Flywire Corporation (FLYW) Earnings Call Transcript & Summary

All right. We'll get started now. Very excited. So I'm Will Nance. I cover payments here at Goldman, and we are very excited to have Rob Orgel, President, COO of Flywire today. Flywire helps process complex, high dollar international payments for specialized verticals, including education, health care and travel. Rob leads global payment network, business operations, finance, legal, compliance, corporate strategy. And prior to that, Rob served various roles at Apple and helped develop and launch Apple Pay and Apple Card, so quite the resume, quite the responsibility list. Please join me in welcoming Rob. Delighted to have you here.

Thanks so much. Thanks, Will, thanks, everybody for taking some time to hear a little bit more about Flywire, nice to get a chance to be part of this today.

Awesome. Well, maybe we can kick it off by just starting off pretty high level, level set for everyone. What is Flywire today? How do you expect the business to evolve in the future? And what's the current business mix and where are you going?

Yes, absolutely. So Flywire's mission in life is to help people and help our clients with life's most complicated payments and so we've all had this experience. We've seen the potential of payments to work really well in your life. If you think about e-commerce and how that's developed, you think about Apple Pay and sort of tap-to-pay, all of these are great payment experiences. But there are also whole sectors of the economy that still have what feel like very archaic or an anachronistic payment types where you go to pay a health care bill, and it still feels like the web of a decade ago, you go to pay a college tuition bill for those of you like me who may have kids with those kinds of payments. And again, it feels like you're doing something out of the past. So Flywire came around and our objective is to help use software to drive value in payments. And so we believe across these industries; education, health care, travel and B2B, there are great opportunities to help that digitization that will take place over the next decade in the same way that you saw e-commerce developed over the previous decade. And so the way we do that is we really have a very distinctive and unique set of capabilities that we bring to bear in the market. And so we talk about it as the Flywire Advantage has 3 core components to it. And it's really the combination of those 3 together that are what allow us to do things for our clients that really nobody else out there in the payments ecosystem can do. So those 3 things, namely, we start off with what is a core payment platform. So this is a horizontal platform, but significantly more sophisticated than what you might see across a payments company that's just out there trying to solve for credit card payments, for example. That's all good stuff. But what we're trying to solve for is to deal with these high-value, high stakes payments includes things like be able to handle a bank transfer as well as a credit card, be able to do an authorization and settlement and figure out how FX is going to handle all of that complexity, things around a payment plan and a whole bunch of other areas where this horizontal platform has a lot of sophistication to it. The second thing we did is we built out a global proprietary payment network. So over 10 years in the making, we had teams operating around the world that went and developed 50-plus local accounts around the world that allow for a payer in those countries to make a transaction that feels like a local payment. So if you're somebody in China, somebody in Korea, Brazil, Mexico, we're trying to establish for you capabilities that look like local capabilities. So all of the accounts setup, the legal and regulatory compliance and the tech that goes with solving for that is all part of this proprietary global payment network that is really very distinctive. Hugely advantageous for our clients because when they work with us to get the benefit of our relationships with folks like China UnionPay, Alipay, of course, Visa, Mastercard, American Express as well as other networks and payment types all around the world. So a very distinctive capability. And the final piece of what we do that, again, as part of Flywire's Advantage, is we go deep in vertical-specific software for the verticals we target. And so it's one thing to be able to do a simple e-commerce payment, but it's really quite different when you want to go and solve the problem for a vertical. So we -- sure we'll talk more, Will, about things like health care and education, but just to give one tangible example in the education space, a payment may well be structured with a payment plan, right? So if you're a student or your family trying to solve for affordability, that payment may well be staged over multiple payments. And so our software will do all of the things associated with tracking that payment plan, rebalancing it, if you add more expense, you get a loan or a grant. All of those things will affect this payment plan. And so the software is dealing with all the complexity of that transaction and trying to make it all feel as seamless and great as an e-commerce transaction feels today. So all of that is the Flywire Advantage, and all of that is what we sort of mean when we say software drives value and payment. Now, Will, I think the last part of your question was around sort of today versus the future. We just did an Analyst Day not too long ago where we shared how we see the way we play in our ecosystems today, creating a very exciting path for how to play even more deeply in those ecosystems going forward. So the 3 things in particular that we talked about were a launch of a capability around strategic payables. And so if you think of Flywire historically as being a company that helped our clients get paid, we have a very specific approach to how we're thinking about strategic payables to go even deeper in our ecosystem. We have a second piece around non-client receivables. And in those non-client receivables, again, we used to work in a way where we really focused on serving our clients, helping our client get paid. We saw a need in the ecosystem to actually help pay all of the players in the ecosystem. So for example, 529 plans, they want to distribute money out to the -- all the schools where their students are attending, we developed and launched the capability to do that, and we're working with 529 providers to do that sort of thing. And the final piece around new capabilities is opening up Flywire to the world of payer services. So historically we're very narrowly focused just around our school getting paid just around sort of those core tuition, accommodation type capabilities. And what we've embarked on now is expanding to help all of those students who are about to embark on these incredible life experiences how can we now help them also do things like get other services that will help sort of complement around out that experience. We can talk about all of those more if you'd like.

Yes. No, I think that would be great because I obviously attended the Analyst Day and heard these 3 items that you guys were calling out. I think it might be helpful to maybe unpack each of them and talk about how it's different than what you've historically done in a little bit more detail. So starting with strategic payables. So this is payable as opposed to Flywire's historic focus on receivables. What are some of the payables across each of the verticals that you guys are most focused on as low-hanging fruit here?

Yes, absolutely. So first of all, let me just try to distinguish a little bit about what we are doing in payables from what is sort of this general category in the sort of financial industry around payables. There's a whole ecosystem around payables sort of helping a company pay its staples bill or whatever it may be. That was never the thing that we thought was sort of strategically interesting. But in our ecosystem, there's a lot of money moving around in complex transactions. So for example, in the education vertical, there's a whole ecosystem around agents, right? Agents are helping students around the world. You may not see it quite so much here in the U.S. because we're not so familiar as a country with the operation of agents. But if you're a family in China, across a whole number of countries inside Asia, your whole student experience and your overseas experience may be shaped meaningfully by an agent. And so there's a whole financial ecosystem around that relationship. And what we're going to help our schools do is manage that in a much more graceful way that's really to the benefit of the school as well as to the benefit of the agents. So you see the money moving initially around the tuition, accommodation and so on, but the strategic payables are going to be around helping sort of that counter flow. A second example and the second place that we'll be launching this is around the travel vertical. So in travel, many of us will have had the experience, you've booked a trip, an international trip. You will pay an entity who helped you organize that trip, perhaps in the industry, they're known as destination management companies. But as soon as you make that payment to that destination management company, there's now a whole series of payments that have to go the other way, payments that go to the suppliers, commission payment potentially that goes back to an agency or someone that helped organize that trip. And so we see this opportunity to continue serving these transactions that we're the sort of the trusted partner for the travel organizer around the receivable. But while they're in our system and with that transaction that we have all this insight and visibility into, let's help them move that money into sort of the proper places where it belongs. It's a great revenue and sort of monetization opportunity for us. So that's a little bit on strategic payables.

Awesome. So maybe moving on to non-client receivables. So still in the kind of traditional receivables business that Flywire has operated. And what's different about these receivables?

Right. So again, we started in our business really thinking about how to serve clients, as you know. If you go back to the early days of Flywire, when we were one industry, this went schools as we've evolved and added health care, travel, B2B, we have a whole set of clients that we're helping receive the money. Now in the school world, we in working for those clients, like we would only accept payments that were going to be routed to somebody signed and under contract with Flywire. As you see the ecosystem getting more complicated, you've got folks like 529 plans. Those 529 plans, obviously, will end up with students going to just about every school and school type around the United States. And the way that worked until recently, I mean, you won't believe the level of sort of manual and paper check involvement here, you would see tons of 529 payments and what the 529 plans typically had to do was start stuffing FedEx envelopes and start sending them around. They're going all over the schools, they're landing in the wrong places, and we saw a chance to bring digital benefit to all of those. So what we've developed is the ability on behalf of not just 529 plans, but also these school agents that will have a desire to send money to schools all over the place to deliver this money to non-clients. And so there's 2 big benefits for us in doing that. The first benefit, the kind of obvious one is that there's a revenue stream attached to every one of these payments that we'll deliver. But the second thing, the thing that's really sort of strategically important for us is that we also get the chance then to go talk to that school about the services that we can provide them. So what we've seen already, even in the very early days of this initiative is that we can have this conversation with the school saying, "Hey, we're already delivering quite a lot of money to you, but you're not getting the benefits of Flywire, you're not getting the dashboard, you're not getting the reconciliation, you're not getting the cost savings, all of the hallmarks of the value proposition of our company. So why don't you sign up with us, you'll get not only these 529 payments, but all the other savings across all your payment volume, and we've seen really nice early success with that.

Great. And then rounding this off, payer services. So rather than services to the receiver and to the payer, what are you most focused on here?

Yes. So we see opportunities across multiple of our verticals once again. I'll give 2 examples. One of them is now very much real in the sense that we did an acquisition earlier in the quarter, actually, just a few months ago of a company called Cohort Go. They had already started down the same path that we've identified, which is, "Hey, you've got this relationship that you've established, a trusted relationship with a payer who is about to embark on a really important part, venture in their life. And so there's a lot more we can do for them than just help move the tuition money or just help move the accommodation money. And so Cohort Go as an example of a payer service has developed a business around helping students that are about to travel, in particular, to Australia, which is their home country, procure the third-party health insurance that they need as a requirement of going to that market. So along with paying the tuition, accommodation, let's also make sure that you've met your legal and regulatory requirement of having appropriate insurance. And so that's a really nice revenue stream that is around the nature of payer services. And you can imagine, as you think about the enormous volume of students we're serving that are coming to the U.S., they're going from the U.S. to other parts of the world. There's a whole set of services that we can create around making sure that when you get to those destinations, you've got the right kind of account, you've got the right kind of insurance and a whole bunch of other complementary services that we can wrap around that. And it won't surprise you now as you think about sort of that same metaphor as you think about travel, you're about to go on a travel experience to somewhere around the world. There's a whole set of services that make sense to offer along with helping you confirm your travel. And so we're exploring and over time we'll be adding those kinds of payer services as well.

Got it. And I guess when you talk about moving kind of beyond that payment relationship with the payers, do you think payer service is something that can help kind of increase retention of the relationships with the payers or with the -- all the international students, for instance? And I guess it's something that could down the line help with things like revenue retention, things like that?

Exactly right. Very well said, indeed, Will. There's 2 things that are going on there, right? So if you use a concept that will be familiar to many of you and you think about things like sort of lifetime value of a customer, there's a similar way of thinking about a lifetime value of a payer. And so what we want to do as a company is continue to expand both of those, but increasing lifetime value of payer, one of the things you want to do is increase the number of essentially services and products that they're paying over our rails, but also the period during which they do that. And by providing more of these services, you sort of earn the right for that longer-term relationship.

Makes a ton of sense. So maybe I guess that's a good segue into sort of the financial aspects of what you guys are trying to do. I think Flywire was one of the first recent IPO of vintage companies to really respond to the rapid shift in investor sentiment around growth and profitability, the total 180 over the course of 12 months between growth towards profitability. You laid out very detailed medium and the long-term targets. So I think its revenue and gross profit expected to grow around 30%. EBITDA margins expanding 300 to 600 basis points a year. Maybe we can kick off with the top line. Could you start by talking how you're thinking about new client acquisition and net revenue retention to build up to that 30% growth? I think since Flywire is a consumption-based model, how does -- how do you frame sort of the wallet share opportunities to help maintain the NRRs over time?

Yes. So maybe for the benefit of the group, let me sort of walk you through how we think about revenue and sort of what is that revenue algorithm that we have for building up to the growth rate that we've talked about. So again, what we put out there at Analyst Day was we view ourselves as a 30% annual grower, both on the revenue line and on the gross profit line, and that's sort of where we think about sort of the organic growth potential on top of which we'll talk about M&A perhaps in a minute here. But foundationally, the company has had a really strong track record around NRR. So that NRR 3-year average is 123%. And so foundationally, we obviously, we get a big step forward towards that 30% annual growth with an NRR that is of that strength. Underneath that and just to give some foundation for why we've been so successful in that NRR, we've been very, very good at a land and expand strategy, and we've been very, very good at a customer retention strategy. So if you start first with the customer retention, sort of 95% plus customer retention, I could say there's a distinctive thing about Flywire and investors have done a whole bunch of diligence to prove this for themselves, a very happy base of clients, like we do a great job servicing our clients like fundamentally we are a great benefit to them operationally and economically. And with that, a very loyal client base with a really strong customer retention. On top of that, the fundamental strategy of the company has been around land and expand. And so it's not that easy to go into a school or a hospital and say, we want to move all the money of every sort. But what we have been very successful in is what we call land and expand. And so in the context of a hospital, for example, we may step into a hospital and we'll win the mainline hospital, but we'll only do it for their post service, their patient responsibility portion of their payable. Over time, we may win additional hospitals. We may win over the physician group portion of their integrated network. We may win over a different platform, right? We've started with Epic and we're going to then add their Cerner or Meditech type systems. All of that is what we would call sort of land and expand where we've established our position. We've shown our value in one area, and we're going to use that to expand. Very easy to see how that translates into education. If you think about the education business, you'd say, hey, we're happy to start with cross-border. We'll start with cross-border today. We'll prove to you the ease and simplicity of using our platform. And over time let's get you involved in our payment plans, our domestic payment processing or some of our other services and products in the education space or it may be that we start, for example, with just the undergrads or just the extension school or a given part of a given educational institution and over time we'll expand to take on more and more of their student population. So land and expand has been quite fundamental to our strategy, a really big part of that NRR. So I spent a bit of -- quite a bit of time on that because obviously that's a big chunk of getting to the 30% growth per annum. On top of that, we have 2 other key drivers. And that is that in the way we talk about NRR, it doesn't include the full year effect of previously signed clients. So for example, clients that we signed this year, they'll have a partial effect this year, and they may not be included in that NRR, but will have a full year effect on those clients next year. So that's a meaningful addition to the growth rate. And then the final piece, of course, is new clients that we sign and those add to a given year, even though they'll add even more probably in the following year. So just to kind of put a measure around that, we've shared over 2,800 clients as the sort of client population. Last quarter was a record quarter in terms of signings, added 140 more clients to the roster. And so as you think about sort of building up that long-term capacity for 30% growth, it's the NRR plus clients that have been around in that first full year, plus the net new clients that are signed, and that's our basis for sort of long-term growth. Happy to talk about M&A as well, if you like, or we can save that for later.

No, I've got lots of M&A questions down the list here. But if you don't mind, could we maybe talk on a couple more financial-oriented ones, and then we'll jump into capital allocation. So one of the things that you guys talked about specifically, which I think was particularly responsive to the environment was the margin outlook for 300 to 600 basis points of margin expansion. I think its 10% to 20% margins over the next 2 to 4 years. So how within those parameters, how are you balancing kind of growth versus profitability? And what might put you at the bottom or the top into those ranges?

Yes. Yes. So most important sort of big picture point in all of this is that we view ourselves as very early in our industries, right? So sort of the opportunities, I'm known for using the expression opportunity everywhere inside the company and sort of a true believer in sort of the early stage of where we are in our market. So to achieve that kind of adjusted EBITDA margin over time, the first and most important part of that will be delivering on the growth opportunity that we have. So what you'll see us do is continue to invest in things that are high ROI, high impact benefit for driving that growth. And we've started that this year. We've made notable investments in go-to-market. We're very, very pleased with the return we're seeing on those investments. So we'll keep investing in that go-to-market piece. But it is worth slowing down for just a second to talk about 2022 and comparing that versus 2023 and beyond. We called out 2022 at the beginning of the year as a notable investment year. We called it out because if you look at 2021, you will have seen some pretty strong financial performance in the business, right? $20 million plus in adjusted EBITDA, 12% adjusted EBITDA margins. And we saw 2022 as a year we wanted to continue to invest and build out capacity. So 2022 was a big year in terms of investing in go-to-market, but also a big year in terms of investing in R&D as well as a year in which we have a bunch of sort of new expenses as a newly public company, right? So things like SOX compliance, things like professional services in ways that, obviously, we didn't have pre-becoming a SOX 404 company. And so 2022 is sort of a distinctive year in terms of investment. But what we set out in our Analyst Day was this 300 to 600 basis points of growth per annum and adjusted EBITDA as being the target that we were setting out there on a path towards 25% adjusted EBITDA margins over the course of time, call it, 5-ish years. And so what you'll see in the next little while is us starting to show some of the scale in a bunch of the areas. So not so much focusing on go-to-market where we want to continue to invest, but more scalability and economics flowing through in terms of everything from R&D to G&A, some of these kinds of expenses that I was just describing. And essentially there's a lot of scale to get across all of those functions, global payment network, general and administrative even across things like marketing and other areas where we see ourselves having benefits of scale as we keep growing.

Makes a lot of sense. I'm going to jump ahead a little bit because I can tell you want to talk about M&A. The WPM deal coming up on a year, I guess, since you guys announced it. I guess it might be helpful to provide a little bit of background about what that company did and what it brought to the business. But I guess, drilling down one more layer, I think you guys recently announced some progress on the synergy opportunity, which you in my mind, was the bigger part of the acquisition, the ability to drive volume from that, that wasn't flowing over a payment network, over your payment network over time. And it seems like you've got some of those deals closed just before tuition season in the third quarter. So wondering if you could talk a little bit about; one, the WPM acquisition, the cross-sell opportunity. And then what -- how -- what we could expect for those synergies in terms of flowing through to the P&L over the next couple of years?

Yes. So for those who aren't familiar with WPM or haven't heard much about them, WPM was a longstanding U.K. software company, kind of a family run business, but a very well respected and appreciated provider in the U.K. higher ed market. They had over 170 clients. And if you think about sort of where they played, if you were a student or family going through that experience of getting ready to pay a tuition amount, they were sort of that software that got you to the pay button, right? And when you got to that pay button, they would hand that transaction off to somebody else. And what we saw was an opportunity to integrate everything that they had in terms of great experience and great value they were providing to the clients and put all of our monetization behind that pay button by making our rails very available, very easily accessible by the school and delivering for the school a great experience where it would all reconcile, it would all appear in one dashboard, one slickly and smoothly integrated experience. So that's what we embarked on doing. And so when you talk about what we've accomplished so far, we've signed up well over 20 of their existing clients over that 170-plus where they will at least use part, if not all, of the Flywire capabilities to start offering payment via Flywire following that pay button essentially that I described in their experience. So in some cases, they'll use us for domestic and international. That's sort of the full range of capabilities that we would offer those schools. In other cases, we'll start with just cross-border, and we'll start there and work our way towards getting the domestic experience. But the -- we'll start to appreciate some of that benefit this year, but what you'll really see is that next year we'll have a full year benefit of a good number of these schools, we'll have more and more of them integrated. We'll have more and more of them using us for both domestic and international. So we're super happy with the results. I think the proposition that we set out, the value proposition that we thought would appeal to the schools is appealing very, very strongly to the schools. That's what's driving the sign-ups. And now we'll start converting them into monetization and revenue.

Makes a ton of sense. So then I guess when you look out, it sounds like the path forward is positive EBITDA margins, positive cash flow. How does that flow into capital allocation? Is M&A a part of -- a large part of the strategy? Is it going to be a capital return focus? I kind of doubt it. How do you think about capital allocation over the next couple of years?

Yes. I mean, first thing to say is that 2 thoughts. One is we view ourselves as a company that is good at M&A. We've done a series of acquisitions over time. We've managed to do really well on client retention. We've managed to do really well on employers. We call them FlyMate retention. And so the ability to do M&A effectively is something we feel very strongly in. Now at the same time, everything that we talked about in terms of that organic growth rate is just that. It's an organic growth rate based on the idea that we can meet the financial targets we've set out without doing more M&A. So if you combine those 2, I think what you'll see is us continue to look for great opportunities, things like WPM, things like Cohort Go, the one that we did more recently. And I fully hope and expect that we'll find ourselves doing more M&A, but it's not something that we've set a timeline or a requirement around. We'll look for things that are a really good fit. We'll look for things that make sense in terms of accelerating markets, accelerating client acquisition and things that are true to the Flywire value proposition and positioning of software drives value and payments.

So with all of the growth opportunities in the business, in your existing verticals, is the thought process more bolt-on acquisitions? Or could we see larger type acquisitions such as the one that got you into the health care space?

Yes. No, we were -- in fact, we were already in the health care space. So we had an acquisition. If you look at what Simplee did, Simplee was to combine our health care business with their health care business and make a market leading health care business. Look, I think we're not shy when it comes to the idea of doing meaningful acquisitions, but the most important thing will be the belief that we found the right company culture or the right company fit and that we can sort of do things that will accelerate our business. And it will be in software drives value in payments.

Got it. Makes sense. I think we need to ask the obligatory macro question, just given that's the topic majority of these days. You guys -- I think the verticals that you service are particularly nondiscretionary, particularly compared to a lot of the other kind of more e-commerce exposed names, for instance, education, nondiscretionary health care, nondiscretionary. How do you think about how this macro environment can impact your business?

Yes. So I'll start with just a little bit on the industries, and then I'll come back to some of the puts and takes, Will, just as you sort of implied there. One of the things that's always been distinctive about our company and since the sort of first meeting I did with first investors, many years back, people said we love the verticals that you operate in. Like we get it, that education is a vertical that has been through many a cycle. We get it that your clients, many of them are 100 or 100s of years old. They've seen every version of a cycle, and we get it that the value proposition you're providing for everybody is one that stands at the test of economic cycles, right? We're helping solve for affordability for students. We're helping solve for efficiency for the schools. We're really a benefit to both sides of the ledger in that regard. And so for education, what we do is really incredibly valuable. And you say almost the same thing around health care. Obviously there is a portion of health care that's discretionary. But in the bigger picture, most of health care is nondiscretionary and the value proposition we have is around affordability for patients and allowing them to be able to fulfill obligations that they have as well as even understand what those obligations are. And at the same time, we are delivering very much bottom line results for the schools. Like if there's anything I pound the table on, it's that the ROI for our clients is fantastic and what we do for them. We're helping address a really important portion of their P&L and their balance sheet. And so the work that we do on behalf of health care really matters. Travel is the one thing, when people look at our business, they say, hey, that might be a bit more discretionary. It's important to understand that in our travel business, we are mostly on serving clients that deal with more sort of luxury and experiential type travel. Not to say that, that doesn't have some cyclicality to it, but it's certainly less cyclical than what you call sort of a mainline travel business because our -- certainly in a post-COVID era, what we're seeing very strong evidence is that people have a great desire to get back out in the world and do things. And of course B2B, final vertical for us, again, even if there is some cyclicality to it, overall, our proposition around affordability and efficiency plays very well in any economic cycle. So we're really pleased with the verticals that we have. It's a big part of how we sort of think about macro and how we sort of continue to plow with whatever headwinds are out there. Just to spend a minute on that, there are 2 things worth mentioning as we think about macro. So the first one is, and we called it out in our previous earnings call, we are dealing with a rather unprecedented period in terms of FX. Like if you look at what's happening in currencies like the euro, the pound -- sorry, the euro, the pound, Canadian dollar, these are all currencies that are having really historical swings relative to the U.S. dollar. Obviously we're a U.S. dollar revenue recognition company. And so where you have a significant portion of your business that is happening sort of inbound into those currencies. It does have an effect on our sort of revenue recognition. We shared in our call that that's a multimillion dollar effect as you think about the second half of the year and those FX sort of trends aren't really reversing. They're just continuing to play to a very strong U.S. dollar. So that's one thing that's out there. I think we sort of help people understand that one a fair bit. And the other thing that's out there is there just are macro trends, whether you call it COVID, politics, conflict around the world. You are seeing notable movements in how international students, in particular, international travelers are moving around. That's, in a way, always been part of our business, like we've always seen different countries emerge as important destinations or important sources for students. If you look at our discussion and earnings calls, we've called out strength in Canada over time. We've called out strength in the U.K. over time. If you look at sort of more current period and things affecting sort of what feels like 2022, you'd say, hey, you'd notice strong inbound markets and limited inbound markets, right? So places like Japan and Australia have been pretty limited, they had and Japan continues to have fairly strict rules around inbound. And if you look at outbound markets, again, you see different trends, India particularly strong. China as well documented and some of the things that you may have seen in the Journal and others. Chinese students are having different patterns in where they're studying this year. Now for us, there's a real benefit in our global footprint, right? So students may decide that Canada is their destination, U.K., U.S. is their destination because we have strength across all of those, we can sort of be there as these patterns move, and we've tended to see as one area adjusts, there are other adjustments across the ecosystem. But as a macro trend, sort of that whole COVID continuing, conflict continuing and just sort of general macro client, but those are all things that ultimately, particularly as it affects our education business, where and when these students travel does affect us.

Yes. That makes a lot of sense. And so maybe we can touch on the business outside of the U.S. and it's, I think, a larger piece of the business than what people had thought. You guys provided the 2022 outlook, and that was -- I think it was over 50% of the business in education coming from international. So what are the trends internationally? How do you kind of compare the penetration domestically versus international markets?

Yes. I mean we're -- I think we're quite distinctive as a company, like we are a truly global player in fintech, right? So I think there's a lot of companies out there that have sort of the promise or potential to be global. We're clients in 30-plus countries. We have teams spread around the world. That revenue balance is already at the point where it's close to balance in terms of sort of U.S. revenue versus international revenue. Some of the data points that we've put out there as we look at sort of these opportunities all over the place, is that our pipeline is growing faster outside the U.S. than in the U.S. So if you look at what happened in the first half of the year, as we substantially increased our pipeline, we saw that pipeline grow even faster outside the U.S. But maybe to make it feel even a little more tangible, if you look at some of the places we've talked about, Latin America as an example, we've got a tiny team in Latin America. I mean they're doing great and they're winning us these lighthouse accounts, but there are a whole great companies that have been built just off of one geography like Latin America. We've got barely a handful of people across the whole region and sort of this opportunity to grow and scale there. And it's not just LatAm, and same would be true across Continental Europe, same across APAC. And over time we'll get to even more places and add even further. So there's a great opportunity in the U.S. There's a great opportunity for us around domestic, which maybe we'll talk about.

That's the next question.

Okay. We'll get there very soon then. So there's great opportunities for sure here around the U.S. and domestic. But if you say sort of where is that pipeline growing fastest, it is us taking advantage of this incredible international opportunity.

Got it. So you hit on domestic payments. It's a good cue for the next question. One of the things, I think, you had a kind of marquee win in recent quarters of taking a kind of cross-border only business and taking the full tuition inbound payment stack. What's that sales process like? And then how does that opportunity stack up to some of the strategic objectives that you talked about at the top of the chat?

Yes. So domestic for us is really a great opportunity. It's a revenue multiplier in any account that we can get to do sort of that full stack domestic with us along with international. I'll focus this mostly on the U.S. because I think that was your question, although it's worth noting that for us, domestic is not a U.S. only thing. Domestic is an opportunity for us in almost every market around the globe. But if you focus on the U.S., we have announced great wins, right? We've talked over the last couple of quarters about Texas A&M, Stanford, University of Connecticut, URI, Rhode Island. And all of these are examples of schools that have chosen to work with us to process not just those cross-border payments, but their full suite of U.S. payments. And the suite that we bring them is really quite a comprehensive one, right? So it's helped them with domestic sort of onetime payments, it's with payment plans. We have an e-store module. So we're helping them handle all sorts of more commerce like transactions with an e-store that can help them everything from sort of the athletics department all the way to the engineering and beyond. So we've got this e-store module, a thing called A/R Collect, which helps them collect post due receivables. And so when we go to these schools, we can really help them simplify and essentially moving all the money on their behalf. And that's the proposition for us. It's this revenue multiplier. And if you look sort of in a macro sense, we've got a huge revenue multiplier opportunity for the whole company by continuing this domestic expansion. We're in the earliest innings of it. So just to kind of put some scale around that sort of single-digit percentage of our client base has gone towards that full cross-border plus domestic full suite capability. And so certainly one of our objectives is to drive that percentage higher.

Got it. Makes sense. We could probably keep going on the education business, but I did want to spend a little time on health care and travel. Obviously all sorts of issues with health care billing. I think anyone that has ever gone to the doctor has probably experienced it at least here in the U.S. Can you talk about where you draw the line between issues that Flywire is addressing in that ecosystem today? Are there problems in that space that are too big for you guys to solve? What are you trying to accomplish?

Yes. Great question. So health care is more complicated, certainly, than most ecosystems out there. We are very clear in our focus, right? There is a challenge for hospitals around the patient responsibility portion of their receivable. And so we want to make for the best possible digital experience that solves for affordability and ease for that patient and delivers the maximum possible yield on behalf of that client of ours, that hospital or physician network. And so we do that by essentially doing what is a deeper integration into their capability and making for a great set of experiences. So let me try to illustrate that. Probably most of us -- all of us have had the problem of the experience of you've gone to a health care experience, you've got one bill from the hospital, one bill from a radiologist, another bill from the anesthesiologist and over time if your another family member went, you've got another couple of bills. We can help our clients do 2 really important things that help drive that receivable. First thing we do is we help them sort of essentially aggregate that into one single billing experience, one bill per month at the guarantor level, you and your whole family in one bill. Once you have that, you can now start to have the ability to present smart payment options. So affordability is a huge challenge in the U.S. You present the majority of American families with a multi-thousand-dollar bill. That's going to be a really difficult bill for them to tackle in any way. What our software will do using business rules designed by that hospital, again, not our balance sheet, always their balance sheet, always their capital, but we'll help them implement a system and rules in their -- by their design that, for example, will allow that $2,000 bill to be 10x200, right? So we've understood that patient's capacity to pay. We've understood their payment history with that institution and now we presented them a smart and viable option for how they can pay that bill. And we actually had a Forrester ROI report done where they went out and met with a bunch of our clients and they gathered the data and the ROI on that is really quite incredible. So we've helped the patients with affordability, we've helped the hospital with the yield and that's really what's driving our health care business growth.

Got it. Got about a minute left. You hit a little bit on the travel. I think one footnote to add to the financial discussion earlier was the impact that the travel acceleration recently has had on some of the payment method mix, implications for gross margin, monetization rate. Maybe it's good in the last couple of seconds to just remind people just kind of the implications for what a higher rate of travel does to the business kind of -- and tie that into the gross margin discussion you have later this year?

So going quickly, travel is a great business for us. One of the characteristics of travel is that it happens to be more card-centric, credit card-centric business. And so in that, what you'll see in our business is as that travel business grows, again, it's great for us in terms of spreads. It helps drive gross profit, but it does carry with it a lower gross margin. So as that becomes a bigger part of the mix, the effect that it has on the mix is its one factor that would affect gross margin. In that case, again, great for revenue, great for gross profit, but it does carry with it a lower margin. So we always tell people, when you're looking at Flywire, first, make sure you understand seasonality, don't look at the company on a sequential quarter basis, look at it on a prior year basis. And when you're looking at things like that margin and monetization, make sure you're paying attention to that dynamic because underlying great economics, great unit economics in the business, but some of those things will make those numbers bounce around a bit.

Awesome. Well, we can leave it there. But thank you so much for joining us. Really great discussion.

Thanks.

All right. Appreciate it.