Q1 2021. Across all our verticals, we added over 130 new clients during the quarter, our most new clients for a quarter as a public company. Flywire was also named to Inc. Magazine’s 2022 Best Workplaces list, further evidence of our focus on strengthening our FlyMate community and being seen as an employer of choice in a highly competitive global marketplace for talent. By now, most of you know that Flywire focuses on high-stakes, high-value payments within industries such as education, healthcare, travel and B2B. Within these industries, digitization is still in the early stages, and payment experiences are fragmented and often difficult for both payer and receiver. Ultimately, we are helping our clients get paid and helping their customers pay seamlessly and easily from all over the world. We expect that the secular trends in these industries, coupled with the inevitable shift towards digitization of payments, positions Flywire very well for growth for years to come. In times like these where there are macroeconomic uncertainties, we believe our solutions are even more critical as our clients…

Thanks, Mike, and good afternoon, everyone. Our strong results this quarter reflected continued execution of our growth strategies. We saw strength in bringing on new clients with the addition of over 130, 20% higher than our best quarter in 2021. This brings our client count to over 2,700. And consistent with our recent quarters, we had a lot of success in cross-selling to existing clients. I’d like to highlight some of our successes across the verticals. Starting today with travel, we added a great group of over 40 new clients. Our travel business grew in part because of our new clients but in larger part due to recovering activity levels across the range of our travel clients as COVID restrictions and hesitancy continued to shrink in many areas globally. One indicator of the return of travel is that we have seen our travel clients deliver net revenue retention of greater than 145% this quarter with particularly strong growth among our European destination management clients. These clients believe that summer 2022 will return to normal levels for the first time since the summer of 2019. During Q1 2022, we generated more revenue from our travel clients than we did from all of 2019 or 2020. As an example of a new European destination management client, we added I.D.I. TRAVEL as a travel client. Based in Via Torino, Italy, I.D.I. specializes in carefully planned itineraries for high-end, bespoke stays in Italy and France. They signed with Flywire in early March 2022 and went live in mid-March. They signed with Flywire because of our large global footprint and variety of payment methods. We’re excited by the early results from our relationship with I.D.I. in Italy and France and look forward to further expanding our payment solutions with them. Continuing with healthcare, in addition…

Thank you, Rob. Good afternoon, everyone. Today, I will be discussing our non-GAAP financial metrics for our first quarter of 2022, including revenue less ancillary services, adjusted gross profit, adjusted gross margin and adjusted EBITDA. For our financial results prepared in accordance with U.S. generally accepted accounting principles, please read the preliminary and unaudited financial statements included within our earnings release and the unaudited financial statements that will be included in our Form 10-Q when filed with the SEC. Revenue less ancillary services for Q1 2022 was $59.3 million, representing a 47% increase compared to Q1 2021. Our revenue growth rate was driven by an increase in total payment volume, particularly due to strong performance from our international cross-border payment volumes in our education and travel verticals. We processed $4.2 billion in total payment volume during Q1 2022, which was an increase of 46% from the $2.9 billion we processed during Q1 2021. We experienced revenue and total payment volume growth across all regions, verticals and revenue types when compared to Q1 2021. Specifically, transaction revenue increased 50% compared to Q1 2021, driven by a 46% increase in transaction payment volume. Platform and usage-based fee revenue increased 36% compared to Q1 2021, driven by a 45% increase in platform and usage-based payment volume. As a result of our revenue growth, we generated $38.8 million in total adjusted gross profit, representing a 41% increase compared to Q1 2021. Adjusted gross margin for the quarter was 65.5%, in line with our model-driven expectations for Q1 2022. Comparing Q1 2022 versus Q1 2021, our vertical mix drove transaction revenue to grow faster than our platform revenue, which has software-like adjusted gross margins. Within transaction revenue, our payment method mix for the quarter included more credit cards, which generate lower adjusted gross margins. While…

[Operator Instructions] Our first question will come from Dan Perlin with RBC Capital Markets. You may now go ahead.

Hey, guys. Congratulations on another great quarter. I had a question about new client wins. 130 new clients, that’s a really strong number. I think, Mike, you called out, you added 40 in travel. I’m wondering, how do we think about the remaining, call it, 90 or so? Was that pretty evenly distributed? And when we think about this 130 and you’re kind of leading a lot of your discussion today starting with travel, is there like an expectation that these are maybe some of the more sizable clients that travel is likely to be the most impactful as you think about the build-out into 2022? So anything around that would be fantastic. Thanks.

So I’m happy to jump here and start this. So Dan, thanks for the question. Overall, the quarter looked like other quarters in terms of the distribution, meaning we had a very healthy distribution of wins across the various verticals. Education would have been the largest vertical in terms of wins by account. Travel was particularly strong. We feel we’ve got sort of a great stride in the travel segment. Wins in the other segments as well, so good wins across all four of the businesses. I think the second part of your question was sort of a bit about sort of the significance of the accounts. What we’d say there is that they also are following very much along the lines of our historical patterns in terms of size. If anything, we see slightly better in terms of sort of the average ARR across those clients. So we would be very – we are very happy with the group that we’ve just added in to our client list. But overall, I would say, it follows the mix and sizing we’ve historically shared with you.

Okay. And then a quick follow-up in relation to the domestic education solution you guys are selling. Can you just remind us kind of the go-to-market motion you’ve got there? You called out, I think, University of Connecticut, which sounds like it took both down. So my question is, you’ve got a pretty big back book of cross-border education. Are you finding it a lot easier just to go back to that back book in order to win those types of domestic education deals or are you finding that actually, clients are ready to make a bigger change for both, and that that’s where you’re seeing more success near term? Thank you.

So I’ll take that one as well. So there is a couple of things about domestic to try to sort of paint the picture of how pleased we are and how well it’s going on in the domestic side. So the first thing, focusing on your question, was sort of that U.S. domestic win along the lines of UConn. Previous call, we announced Stanford. We see a mix of those. It tends to be easier, just as you implied, that we would take an existing client that know and appreciate Flywire, that we’d be able to take that client and do to the land and expand to be able to add the domestic. That is probably the more common move for us. But UConn’s an example that it doesn’t have to be that way for here in the U.S. market and where we can take a net new client and add both cross-border and domestic. The only other point I’d add to this is I’d sort of contrast it with our experience internationally. Remember, internationally, we are also offering domestic and international payment as an offering. And I would say internationally, it’s probably, if anything, slightly the opposite. It’s more frequent for us to come in and be able to take on both domestic and international from early on or even right away in terms of the relationship. So that domestic piece is working for us both in the U.S. as well as in our international markets.

That’s great. Thank you very much.

Thank you.

Our next question will come from Jason Kupferberg with Bank of America. You may now go ahead.

Hey, guys. This is [indiscernible] for Jason. Thanks for taking my question. So just a general kind of question overall for 2022 guidance, obviously, you guys had a strong quarter, but it looks like you guys are raising your 2022 revenue guidance by more than that. So is that upside just mainly coming from the travel and education verticals or maybe can you talk a little bit more about the B2B and the health care piece as well? Like kind of what is driving your more optimistic outlook for the full year? Thank you.

Yes. Thanks for the question. One thing I would just highlight is we see confidence across the business. And so when you look at that, I’d say that flowed through in how we look at full year guidance now. So clearly, we called out education and travel in the comments. And I would say that is definitely where we’re seeing additional upside here based on the results we saw in Q1. But really, across all sectors, right, we feel really good about the trends we’re seeing. I covered a bit in my prepared remarks, there is good trends across all these industries. But definitely, the callouts are education and travel. I would also say just global performance across lots of regions is really encouraging at this point, too, specifically around the travel business. So those would be the big callouts.

Okay. Awesome. And then just on the margin piece, can you just talk about quantifying some of the investments in the business that you talked about, whether it’s on the sales and marketing side or some other pieces just so – and have any of those expectations changed for the full year? Thank you.

Rob, do you want to maybe cover – just cover the breakdown of the investments and then Mike can double-click on the numbers?

Sure. I mean, we have an investment plan that we shared a little bit about in the last call. We will also be sharing quite a bit more about that in the Investor Day that we’ve got coming up here. We’ve really focused on go-to-market resources as well as R&D, although I’d say there is growth really across all elements of the business as we scale into the revenue growth that you’ve seen us report the last few quarters. In terms of that sales and marketing, we’re probably, at least for my part, most excited about that just because we’re starting to see and feel really good about the results we’ve generated there. So that investment, which I think we shared has added about 100 people overall in that go-to-market function inside the company, has not only delivered well in terms of adding clients. But if we look at the ARR that we signed for the quarter, we felt really good about Q1 ARR signings. We felt really good about Q1 pipeline growth that was generated by that go-to-market team. And so overall, we’re early in that investment, right? Those resources come on board, and you expect their return to come over a bit of time. But the early results that we’re seeing, we feel very, very good about. On the R&D front, we have, again, an ambitious R&D plan. We will be sharing more about some of the new areas for us in the upcoming Investor Day, but we are ramping that team as sort of the second major area of investment for us, overall though, all in line with our plans and expectations.

Okay. Cool. And if I could just with the last one, the 145% NRR for travel was pretty impressive. I mean, can you talk about how that compared to – for the overall business and how that was relative to just the travel piece that you disclosed? Thank you.

Yes. So overall NRR was also very healthy, generally right in line with our long-term averages that we’ve shared with you over time. So NRR, very healthy across the business. Travel happened to be particularly strong. We sort of called out in my comments the general strength of travel in terms of return to travel. All the dynamics in that are very healthy, right? There is more transactions, meaning more travel happening. There is a higher average transaction size happening within that part of the business. So we see very healthy growth in terms of sort of average transaction size. I’d say the EMEA region is particularly hot, but we saw strength really across the span of our travel clients.

Awesome. Appreciate the detail and congrats on the quarter. Thanks.

Thanks.

Our next question will come from Darrin Peller with Wolfe Research. You may now go ahead.

Hey, guys. I mean, it’s pretty clear that the investments paid off with the number of customers you’re adding at these 130 record levels versus the average. I think it’s about 100 per quarter before. So it’s great to see. I just – but I do want to dive in a little bit again on the margin and the investments you’re making to deliver on that. So you added 100 – I think you said 100 professionals. That can add up in cost. Is that run rate going to help – I don’t know if you guys hear me okay, but is that the right run rate to think about where you have enough capacity from an engineering standpoint to show a little more operating leverage going forward now such that maybe we can see some element of more of a pass-through? Or do you have to keep adding at that rate in your view to keep the growth alive?

Yes. I’ll start and folks can jump in. I’d say in general, the investments where we continue to pull is really important that we see the result as we started to see here in Q1. But again, it’s – these are really investments we’ve talked about for ‘23, ‘24 and beyond, right? So I think that’s the – first the important part. We will see results through 2022. But again, we’re making these investments really for the long-term. One thing I’d also just highlight in the way in which we’re looking at it is that, that leverage that we’ve talked about before, which is strong EBITDA margins over the medium to long-term, we continue to hold that really true, right? We’re building this business for the long-term and expect it to have kind of industry strong, leading EBITDA margins over the long-term. So again, we could get there sooner, but we see opportunities to really invest. And that’s really what we shared in the last earnings call, what we will continue to talk about at Investor Day. And it’s great to see the go-to-market paying off. Again, product and tech people hopefully realize we’ve scaled these now four industries, launched four new industries, launched additional products. So again, very confident in our product and tech investments, have a track record of identifying new use cases, deploying new products and driving that land-and-expand strategy across industry that Rob has talked about so much. So really feel good about it. But again, would want people to really remember, these are multiyear investments. And in addition to that, it doesn’t change our view on long-term EBITDA margins being quite strong.

So just to follow-up, I mean, philosophically speaking, I understand long-term, it doesn’t change your view, Mike. But I mean, just given the market we’re in, is there any change whatsoever in terms of what you consider to be the long-term horizon to reach certain levels of margins? Or is it really just important that given the opportunity, you continue to invest as you see given the opportunities in front of you?

Yes. I mean, I think the times are not lost on us. At the same time, we think you’re – it’s not unrealistic to see some flow-through happen this year, but we’re going to invest. And again, we can continue to – we showed that the flow-through could happen last year. We can continue to do that. We’re obviously going to look at things such as G&A and everything else that we can look at to continue to show that scale that we showed last year. And hopefully, people will look at us and say, these investments make sense. We have quite a cash position. But also, we’re not a team that has taken any investments lightly in the past, right? I think we’ve been good stewards of capital. We will continue to do that based on the ROI on these investments. And again, could we get there sooner? We – could we get there sooner? I think we could. But again, we have a huge opportunity, super low penetration on this total addressable market and a ton of growth ahead. So we’re trying to walk that line. And hopefully, that’s clear.

Just one quick follow-up, if you don’t mind. One of the questions we get a lot is to help explain the differentiation domestically, why you guys went – why the land and expand works. So why are you resonating so much with your customers domestically after you get in the door with cross-border often? And that clearly seems to be the case. It continues.

Yes. I mean, it – I always believe it comes down to people and tech. And so when you look at people and product, again, our team – I’ve said this, our team of are industry experts. We believe they are the best of the best within these industries. And so they understand the pain points of these clients and have great reputation in the industry. So I think that first helps, but you have to have a great product. And I think no matter which of these industries you look at, again, there is a combination of companies that have tried to either deliver solutions, but they are very dated, or they require you to piece together two or three other types of technology, including payment providers, payment relationships, banks, etcetera, plus the software. And we’re really coming in with something truly unique and different, right? We’re coming in with something that solves the complete problem, modern technology, not only sold but delivered by a team of experts. And again, I think people are starting to see that. And you don’t win big deals like Texas A&M, Stanford, UConn without that opportunity – without clearly demonstrating that. So again, I think it will take time, right? These industries don’t transform overnight, but these are multiyear strategies for us.

Alright. Thanks, guys.

Our next question will come from Ashwin Shirvaikar with Citi. You may now go ahead.

Thank you. Hi, guys. Good to hear from you guys and results. I guess given the student admissions data that you shared and then just the traction that you’re seeing in travel as well, should we look for an especially solid 3Q? And as we think of modeling from a sequential and quarter-over-quarter basis, is that sort of strength sustainable down the road, is sort of the question.

Yes. I’ll start, and then Mike Ellis, I’m sure, will dive in just make sure everybody has the numbers baseline. But in general, you’re thinking about it the right way. I mean, obviously, we’ve referenced some of the admissions data as an input to why we feel so strong and confident. That will hit in Q3 from the United States perspective. You’re right about that, Ashwin. And so definitely, that is a very encouraging sign. I’d also say we generally see positive trends around global movement. Again, I think we’re all well aware, there continues to be COVID spreads but definitely less impactful, and people are navigating around them when it comes to travel. And that is definitely the trend, and that’s definitely what we’re expecting. Mike, maybe you can just double-click on the Q3 numbers and the quarterly seasonality so everyone has it in their mind?

Yes. Sure. Ashwin, good to hear from you. The admission data is indicative of what we would expect for a couple of reasons. I think first and foremost, if you think about the client adds that Mike and Rob have talked about and education driving a good portion of those, that’s really important to get those signs in the first half of the year so you get to recognize the transactions in the second half of the year. That’s one big piece of it. I think also, the land-and-expand strategy that we’ve taken that has allowed us to show that we can actually generate incremental revenues from our client relationships across all of our products and in education really gives us a lot of comfort and optimism around what Q3 will look like. As you know, from seeing the historical numbers, Q3 is always our biggest revenue quarter. And we expect that would continue for 2022. But based on what we’re seeing on the admissions data and the success we’re having with our client signs, we’re optimistic about what the second half of the year will look like from a revenue standpoint.

Got it. Got it. And in terms of just sort of the ability to keep hiring talent, could you comment a little bit more on that?

Yes. I’ll jump in. Our ability to hire, again, we’ve always had a strong investment in culture, our ability to find great talent, our ability to navigate, I think, the future of work. We’re very encouraged by it. I know most companies aren’t. The other thing you should realize with us is we have a global footprint of FlyMates. And so that is a huge advantage to us, right? It’s a global business. Our ability to expand or to flex in different regions of the world is a strength that a lot of companies don’t have. And so that combination of just a strong culture, what we built really with the amazing set of FlyMates that we have plus this global footprint, really, I think, puts us in an advantage over many. Finding talent is always kind of top of mind for us. Executives carve out time for it. It is a huge focus of how we built this company and how we intend to continue to build this company.

Thank you.

Our next question will come from John Davis with Raymond James. You may now go ahead.

Hi, good afternoon, guys. Mike, I just want to start with FX. Obviously, you guys are a global company. But just curious if you guys could comment on any sort of FX impacts embedded in the full year guide.

Yes. I’m happy to hand it over to Ellis. But again, I think everyone should know, we look to hedge a lot of that risk out of our business. But Mike, do you want to cover if there is anything notable?

Yes. So John, good to hear from you. The FX impacts for our business are relatively small, low hundreds of thousands as it relates – and that could be plus or minus. And it really gets impacted into the adjusted gross margin line but not big enough to highlight. So FX changes within our business or how we operate due to our hedging strategies have been very minimal over time and don’t really drive the needle at all.

Okay. And then, Mike Ellis, you talked a little bit about the gross margins ramping close to slightly below ‘21 levels. That implies kind of a fairly material ramp of a few hundred basis points throughout the rest of the year. So just maybe comment a little bit about what’s going to drive that. Is it mix? I think you called out some credit cards mix in 1Q, but just want to make sure I understand the ramp to get hopefully back to the – close to the 69% gross margin level from last year.

Sure, John. Essentially, when you think about what happens in the second half of the year and due to the seasonality of our business, you’ll see historically, we’ve had really strong cross-border education business that really hit in Q3 and Q4. And what that means is that you have higher average payment sizes, which typically get paid via a bank transfer versus a credit card payment. And really, what you saw in Q1 and what we expect for Q2 is similar credit card utilization payment method mix that will, in fact, show lower margins in the first half of the year. But because of the way the business seasons work relative to our industries, we see that reverting back to what we’ve seen historically due to the propensity of bank transfers for the higher-sized payments.

Okay, great. And then last one for me. Mike, maybe just talk a little bit about the WPM integration, how that’s going, remind us of the opportunity in the UK and what you think – I don’t know if you can give us any stats on like overlap or what percentage of the market Flywire post-WPM has, but just curious there if we can get an update?

Yes. Sure. Happy to. It continues to go quite well. I think I had mentioned in the last call, we had already just come back from the UK and had actually been at the announcement for all the clients in a user conference. I think people mentioned – we also mentioned on that call that we had the tech integration, which continues to go quite well and is on schedule for us to execute against. So again, we feel like that integrated solution is there for customers. Customers have been lining up for it. Rob mentioned the Oxford relationship, which was actually a bit of a shared client that ended up – again, that news positively helped us get additional business there. And in general, if you look at where they came in, they came in with – I think we announced there is about 100 clients or so in the UK. It’s a massive opportunity. They see billions of dollars of payment volume go through their software. And again, they really weren’t monetizing any of it, right, much more platform and software-based revenue stream. And so the thesis is quite simple, which is integrating our network into their software is going to drive a great solution for customers, and you’re going to see monetization of that payment volume. So total UK market, $30 billion plus. And we think that’s a key piece to us marching on that. So the team size, I guess I’ll comment on, too. We pretty much doubled our team size in the UK by merging the two companies together, and we’re even hiring on top of that in that market. So again, we see huge opportunity, multiyear ramp to that payment volume and going quite well. Actually, if all travel plans go well, you’ll – those folks that are coming to the Investor Day will probably get to meet one or two of the WPM folks who would be there as well.

Okay, thanks, guys.

Our next question will come from Tien-Tsin Huang with JPMorgan. You may now go ahead.

Hey, nice to speak with you, guys. Just wanted to – I know there is a lot of questions on the client additions being a record and whatnot. I am just curious, is that just a function of the bigger go-to-market team, better sales productivity, pull forward of the pipeline? Which is related to my other question, which is with the record wins, is the pipeline being replenished at a similar pace?

Yes. I can jump in and take that one. So Tien-Tsin, actually, not only did we add that good roster of clients in that client count, but we actually meaningfully expanded the pipeline total value along the way. So, the ARR signings of those clients were in line with our average, even actually slightly better than our average ARR size. But what we did in the pipeline outside of the signings, not only replenished it, but grew it substantially on top of that. And so again, that’s the dynamic that you see when you have invested significantly in sales and go-to-market expansion. Obviously, those things don’t sort of move overnight. You have got to get those people in place. They have got to develop their client and prospect lists and then convert those over into sales. So, we feel we are seeing the right signs of that progression, and Q1 was a note there. But in fact, the point you make is an important one, which is that the actual growth in the overall ARR in the pipeline is also really healthy and perhaps in a way more important for the future. So, I guess we are very happy with both sides of that.

Amazing. No, that’s great to hear. So, my quick follow-up on that is just, does that inform your thinking in any way around investing more in go-to-market? Is that – I know you are upping your sales, your FlyMates and etcetera. But is that something you would consider in the short-term?

We are really doing two things. So, first of all, as we outlined the investment plan for everybody for the year, and we called out very specifically that we were being ambitious in that investment plan, we are still working on that, right. We are still adding sales reps. We are still adding other go-to-market resources as we go. Obviously, we are not unaware of the climate that we are operating in. We are not unaware of what’s going on in the market out there, but we do feel really good about the dynamics of the sales force expansion. So, we are investing in improving the sort of the skills and training of that sales force. We are expanding the sales force itself. Ultimately, we believe in the LTV to CAC. We believe in the ROI that we deliver. And so we are right on the path that we expected to be on of continuing to invest in that sales force. So, where we stand today is not the end, but I think we will keep going. And even though, again, we will be very mindful of what’s going on in the world and mindful of how we spend, we will continue to invest in everything to do with sales and go-to-market.

Great. That’s what I was looking for. Thanks so much. Well done.

Our next question will come from Jeff Cantwell with Wells Fargo. You may now go ahead.

Hey. Thanks for taking my question and congrats on the results. Can you talk a little bit about the competitive environment in education? What gives you that confidence to say that you will keep winning in the market? This is kind of a follow-up to Darrin’s question. I guess the question is, maybe qualitatively help us understand how you expect to continue to penetrate into that TAM. Is it more domestic opportunity that you are seeing? Is it more international opportunity now that you are focusing more on that different non-U.S. areas? Are there any kind of incremental changes in the volumes that you are seeing yourselves generating now that you might want to call out? And then separately, what would the net revenue retention in education look like now versus maybe a year ago? Do you have that for us? Did you say that already? I just want to check that again. Thanks.

You want that one, Rob?

I can start. So, there are obviously multiple questions in there, Jeff. Let me catch one of the ones towards the end, and then I will try to give you the bigger picture. So, net revenue retention in education continues to be excellent, right in line with sort of our long-term profile for education. And so we are very comfortable that the land and expand continues to work. Now, let me take a step back and try to answer your broader question, which is that the value proposition we have is still distinctive in the market. Like from the various highest level of software drives value and payments, we continue to believe that the software we are delivering and the teams we are delivering it with are the best out there. And so if you look at what’s happening in the U.S., we are continuing to win clients like the UConn example and the others that we have mentioned. And that’s on the basis of a really stellar reputation in the market. Word travels fast inside the markets that we serve, and our reputation probably is one of our stronger calling cards. But of course, the technology and the teams have to be there to support it, and they are. So, we continue to do that. We also, though, continue to innovate like some really interesting dynamics around the things that we do. As we introduce products like A/R Collect, e-store, we announced the Ascensus partnership and the work that we are doing around 529 plans, that gives us another opportunity to get to know more schools and on a new basis and again, all under the umbrella of delivering great value for them. And so when you look at that U.S. business, like everything we are doing for these schools, both reputationally and the results we are delivering, are really, really positive. And I think that’s what helps us continue to grow our list and deepen our relationships here in the U.S. It’s kind of the same thing in Europe, although, again – and internationally, although many of the institutions are perhaps smaller or different. We are now – I think we signed our first public university in Spain. So, we had multiple Spanish clients, but we added a public Spanish university. And again, all of this is part of the distinctive capabilities that we have and the ability for folks to understand what we can do for them. Really happy with the results we see globally with our education business. Jeff, did I catch everything or did I miss any part?

Yes. That was everything for that long-winded question in mind. And maybe just as a follow-up, can you talk a little more about those new wins? You just alluded to this. I thought that Ascensus one sounded interesting as it was the 529 college savings plans. Can you tell us a little more about that? And underneath the hood, maybe can you describe how those payment volumes of revenue are generated by you and what type of size that might be? I am hoping you could help us think that through. Thanks.

I mean again, it’s part of the portfolio of services that we apply both for the ecosystem, the industry and the school. So, we like to think about ourselves as having services that help both the schools and the ecosystems that we are in. 529 plans is a great example, right. It’s a very messy set of payment flows that have tended to be very paper-based, create a lot of noise inside the system. We believe software can add value in those flows. And so by working with Ascensus and the various plans that they help deliver from a technology perspective, we can at scale get access to and work with those plans and then ultimately deliver the payments to the school through the mechanisms that they are used to receiving money from us already. And for those that aren’t already our clients, we will work with them to get them the money as well. And hopefully, that will be an opportunity for us to establish a relationship with those schools and continue to expand our footprint further.

Okay. Great. Thank you.

Our next question will come from Bob Napoli with William Blair. You many now go ahead.

Hi team. This is Spencer James on for Bob Napoli. Congrats on the results. Thank you for taking the questions. Many of mine have been answered, but I was wondering if you could talk about the competition and also the solutions you are replacing in travel, in particular, and maybe how that compares to the education vertical. And as a related question, how might your past success and continued success in education inform your efforts in ramping your travel vertical? Thank you.

Sure. Thanks Spencer. It’s Mike. I will take it. I would say first, competition-wise, you are spot on. You see different competitors by industry, sometimes even by geography. So, in travel, you are typically going to see a way of local acquirers. Like most folks will have just had manual bank-related payments coming in, wires or domestic payments via bank rail. Again, huge manual pain for them and/or they will add a local acquiring partner. And again, sometimes you will see a global one. But again, it varies. Again, you are focused on a lot of these destination management companies are typically within one geo. And when they are in one geography, they usually find someone local around them to accept cards. So, again, you are competing with what is really a sub-sector, a sub-segment of the capabilities you really need to satisfy the use case of travel, right. If you think of this money is coming in from all overseas, they are traditionally dealing with a local acquirer. That local acquirer isn’t really best equipped to be handling lots of foreign transactions. They still have to deal with all types of messy reconciliation with the manual bank payments and wires. And then all that has to integrate into their system of record. And so again, when we are coming in, we are really coming in with a whole different story of connecting into that system of record and travel. It’s more like a bookings platform and/or their ERP system for invoice generation. And then we are bringing with it a solution that takes away all that manual work around bank-related payments and provide a more global card or third-party payment method acceptance vehicle. So, really, that’s where we are competing against. I don’t frankly see a ton of competition…

Thank you. That’s great. And one follow-up, good to see the – or hear the pipeline is up quarter-over-quarter. Anything to call out by geography in terms of that pipeline, maybe a higher mix in your pipeline versus your existing base, anything by geography maybe?

I think we are seeing growth steadily everywhere. I have to go sort of poke in the numbers to make sure every part of that is right. But overall, great strength in EMEA, great strength in APAC, very excited about Latin America and the U.S. doing very well also. So, good strength in our global team. And again, we are excited to invest in some of these other geographies as well, right. We are at the very earliest stages of placing sales talent in very large potential markets for us. And so excited to start to be able to have feet on the ground in whole swaths of Latin America, major countries in Europe, Northern Europe and the like, where we really don’t have any physical presence today and look forward to adding it.

Great. Thank you for the questions.

Our next question comes from Andrew Bauch with SMBC Nikko Securities. You may now go ahead.

Hey guys. Thanks for squeezing me in. I wanted to drill in on gross margin once again. I know it’s been asked before. But hopefully, I could ask it in a different way. I mean I know you called out verticals and mix being the two primary variables on why it was down sequentially quarter-over-quarter. I am trying to understand, I mean isolating those two variables, should we assume that the vertical element was something in the lines of travel? And if travel outperforms, it may ultimately limit the upside to gross margin? And I guess talking about the payment mix side of the business, I mean what gives you the confidence that we do see that sequential ramp throughout the remainder of the year, particularly in the second quarter when it’s not a particularly strong education quarter?

This is Rob. I can start with all of this. So, just to be clear about what we have indicated on the call thus far, Q2 is likely to look more like Q1, where you will see sort of the mix dynamics changes in Q3 and to a medium extent in Q4 as well. But Q3, most notably, is going to be very strong in education, very strong in cross-border education. And with that, what we have historically seen is a skewed bank transfers, and those do carry sort of higher margin rates. So, not only is it our biggest quarter, it’s been our traditionally highest adjusted gross margin quarter and driven off the two dynamics that I just mentioned. We are still doing a lot around all of our businesses. So, yes, in today’s version of travel, one of the primary dynamics is that we do see a bit more card mix in that. But note that we are still early in all of our businesses. And as we continue to invest in new software and capabilities, as we continue to sort of tune the capabilities, as we present them to the various kinds of payers that we serve, we will see the mix continue to adjust, right. You will see some quarters where – and some corners of the business where there is more card mix, and that will presumably continue to be a bit lower on the adjusted gross margin side of things. But all the other things that we are doing and that we are innovating around can go in the opposite direction as well. And so that’s where overall for the year, we have given the guidance about our expectation that we will get adjusted gross margin near, but slightly below the full year last year.

No. That’s very clear. Thank you. And then another question on M&A, I mean I know you guys have your hands full with WPM and converting a lot of that volume into process and integrated solutions. I mean are there additional opportunities on the horizon, particularly given where we are as far as market valuations go and thinking about how much – what are the other things you could do in similar verticals that could follow that playbook?

Yes. Andrew, I will take that one. So, we continue to believe in the three pillars. How can we add on to an existing vertical? How can we potentially layer in an additional capability that can drive NRR across the customer base, or again, third and probably least likely, can we use it to expand in a new industry? Definitely focus on those three pillars for M&A, continue to be quite active. I would say we have not seen an adjustment as much to valuation sitting in the private market. I think you are starting to see it, and you are starting to see articles out there in the public domain talking about it, but nothing like what you are seen in the markets so far on the public side. And so again, I think we are picky when it comes to M&A, right. We have high 90% client retention, high-90 percentile FlyMate or employee retention in the deals we have done. And so we are going to be a bit picky. But at the same time, I wouldn’t say our capacity is limited by the WPM. Integration is going quite well. It’s a great group of professionals. FlyMates are all over it and executing quite well. So, we just got to go find another deal that we think looks like a deal that would be successful for Flywire.

No. Makes a lot of sense. And looking forward to seeing you guys next week.

Thanks.

Our last question will come from Ken Suchoski with Autonomous Research. You may now go ahead.

Hi. Good evening everyone. Thanks for taking my questions. I wanted to ask about the travel recovery since you called out the strong trends in that vertical. Can you just talk about how much room there is to go in looking at that travel recovery? And how confident are you that this vertical is going to further normalize on a same-store sales basis as travel continues to improve? Just – because I believe you signed a bunch of travel deals prior to and during COVID and so I just wanted to understand the upside there.

Sure. I will start. And Rob, you can pile in, if you want. I would say if you look at travel, obviously, we don’t feel like we really pulled our foot off the gas even during the pandemic when it comes to client adds, but continued to ramp that. So, I would say some of the growth you are seeing here is obviously those clients performing well as the world hopefully comes fully out of a pandemic. At the same time, there is tons of opportunity within that sector, right. We are in the early, early stages. So, if you look at the sub-sectors between accommodations, luxury tour operators, destination management companies, there is a lot of depth in that nearly $0.5 trillion total addressable market that we have highlighted. So, again, early stages there, making a big investment and continue to make that investment throughout this year in travel and feel really good about not only this year. But as you start to look at that ramp for travel, we think it will continue to ramp quite well, right. There is investments in not only EMEA, which is performing quite well, in North America and Asia Pacific, where we have teams, but I think Rob mentioned we don’t even have teams yet going after some major geographies within that sector yet, all part of the investment plan. So, I feel really good about it and see it ramping over multi years, not just, obviously, the comeback that happens from the pandemic. But again, I feel like this is something that will grow quite nicely for the business over time.

Okay. Great. Thanks Mike. And then as my follow-up, I wanted to dig into just the domestic business a bit because it is a big part of the thesis. And so I just – can you talk about how penetrated the company is on domestic payments? I think it’s still very early days, but just curious how quickly you expect that to ramp. And then could you just remind us what the ARPU lift is when adding in domestic payments?

Yes. Rob, do you want that one?

Yes. I am happy to take that. So, first part is, we are in the very earliest innings of penetrating that domestic opportunity. So, I think your question, Ken, was mostly focused on the education side, where we have penetrated a very small percentage of our client base. Keep in mind, as we create this domestic opportunity, we will create it in the other businesses as well. We are similarly very early in domestic as it would relate to travel or B2B. And so those are all opportunities for us, all in the very earliest of innings and with a great upside opportunity for us, right. So, as we look at each of those and focusing, first and foremost, on sort of answering the question from an education perspective, we have seen this revenue multiplier in accounts when we are able to get in there and take on the domestic alongside the cross-border, right. The larger population of students is a real opportunity as we bring forward the rest of our suite of products.

Yes. No, absolutely. And is there a big lift to build out the domestic payments on the travel and B2B side like you mentioned, Rob?

Not in terms of the network capabilities. I won’t say that there is no work involved, but we are – have been mindful for a long time that as we built the global payment network, we were building it to serve multiple verticals. And so again, there is some work to be done there, for sure. But the heavy lifting of figuring out how you serve the market, how you get appropriate licensing, a lot of that is very leverageable across the verticals. The work with the partners and the networks and the setting up the accounts, all of that is very leverageable across those countries and across the global payment network. So, we see a lot of leverage, a lot of scale there.

Alright. Thanks very much.

Just to tack on to that, Ken, one thing I would just say is, remember, those investments we are making geographically not only help with go-to-market, but they also help with the payment network expansion, right. So, pick a country like Spain, you have got clients across multiple verticals in it. You have students going to it from all over the world. You have students coming out of it all over the world, right. So, when we are making those investments, they are really being leveraged all across the business, which is the beauty of the model.

Yes. No, absolutely, it’s a great point. Alright. Thanks guys. I appreciate it. I will see you next week.

This concludes our question-and-answer session. The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.