Flywire Corporation (FLYW) Earnings Call Transcript & Summary

Hi, everyone. I'm Jason Kupferberg, the payments and IT services analyst here at Bank of America. We are in the afternoon session of day 1 of our Electronic Payment Symposium. And we are very excited to have Mike Massaro, CEO of Flywire, here for a fireside chat for the next 45 minutes. If anyone would like to submit questions for me to ask to Mike on your behalf through the portal, please feel free to do so. But Mike, thanks very much for your time. We appreciate it.

Jason, thanks for having me.

Yes.

Glad to be here.

Great. Great. So let's just level-set a little bit because your IPO was just last year and maybe just outline, for those in the audience who might be a little bit less familiar, some broad strokes on the business model, on the revenue model of Flywire. We think it's pretty unique and interesting. So I would love you to share some of the highlights to kick this off.

Sure. Happy to. So our belief at Flywire is that there's major sectors of the global economy that have yet to be digitized when it comes to payments. If you think of yourself as a consumer, if you think of e-commerce experiences and retail experiences you have today, they're way more modern than they were 1 or 2 decades ago. Frankly, it probably causes you, like me, to spend more on e-commerce than you probably want to. But those are payment experiences that have taken decades to get to that point. And Flywire really was built around looking at certain areas of the global economy that are poorly digitized. Typically, it's high-value, high-stakes payments. So things like paying a tuition bill or maybe that confusing set of medical bills that you sometimes get in the mail after visiting a medical hospital or having a doctor's appointment. Maybe it's going on a vacation overseas. Or maybe if you're in a business, it's invoicing a supplier in a different country. All of those are good examples of really poor payment experiences that have existed for decades. And at Flywire, we look to solve those. And so we ultimately help our clients get paid from their customers all around the world. And we do it through a combination of software and payment capabilities. We often refer to it as the Flywire advantage, but it really has 3 components that make us different than most companies. The first is a payment platform. Think of this as a shared set of services, does everything from make a bank transfer, do a currency conversion, do a payment notification, store a credit card, perform a payment plan. All of those shared services are all in one core platform no matter what industry we're serving. That platform is horizontal, like I said, across the industry. And it sits on top of a payment network. And what's unique is that we actually own and control our own payment network here at Flywire. So think of it as 50-plus bank accounts around the world with some of the leading banks. Think of it as acquiring relationships with some of the top acquirers in the world, direct relationships with folks like China UnionPay, American Express. All the third-party payment methods you would expect to see in these payment experiences, they come as part of the Flywire network. And then on top of that platform and that network, again that service all our industries, we have vertical-specific software. And that software is really deeply integrated into the system of record of our customer. It could be a student information system in our education business. It's typically an EHR, where all patient data is stored in a health care system. It could be an ERP system, if it's a B2B payment, for instance. And so that's really what differentiates us, is those 3 components, platform, our own payment network, plus vertical software. And then when you look at the business, we monetize revenue really in 2 buckets, one of which is transactional and one of them is platform and usage, which is much more like SaaS-based revenue and transactional revenue.

So let's go into each of the 4 verticals that Flywire operates in. And maybe you can just give us kind of the contours of the competitive environment for each use case?

Sure. Sure, happy to. So across our industries, first, you'll really -- you won't really see anyone competing across industry for us. You'll typically see someone compete within a given industry or sector. Sometimes, it's even within one solution within an industry or within one geography within that industry. So Flywire, if you look at education, we started off for the first 6-plus years of the company really focusing on cross-border tuition payments. It was a massively underserved opportunity. It was really poorly digitized by incumbents in the space. And as the number of students studying outside their home country grew, a need for a solution was really there. After those 6 years of helping digitize that for some of the top institutions in the world, many of our clients said, "Why don't you do more for us? Why are you just doing my cross-border tuition? Why don't you help me with payment plans and domestic payments and other systems that really hadn't been modernized by incumbent providers." And so if you look, today, we actually have a whole suite of offerings in our education business, again, always focused on helping our client get paid. And our client is typically under a multiyear exclusive agreement with Flywire. And they're the top educational institutions. Maybe they're even boarding schools that are famous and well known. And they can even be language programs around the world, vocational programs. So it's a really broad definition of education. And Flywire software is really facilitating all the payments that can happen, whether they're cross-border domestic, whether it's potentially making a disbursement from a 529 plan or maybe you're setting up a payment plan to make multiple installments throughout a semester. All of those are good examples of how Flywire technology is deployed in the education sector. And again, in that sector, you're going to see mostly us competing with incumbents who were delivering traditionally just software without a really modernized solution or without deeply embedding payments as part of it. If you look at transition then to health care, it's our second largest industry. We're working with 4 of the top 10 major health systems in the United States as an example. And there, we're really helping these hospitals digitize a problem that didn't exist many, many years ago, right? As the cost of health care has grown mostly in the United States, you've seen more out-of-pocket spend by the consumer. If your household's anything like mine, I have 4 boys, when you get a hospital visit, you get bill after bill. And some of that's owed by the actual patient. And the health systems really lack the ability to really engage patients in these balances that they have. So time and time again, you would see papers show up at their house. It would be -- it would look like a bill, but it would say, "This is not a bill," literally on it, and it would cause a lot of confusion with the consumer. And so what Flywire has done is taken our core set of capabilities, our payment network, and delivered great engagement solutions for hospital systems, really everything from post-service, where they're getting a bill maybe to their house or maybe now digitally delivered, and driving that entire payment experience for the patient, whether it's paying a $400 balance at once, whether it's making 4 installment payments, again all just the hospital extending different payment terms to a patient based on their affordability needs through our software. And you're even seeing Flywire get deployed now at pre-service. So during the pandemic, many users ended up seeing check-ins where you had to fill out the COVID protocols for a hospital. But oftentimes, you saw payments being brought up as well, if you had an outstanding balance. So that, again, they were trying to digitize, engage patients and make sure they were modernizing their payment experiences. And so that's what Flywire software does in health care. And again, you're typically seeing print vendors or incumbent legacy software vendors who are trying to help hospital systems transition digitally. And so Flywire is kind of coming in with a different proposition, where we have the software and the payment infrastructure and putting that together for our clients in health care. If you go to our other 2 industries, travel and business-to-business payments, in travel, we're focused again on high-end large transaction types. So you're not going to see Flywire processing small travel payments. We're not going to be competing with e-commerce incumbents. We're really focused on large parts of the travel ecosystem. It's about $0.5 trillion of total addressable market in travel alone, around things like accommodations, whether it's a villa rental that you're doing in some family destination on a trip you're doing, whether it's an African safari or a big family vacation you want to take to Italy or Spain. Those are all great examples of where Flywire technology is deployed inside travel, really helping take a very large transaction, traditionally cross-border, and provide different ways to pay for that consumer, really automating that AR process for the travel company. And that's really what we're doing there. And most of the time, you're seeing manual processes there, where we're placing bank wires. Sometimes, you're replacing a traditional credit card acquirer, who is just processing cards, oftentimes within that geographic market that the travel company exists in. And we're bringing, again modern software and a whole -- a broader set of payment options to travel companies. And then the last sector we're in is business-to-business payments. And in that sector, again, we're focused on the accounts receivable side. It's a big differentiator in that sector, in particular. There's a lot of companies that focus on accounts payable digitization. We're on the accounts receivable side, so connected to that invoicing flow and delivering great payment experiences to some of the top tech companies in the world, professional services companies, manufacturing companies, all good examples of the types of B2B clients that we serve, again really trying to provide an easier way for them to get paid from customers all over the world.

Education, obviously, is your biggest vertical. It's where the business started, as you mentioned. So I wanted to go a little deeper there. And maybe you can break down for us some of the types of institutions that you service that maybe wouldn't be intuitive to people. I think you mentioned 1 or 2 in passing before, but it's not just about colleges and universities anymore, right? And maybe you can give us a sense of kind of the materiality of some of those other kind of subsegments within education.

Sure. It's a massive opportunity. There's almost $600 billion in total addressable market in education alone. If you look at the total Flywire volume in 2021, of over 13 billion across those 4 sectors, it tells you how early we are in not only education, but all our industries and what gives us such great confidence for the future. If you look at education, we started off in the U.S. education system. The first 6 years of our company, we were only focused on servicing higher ed institutions in the United States. And so in the last 4 or 5 years, we've really shown that we can go deeper in that educational system, right, so some of the premier boarding schools, language programs. A good example of a vocational school is someone like Le Cordon Bleu. It's a famous culinary school. They teach the culinary arts in 13 -- over 13 campuses around the world, average tuition amount of over USD 50,000 to study culinary arts. So some of the most famous chefs in the world have come out of Le Cordon Bleu. So it is truly a really deep definition of educational experiences. And if you look at our footprint, we have educational institutions now in over 30 countries. And so we've really proven our ability with the same software and network capabilities we have for payments to really go after the entire world when it comes to the education sector. And so by being able to go downmarket into subsectors and also to truly be able to go after universities all over the world gives us a huge opportunity to go after that total addressable market.

Right. Right. How does the sales cycle typically work in the education vertical? I mean I know you've got a sales force obviously out there in the market. And so if they're just trying to win a new greenfield opportunity, let's say, with a U.S. higher education institution, how long is that sales cycle? Does it tend to be kind of a traditional RFP process? Maybe just take us behind the curtains there a little bit.

Sure. Happy to. So our go-to-market at Flywire is really direct. We have kind of a channel ecosystem across all our industries, but that's really more of a partner ecosystem and it's kind of more of a sell-with versus a sell-through. So definitely a go-to-market, definitely experts in go-to-market. We also go-to-market with teams that understand these industries exceptionally well. We're not trying to take a generic sales team across industries. We're going into education, for instance, with experts that have traditionally spent 10, 15, 20 years of their career selling into the CFOs and the educational institutions around the world. So that's part of the strategy when it comes to go-to-market. On deal size, you'll see, if it's a targeted solution, maybe a university is just looking for the international payment solution or maybe just payment plans to start. Those can actually be relatively quick. You can see a deal in 3 months or less. If it's a more enterprise-level deployment, and we've noted a few of these recently on our earnings calls, folks like Texas A&M or MMU, which is a university in the U.K., or Stanford, all the examples we've recently shared, that could be a traditional RFP process, where they're looking to replace an incumbent vendor and they're signing a 3-year, 5-year deal and it's going to be a broad set of capabilities. So we may be doing the admissions payments, the deposits, the full tuition payments domestically and internationally. We may be administering the payment plan capability. We may even be deploying an e-store module, which lets them digitize different parts of campus that have traditionally made their own payment decisions, which you would imagine causes all types of chaos on campus. And so those are all the solutions that we deploy. And so you can see something as short as less than 3 months, and then you can see a sales cycle that would be more in that enterprise of 6 to 9 months' cycle.

One question that just came in here through the portal. You touched on it a little bit, but specifically, kind of the belief and about the TAM by segment and your 4 verticals and then just any way to think about like where your penetration rate of those individual TAMs could go over time. It's obviously small today. Therein lies the opportunity, but...

For sure. So if you think of the total addressable market for those 4 industries that we've talked about, it's just under $12 trillion of total addressable market. It is truly massive. So you're looking at -- B2B is by far the largest. Some folks will talk about a $20 trillion -- mid-20s, $24 trillion addressable market in B2B. We focused on about $10 trillion of it, that's directly addressable by us.

Okay.

And then if you look at the other 3 industries, for the sectors we're focused on, they're roughly about $0.5 trillion each between education, health care and travel. So again, massive, especially when you look at where we are in payment volume of 13 billion, and that's what gives us such confidence, is the ability to have proven our business across 4 industries. And then in addition to that, to already have clients in 30-plus countries, it shows the applicability of the solution for clients all over the world.

Yes. For sure. And I wanted to probe one of the other points you were making before, which is around domestic payments in the education vertical. It seems like a pretty interesting opportunity. Any way you can sort of quantify the progress you've seen there so far as well as what the ultimate kind of cross-sell opportunity would be to the existing base of customers that started just doing your original cross-border solution?

Yes. So as you mentioned, right, cross-border was our core solution for a long time. So we built up a client list within that sector that -- within that solution that is quite strong. And so part of what's driving this net revenue retention number that we talk about a lot is the ability to upsell more capabilities to existing clients, especially inside education. And so domestic payments is a cornerstone of that. It is a revenue multiplier for our revenue potential at that given university. It's going to vary on a case-by-case basis, depending on the size of, obviously, the student population, the size of the amount of the tuition payment. But it is a revenue multiplier for us. And we're still single digit-penetrated when it comes to upselling our existing clients in education on the full suite of capabilities we have to offer. So for us, again, it couldn't be more exciting. Again, most of that upselling for that is in the United States. As we look outside the United States, we've really -- we go to market now with a full domestic and cross-border solution. Again, in the U.S., we have this large customer base that for 6 or 7 years just knew about us solving that cross-border tuition problem, that we're really driving that upsell and that deployment of the domestic solution. But it is a revenue multiplier on a per-account basis.

Okay. Yes...

Jason, one more thing to add, it also adds in more of a platform and usage SaaS-based revenue stream. So you can imagine, Flywire, when we're deploying all our capabilities, you actually have multiple revenue streams, both at a transactional level and as a platform usage software-based revenue perspective as well, which is quite valuable.

Okay. So you get some additional SaaS revenues. I guess presumably, the take rates are lower, right, on the domestic transactions, but obviously, you're bringing a lot more volume onto the platform.

Yes. I mean that's one thing that, oftentimes, people look at us and they will often look to take rate and volume and pricing. For Flywire, again, we -- because you get that platform in usage-based component and the transactional revenue stream, that's obviously quite helpful. In addition to that, Flywire actually doesn't really focus a ton on how someone pays, right? We actually leave the choice up to the end payer. So yes, you may see lower take rates if you did the math on the domestic volume. But as I mentioned, it's a revenue multiplier, and it's also an exceptionally great unit economics compared to traditional domestic processing because of the software that's truly adding the value there.

Right. Right. And maybe you can just say a few words about like implementation process. So I mean, I guess, let's take an example of the Texas A&M, right? Because that's a big multifaceted customer using a number of your products and solutions. So what does that implementation look like from a time frame standpoint, from a complexity standpoint? Is Flywire providing implementation resources to help the customer get live?

Yes. I mean across all our industries, our clients, like so many out there right now, don't have a ton of IT resources kind of on the bench, right? So for us, it's really critical to help them get it live. And that really happens in 2 ways. One, we make sure that we have as many connectors or prebuilt configurations for the leading products and platforms for that industry. So you'll see various types of partnerships we talk about publicly with folks like Oracle, or we recently announced a student information system in the U.K. called Tribal. All those are great examples. Ellucian Banner is another platform that's very popular in education. In health care, it could be something like an Epic or a Cerner, where you can either integrate into their kind of app store or have a series of prebuilt connectors to make those deployments easier on clients. And then we also have an implementation team. And so, again, it's going to vary slightly about based on how many products they're deploying. But you could see something as short as a number of weeks to go live with maybe a cross-border product or one of our modules. You could see something that could be a multi-month, 3- to 4-month deployment, if it's replacing all their existing infrastructure for accounts receivable.

Okay. Yes. Still, that's not bad at all compared to what a lot of enterprises see when they get to do a new ERP, right?

Yes. I mean that's part of what's special about it. And like we know our software is going to fit between our software system of record of their customer. And so the beauty of that is those systems are: a, pretty stable on the back end; and they oftentimes have great sets of interfaces. And so, for us, that's really where we're experts at an industry level of knowing how to interface into those systems, and that's where our customers look to us for kind of those best practices of getting that deployed with the systems that they have in the back end. And some of our customers will even have different systems, especially in sectors like health care, where they may be running one part of their hospital on Cerner, another part on Epic. You can actually deploy Flywire and actually integrate to bulk different systems and service to maybe different geographies in the United States, but again have one consistent interface for patient engagement.

Right. Right, which obviously simplifies the whole thing for the client. Yes. You mentioned earlier, when you were talking about some of the components of the Flywire network, some of the acquirers that you have relationships with. Maybe you can talk a little bit about who specifically those partners are, why did you select them, how the economics get shared between Flywire and the acquirers.

Sure. So when you unpack that payment network, that payment network is really Flywire owned-and-controlled accounts or relationships. Again, and one of the big differentiation points for us is that we always say our clients shouldn't have to be experts in payments, right? They should be running their university, running the hospital, running their business. And as much of so many of us understand payments and think it's fun to be there, a lot of these folks don't understand the complexity around interchange or around getting banking infrastructure in all these different markets around the world. And so we look at -- we truly look at that as our job. So we have a dedicated global payments team at Flywire. This payment network we built took over 10 years to build. The vast majority of our volume is bank volume. That's because it's typically large transaction size, but there's a huge part of it that's also credit card and third-party wallets. So third-party payment methods, like a PayPal and Venmo, Alipay, which is very popular in China, those are all preconfigured methods inside Flywire. That means a client doesn't have to sign new paper with someone like PayPal to accept PayPal and Venmo. It's just configured and enabled right through Flywire. The same is with the major card brands. And so we've publicly mentioned before that FIS-WorldPay, Fiserv, First Data and Adyen, are our 3 primary acquiring relationships. But again, Flywire really controls that through the network and the platform. So meaning our clients don't sign paper with those vendors. They also, frankly, don't really care how the money is routed around the world. They care that it gets to them in a fast and transparent way and that it's a great experience for their payer. And so that really gives Flywire the ability not only to kind of have control of the payment infrastructure, but also to be able to control if we need to adapt or change that. So if we're going to add a new method, if we're going to add a new currency option, a new bank account around the world, it can be enabled really immediately. So it puts us in an amazing ecosystem. It streamlines all that complexity around payments for our customer. But it puts us at the center of amazing partnerships with not only the acquirers, the third-party payment vendors, the major banks around the world, even the card schemes. Those -- so having that network is truly a strategic asset for us, delivering value to the customer, but obviously putting us in a great spot inside the payment ecosystem.

So another one from the portal, which kind of ties into this. You're talking about the APMs. I mean any clients in any of your verticals asking for crypto acceptance or...

We've heard a little bit of it over time. I would say, obviously, the fluctuations in some of the major cryptocurrencies has caused people to realize maybe they don't want to use it for certain types of expenses, saving for a kid's education, for instance.

Yes.

But ultimately, for us, personally, I'm a crypto believer and I think it's inevitable that you'll see the digitization of fiat currencies through a more digital mechanism. And for us, we just see those as different nodes on our network, right? Our customers, if you think of how we're deployed, right, our customers don't want to have payment methods that are going around their core systems. And so when you think of that, it's the software, it's the integration of that system of record. It's that software that's delivering a payment experience. If there wants to be a bitcoin or some other currency, stablecoin, for instance, in the future, it's logical to just be there, right? No one wants to build all that infrastructure around it and then do another deep IT integration into our clients. So for us, again, it's something we look to eventually just have as part of our network. But obviously, customer demand, client demand, payer demand is what we'll take into account.

Yes. Yes. Totally makes sense. You talked a lot on this latest earnings call about key investments that you'll be making in the business this year. So maybe walk through the details of that for those who might have missed it and just explain why is now the right time to lean in on this spending.

Yes. Well, obviously, as we, like many companies, navigated the global pandemic over the last 2 years, and we entered 2021, we kind of had this belief of this rolling recovery. And even at the point of our IPO, we mentioned this that we expected the world to figure out how to live with the pandemic, which I think is what you've seen. Now we couldn't -- none of us could have predicted exactly when and what variant is going where and what countries get hit by what, but you continue to see this kind of rolling recovery behavior across industries and across geographies. And so that led us to make sure that we are waiting to see that behavior before really accelerating additional investments. And in 2021, the other thing everybody hopefully saw in our financials is you saw great flow-through, right? We have amazing lifetime value. We have an amazing NRR number of customers wanting to do more and more with us. And our cost of acquisition is also extremely low as a business. And so looking at those factors, it's pretty evident to us that we needed to -- we wanted to continue to invest. And with the numbers that we have and the great unit economics, that's what we kept hearing from investors. And so -- that was really the investment plan we started talking about in 2021. And then as we entered 2022, obviously 2 things happened. I think you started to see the world look a little bit more towards companies -- favorably to companies that could grow profitably. And so one thing we wanted to do is make sure we could still prove that's who we were as a company. And so we set out the most aggressive investment plan we've ever had as a business for 2022, at the same time, still guided to profitable EBITDA for the year. And again, we're really, really excited about the plan. It's really an investment in product and engineering and in go-to-market. And then, obviously, there's some public market company costs that are fully annualized as part of that investment as well. And it's the biggest go-to-market investment we've ever made. We obviously expect it to have impacts for many years out, and actually will have relatively little impact to 2022, maybe a little bit in the second half of the year. But we've always told people to think about us as this compounding growth business over years. That's kind of how the industries were in evolve. And again, as I mentioned earlier, just early innings in the evolution of those markets, so really excited about the investments. We think it's the right thing to do. And we've been really happy with what investors thought of our plan so far. More to come at Investor Day as well in May.

Yes. Well, maybe I'll jump to that for a second. I certainly don't want to steal any thunder there, but for those who are planning to be there, and we are excited it's going to be an in-person event, what -- at a high level, what should people expect to learn? Or are we going to hear from a broader swath of the management team? Just any little sneak peek previews there?

For sure. So we're excited to -- first, we're hosting in Boston. It's our new headquarters. So hopefully, people can join us. There will be in-person and virtual, if people can't make it in-person. And you're going to hear from us about not only our, of course, our industries, but you're going to get to hear from our technical team, and throughout the whole IPO process, we've tried to always put front and center as much as I may be out there and our senior executive team is out there. We have an amazing group of FlyMates behind us who are executing every day. So you're going to get to meet more of those folks, hear about more of the investments for 2022. And I think that's going to give people a great appreciation for our business, the depth of team we have and why we're so excited about the opportunity ahead. So more about go-to-market, more about technical, more about the culture and what makes Flywire unique.

Very cool. Yes, we'll look forward to that in May. So let's circle back to the travel space for a minute. You kind of made mention of this earlier, you guys specialize in high-end, big-ticket, specialized types of trips, tours, experiences. So what are you seeing from -- via your customers, kind of down to the end consumer, demand perspective? Obviously, more borders are opening, which is clearly a good thing. But then we've had Russia, Ukraine, obviously, emerge here. So just wondering if you're seeing any moderation of demand as a result of that in any parts of your travel business.

Yes. Obviously, to have a travel business in the middle of a global pandemic, it prompted us to do a couple of things, focus on the customer first. And what we saw during the height of the pandemic was our clients trying to keep their businesses alive, right? And they couldn't get international travelers, but they could get domestic travelers. And so one -- the first thing we did, and frankly, had been doing it ever since, is make sure we were making domestic solutions a core part of our solution, right? So that when we got a customer, we didn't just get them live with cross-border, but we got them live with domestic and cross-border capability. And so that allowed us to actually grow our travel business even in the height of the pandemic in 2020, right, which is pretty staggering to think about. And then as you went through 2021, you again started to see this kind of rolling recovery happen in the travel sector. If people remember back to December of '21, everyone thought things were starting to get over in August. You started to see Delta come back. You then started to see Omicron come out. And again, you definitely started to see that it was this consistent rollingness of the recovery and somewhat spotty by region. But our travel business grew exceptionally well last year. I'll often tell people, think of it as a part of our company, that if it was separate, it would be raising a large growth round to invest in growth. That's the type of success we think we have pent up in our travel business. And again, when we look to 2022, we still aren't expecting kind of full recovery. We're expecting this rolling recovery through 2022. That's how we look at our business, is one that has a bit of logic in how the world is operating. If the last 2 years have taught us anything, it's that we don't know what's going to happen 3 or 6 months from now. So how do we make sure we're making great investments, helping our clients and preparing for growth, even if we're not exactly sure when that growth will come? But amazing growth last year in travel, already seeing exceptional growth so far. And I think if the world continues to get better, I think that's going to be a standout in future discussions.

Okay. So nothing you've detected like in Europe, for example, as a result of Russia, Ukraine? Any kind of...

From a client base perspective, Russia and Ukraine, across all our sectors, education in particular, there's no clients in those markets.

Right.

And even the total payer volume in those markets is less than 1% of revenue. So it doesn't have a massive impact for us, and we would like to see a macro trend. I actually just got back from Europe just over the weekend myself. And I personally haven't seen any broader impact outside of, obviously, all the awful dynamics happening in those 2 countries.

Yes. Yes. Yes, for sure. Okay. Why don't we go into B2B for a minute. As you mentioned, it's your biggest TAM, but today, it's your smallest vertical from a revenue contribution standpoint. So that's kind of interesting. One thing I think would be helpful is maybe if you want to use a couple of client examples, maybe some recent wins to kind of bring this to life a little bit because I think, big picture, we understand, okay, digitization of AR, but maybe a little bit more detail on some client examples and use cases.

Sure. Happy to. So it's a massive market, as you mentioned. I would also say that if you look at that market, it's mostly manual. Lots of bank wires in the United States domestically, lots of paper checks still cut inside B2B payments. And I would say there's just different approaches, right? You've got folks kind of going after how businesses make payments and trying to digitize that flow. And then you've got Flywire and others going after the accounts receivable side of that transaction, where the invoice is generated from and how can you make it easier for other businesses all around the world to pay you. And really, those are not -- it isn't a winner-take-all market in our belief, right? You're going to see great AP digitization continue to happen. The market is that large. And we believe you're going to see great accounts receivable digitization really helping the industry get there. And so if you look at what we're doing, we're focused on specific subsectors, so things like manufacturing companies, could be professional services business, could be a tech company. If you're a manufacturer and you're selling your products in 3 or 4 markets around the world, your choice is to make sure, first, you're banking with a global bank. If you're not, you may have to switch your primary banking relationship or find another banking relationship. You then have to go create entities around the world. You then have to go add bank accounts to those entities. You may have to staff finance teams around the world to deal with inbound receivables in those markets. You may have to find different payment methods in those markets that are acceptable ways to pay. And all that complexity that sits at our client, we're looking to take away, right? So if someone is managing a global business, if it's a rapidly growing business, we're not really looking at the small business sector, so we're looking at businesses in the kind of $50 million to $1 billion in revenue.

Okay.

It's not going to be the -- we're not going to digitize the AR for Apple or someone that has a massive treasury function already built in. But there's a lot of companies that sit in that mid-market space that are really dealing with this global set of receivables and trying to improve the way in which they get paid. And so that's where we're focused. We've highlighted a couple of case studies on our earnings calls, folks like AppsFlyer, which is a tech company. MongoDB was another one we recently talked about. But again, think of it as any business that has a global footprint of receivables. And traditionally, what may seem modern is either sending an electronic PDF and e-mail to get paid, and we're really digitizing that entire payment experience from that point of invoice.

In any given year, I mean, how should we think about your mix of revenue growth when you break it down between new and existing clients? I mean as you mentioned earlier, net revenue retention is super high in this business.

Yes. So if people are trying to think of our kind of growth algorithm, one of the benefits for us is we have many levers of growth, and that's part of what gives us such confidence in the future. It starts with that NRR, as I mentioned. So at IPO, it was 118%, 3-year blended average, 126%, 128% and 100%, with the COVID-impacted year of '20, blended to 118%. We announced in our Q4 earnings call that last year was around 140%, so that brings that 3-year average, which is the right way to look at it because of the COVID impacts, to about 123%. So that's your baseline kind of for growth as you think about on a year-on-year basis, and that's really driven by customers doing more with us, us deploying more of the capability, as we talked about earlier. And all of that is really what's driving that core NRR number. On top of that, you then have full year effect of customers that went live in the prior year, again gives tons of predictability in that number because we -- again, it's us getting a client live where we have very good line of sight into the volume processed on a calendar year for them, and we may have only gotten live in Q1 of that year, for instance. And so you kind of have the full year effect that you can model and play in quite well. And then you're adding net new client acquisition on top of that. And so again, in a given year, if you just do that, do some back-of-the-napkin math there, the net new customer adds in a given year actually doesn't impact revenue that much. It's the out-years, where it drives additional incremental revenue, right? So again, for us, the investments we're making are really focused on 2023 and beyond, and it's really to drive that. Now on top of the great NRR, the full year effect of clients, are different ways of growing new clients, are not only across industries, but also across geographies, right? So we are already global, 30-plus countries where we have clients. And so when we talk about go-to-market investments, we're making them regionally all over the world. And we're also making them across all the industries that we serve. And it's not just salespeople, it's client services, who is really important in the upselling of additional capabilities to customers. It's that implementation team as well. And so those are the kind of organic growth levers that we have. The direct sales team is reinforced by that channel team I mentioned earlier, with great deals, with various types of folks, like Cerner in the health care space is a great tech partner that helps us drive go-to-market as well. And then in addition to organic, there's always the chance of inorganic. And we've done a few tuck-in acquisitions over our history and have recently announced one in Q4 of a business in the U.K. education sector. And so that's an additional accelerant for us to our organic growth levers, is the ability to do tuck-in acquisitions.

Yes. Let's talk about WPM for a second. It seems, from our vantage point, a very strong strategic fit. So just tell us what kind of attracted you to this asset, how does that potentially expand your TAM in education?

Yes. So for us, it's -- I actually had known one of the founders for a number of years. I would say they were kind of part of the ecosystem when we go into a new market. You start to understand what vendors are here, what pieces do various vendors do. And so we had a great existing business in the U.K., a team of over 40 FlyMates ourselves prior to doing the deal. What the WPM software really did is for universities, it owned the start of the tuition payment experience, but it didn't really own the pay button, right? And so when you think of what we can do together with our payment network, our payment infrastructure and their team and their software that was driving value at their university clients, it's really, we believe, an accelerant to our U.K. strategy. And so if you look at the teams now, you've got a team that's twice the size. So about 40 new FlyMates came from the WPM side, plus our existing team. And our ability now is really to go in and help our clients digitize that payment volume, where they were still manually having to manage multiple vendors, multiple relationships. And we can now bring that all together with one unified payment experience, including the movement of money, which, again, we think is going to be pretty special. So again, relatively minor impact from a revenue perspective for '22, but we believe an important part of '23 and '24 and beyond.

So if we look at your balance sheet, you've got a nice amount of net cash. And I guess, is there the prospect for some more kind of WPM-sized acquisitions going forward? What's the pipeline like there? Could we see more in 2022? Or are you pretty comfortable with where you're at for right now on M&A?

Yes. I mean obviously, financially, we're very well-capitalized, over $350 million on the balance sheet. We also feel quite good about the deal we did. So we're not in a rush, but I wouldn't be surprised to see us be -- continue to be active. But we are a bit picky. We not only look for great strategic fits, but we look for teams that we really think fit and help us grow and expand our culture, too. I've told investors before, we're not -- don't look for us to do a bunch of disparate role-ups. We're not kind of private equity trying to -- we really want to stay core, to kind of core platform capabilities and really bring things together that make sense. If we do more M&A, it's likely to fall into 1 of 3 buckets strategically for us, one that will accelerate a geography or an industry that we're already in. WPM is an amazing example of this as was our deal prior to that, which was a business called Simplee in the health care payment space prior to going public. The second pillar would be something that could help accelerate or continue to drive great NRR, so is there some capability that we could add to our offering that would drive more payment volume or more software-based revenue of platform and usage revenue to our business. And then the third would be something that could either enter a new geography or a new industry. Again, I would think of them in that order as well, being we're very comfortable in our total addressable market, the 4 industries we're serving today, but I wouldn't rule out us looking at something that also brought us into another high-value, high-stakes payment industry.

Right. Right. Right. But you've got plenty of opportunity in front of you right now at this time. Okay. Well, great. We're basically out of time here, but we covered all out of the ground. Mike, I always appreciate your insights. Thank you very much for joining us and appreciate everyone who logged into the presentation.

Thanks for having me, Jason.

Have a great day. Thank you.