UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2021
OR
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number: 001-40430
(Exact Name of Registrant as Specified in its Charter)
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |
| |
||
(Address of principal executive offices) |
(Zip Code) | |
Registrant’s telephone number, including area code:
(617 ) 329-4524
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered | ||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No
☐
☒
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation Yes
S-T
(§232.405 of this chapter) during the preceding 12
months (or for such shorter period that the registrant was required to submit such files). ☒
No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated
filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2
of the Exchange Act. | Large accelerated filer | ☐ |
Accelerated filer | ☐ | |||
Non-accelerated filer |
☒ |
Smaller reporting company | ||||
| Emerging growth company | ||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule ☒
12b-2
of the Exchange Act). Yes ☐
No As of 98,829,293 shares of voting common stock, $0.0001 par value per share, outstanding and 5,988,378 shares of
August
11
, 2021, the registrant had non-voting
common stock $0.0001 par value per share, outstanding. Table of Contents
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PART I. |
3 |
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Item 1. |
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Item 2. |
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Item 3. |
45 |
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Item 4. |
45 |
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PART II. |
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Item 1. |
46 |
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Item 1A. |
46 |
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Item 2. |
83 |
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Item 3. |
83 |
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Item 4. |
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Item 5. |
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Item 6. |
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i
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form
10-Q
(Form 10-Q),
as well as information included in oral statements or other written statements made or to be made by us, contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that involve substantial risks and uncertainties. All statements other than statements of historical fact contained in this report, including statements regarding our future results of operations and financial condition, business strategy, and plans and objectives of management for future operations, are forward-looking statements. In some cases, forward-looking statements may be identified by words such as “believe,” “may,” “will,” “potentially,” “estimate,” “continue,” “anticipate,” “intend,” “could,” “would,” “project,” “target,” “plan,” “expect,” or the negative of these terms or other similar expressions. These forward-looking statements include, but are not limited to, statements concerning the following: | • | our future financial performance, including our expectations regarding our revenue, cost and operating expenses, including changes in technology and development, selling and marketing and general and administrative expenses (including any components of the foregoing), gross profit and our ability to achieve, and maintain, future profitability; |
| • | our business plan and our ability to effectively manage our growth; |
| • | our cross-border expansion plans and ability to expand internationally; |
| • | anticipated trends, growth rates, and challenges in our business and in the markets in which we operate; |
| • | the sufficiency of our cash and cash equivalents to meet our liquidity needs; |
| • | political, economic, legal, social and health risks, including the recent COVID-19 pandemic and subsequent public health measures that may affect our business or the global economy; |
| • | beliefs and objectives for future operations; |
| • | our ability to develop and protect our brand; |
| • | our ability to maintain and grow the payment volume that we process; |
| • | our ability to further attract, retain, and expand our client base; |
| • | our ability to develop new solutions and services and bring them to market in a timely manner; |
| • | our expectations concerning relationships with third parties, including strategic partners; |
| • | the effects of increased competition in our markets and our ability to compete effectively; |
| • | future acquisitions or investments in complementary companies, products, services, or technologies; |
| • | our ability to enter new client verticals, including our relatively new B2B sector; |
| • | our expectations regarding anticipated technology needs and developments and our ability to address those needs and developments with our solutions; |
| • | our expectations regarding litigation and legal and regulatory matters; |
| • | our expectations regarding our ability to meet existing performance obligations and maintain the operability of our solutions; |
| • | our expectations regarding the effects of existing and developing laws and regulations, including with respect to payments and financial services, taxation, privacy and data protection; |
| • | economic and industry trends, projected growth, or trend analysis; |
| • | our ability to attract and retain qualified employees; |
| • | our ability to maintain, protect, and enhance our intellectual property; |
| • | our ability to maintain the security and availability of our solutions; |
| • | the increased expenses associated with being a public company; and |
| • | the future market price of our common stock. |
Forward-looking statements are based on our management’s beliefs and assumptions and on information currently available. These forward-looking statements are subject to a number of known and unknown risks, uncertainties and assumptions, including risks described in the section titled “Risk Factors” and elsewhere in this Form
10-Q.
Other sections of this Form 10-Q
may include additional factors that could harm our business and financial performance. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time, and it is not possible for our management to predict all risk factors nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ from those contained in, or implied by, any forward-looking statements. You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, achievements, events, or circumstances. Except as required by law, we undertake no obligation to update publicly any forward-looking statements for any reason after the date of this report or to conform these statements to actual results or to changes in our expectations. You should read this Form
10-Q
and the documents that we have filed as exhibits to this report with the understanding that our actual future results, levels of activity, performance, and achievements may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements. In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this report, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and you are cautioned not to unduly rely upon these statements.
Investors, the media, and others should note that we intend to announce material information to the public through filings with the SEC, the investor relations page on our website, blog posts on our website (www.flywire.com), press releases, public conference calls, webcasts, and our Twitter feed (@flywire). The information disclosed by the foregoing channels could be deemed to be material information. As such, we encourage investors, the media, and others to follow the channels listed above and to review the information disclosed through such channels. Any updates to the list of disclosure channels through which we will announce information will be posted on the investor relations page on our website. The contents of our website are not incorporated into this filing. We have included our investor relations website address only as an inactive textual reference and do not intend it to be an active link to our website.
2
PART I—FINANCIAL INFORMATION
Item 1. |
Financial Statements. |
FLYWIRE CORPORATION
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share and per share amounts)
June 30, 2021 |
December 31, 2020 |
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Assets |
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Current assets: |
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Cash and cash equivalents |
$ | $ | ||||||
Restricted cash |
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Accounts receivable, net of allowance for doubtful accounts of $ |
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Unbilled receivables |
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Funds receivable from payment partners |
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Prepaid expenses and other current assets |
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Total current assets |
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Property and equipment, net |
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Intangible assets, net |
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Goodwill |
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Other assets |
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Total assets |
$ | $ | ||||||
Liabilities, Convertible Preferred Stock, Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit) |
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Current liabilities: |
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Accounts payable |
$ | $ | ||||||
Funds payable to clients |
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Accrued expenses and other current liabilities |
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Deferred revenue |
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Contingent consideration |
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Total current liabilities |
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Deferred tax liabilities |
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Contingent consideration, net of current portion |
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Preferred stock warrant liability |
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Long-term debt |
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Other liabilities |
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Total liabilities |
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Commitments and contingencies (Note 14) |
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Convertible preferred stock (Series A, B, B1, B1-NV, C and D), $ |
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Redeemable convertible preferred stock (Series E-1, E-2, F-1 and F-2), $ |
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Stockholders’ (deficit) equity: |
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Preferred stock, $ and shares authorized as of June 30, 2021 and December 31, 2020, respectively; and |
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Voting common stock, $ |
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Non-voting common stock, $ |
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Treasury Stock, |
( |
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Additional paid-in capital |
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Accumulated other comprehensive income (loss) |
( |
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Accumulated (deficit) |
( |
) | ( |
) | ||||
Total stockholders’ equity (deficit) |
( |
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Total liabilities, convertible preferred stock, redeemable convertible preferred stock and stockholders’ (deficit) equity |
$ | $ | ||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
3
FLYWIRE CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Amounts in thousands, except share and per share amounts)
Three Months Ended June 30, |
Six Months Ended June 30, |
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2021 |
2020 |
2021 |
2020 |
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| Revenue |
$ | $ | $ | $ | ||||||||||||
| Costs and operating expenses: |
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| Payment processing services costs |
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| Technology and development |
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| Selling and marketing |
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| General and administrative |
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| Total costs and operating expenses |
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| Loss from operations |
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| Other income (expense): |
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| Interest expense |
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| Change in fair value of preferred stock warrant liability |
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| Other income (expense), net |
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| Total other expenses, net |
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| Loss before provision for income taxes |
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| Net loss |
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| Foreign currency translation adjustment |
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| Comprehensive loss |
$ | ( |
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| Net loss attributable to common stockholders – basic and diluted |
$ | ( |
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| Net loss per share attributable to common stockholders – basic and diluted |
$ | ( |
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| Weighted average common shares outstanding – basic and diluted |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4
FLYWIRE CORPORATION
UNAUDITED CONDENSED STATEMENTS OF CONVERTIBLE PREFERRED STOCK, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)
(Unaudited) (Amounts in thousands, except share and per share amounts)
Three Months Ended June 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Convertible Preferred Stock |
Redeemable Convertible Preferred Stock |
Voting Common Stock |
Non-Voting Common Stock |
Treasury Stock |
Additional Paid-In |
Accumu lated Other Compre hensive Income |
Accumu lated |
Total Stock holders’ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shares |
Amount |
Shares |
Amount |
Shares |
Amount |
Shares |
Amount |
Shares |
Amount |
Capital |
(Loss) |
Deficit |
Deficit | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balances at March 31, 2021 |
$ | $ | $ | — | — | ( |
) | $ | ( |
) | $ | $ | $ | ( |
) | $ | ( |
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| Issuance of common stock in connection with initial public offering, net of underwriting discounts and commissions |
— | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Costs incurred in connection with initial public offering |
— | — | — | — | — | — | — | — | — | — | ( |
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) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accretion of redeemable convertible preferred stock |
— | — | — | — | — | — | — | — | — | ( |
) | — | — | ( |
) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of Series C Convertible Preferred Stock upon net exercise of warrants |
— | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Conversion of convertible preferred stock upon initial public offering |
( |
) | ( |
) | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Conversion of redeemable convertible preferred stock upon initial public offering |
— | — | ( |
) | ( |
) | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock upon exercise of stock options |
— | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Reclassification of warrant liability to additional paid-in capital upon initial public offering |
— | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Exercise of common stock warrants |
— | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment |
— | — | — | — | — | — | — | — | — | — | — | ( |
) | — | ( |
) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense |
— | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss |
— | — | — | — | — | — | — | — | — | — | — | — | ( |
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| Balances at June 30, 2021 |
— | — | — | — | $ | $ | ( |
) | $ | ( |
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Three Months Ended June 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Convertible Preferred Stock |
Redeemable Convertible Preferred Stock |
Voting Common Stock |
Non-Voting Common Stock |
Treasury Stock |
Additional Paid-In |
Accumu lated Other Compre hensive Income |
Accumu lated |
Total Stock holders’ Equity | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shares |
Amount |
Shares |
Amount |
Shares |
Amount |
Shares |
Amount |
Shares |
Amount |
Capital |
(Loss) |
Deficit |
(Deficit) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balances at March 31, 2020 |
$ | $ | $ | — | — | ( |
) | $ | ( |
) | $ | $ | $ | ( |
) | $ | ( |
) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock upon exercise of stock options |
— | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock warrants |
— | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accretion of redeemable convertible preferred stock |
— | — | — | — | — | — | — | — | — | ( |
) | — | — | ( |
) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Forfeiture of unvested restricted stock awards |
— | — | — | — | ( |
) | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment |
— | — | — | — | — | — | — | — | — | — | — | ( |
) | — | ( |
) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense |
— | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income |
— | — | — | — | — | — | — | — | — | — | — | — | ( |
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| Balances at June 30, 2020 |
$ | $ | $ | — | — | ( |
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5
Six Months Ended June 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Convertible Preferred Stock |
Redeemable Convertible Preferred Stock |
Voting Common Stock |
Non-Voting Common Stock |
Treasury Stock |
Additional Paid-In |
Accumu lated Other Compre hensive Income |
Accumu lated |
Total Stock holders’ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shares |
Amount |
Shares |
Amount |
Shares |
Amount |
Shares |
Amount |
Shares |
Amount |
Capital |
(Loss) |
Deficit |
Deficit | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balances at December 31, 2020 |
$ | $ | $ | — | — | ( |
) | $ | ( |
) | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock in connection with initial public offering, net of underwriting discounts and commissions |
— | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Costs incurred in connection with initial public offering |
— | — | — | — | — | — | — | — | — | — | ( |
) | — | — | ( |
) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accretion of redeemable convertible preferred stock |
— | — | — | — | — | — | — | — | — | ( |
) | — | — | ( |
) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of Series F-1 redeemable convertible preferred stock, net of issuance costs of $ |
— | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of Series C Convertible Preferred Stock upon net exercise of warrants |
— | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Conversion of convertible preferred stock upon initial public offering |
( |
) | ( |
) | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Conversion of redeemable convertible preferred stock upon initial public offering |
— | — | ( |
) | ( |
) | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock upon exercise of stock options |
— | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Reclassification of warrant liability to additional paid-in capital upon initial public offering |
— | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Exercise of common stock warrants |
— | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment |
— | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense |
— | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss |
— | — | — | — | — | — | — | — | — | — | — | — | ( |
) | ( |
) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Balances at June 30, 2021 |
— | — | — | — | $ | $ | ( |
) | $ | ( |
) | $ | $ | $ | ( |
) | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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6
Six Months Ended June 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Convertible Preferred Stock |
Redeemable Convertible Preferred Stock |
Voting Common Stock |
Non-Voting Common Stock |
Treasury Stock |
Additional Paid-In |
Accumu lated Other Compre hensive Income |
Accumu lated |
Total Stock holders’ Equity | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shares |
Amount |
Shares |
Amount |
Shares |
Amount |
Shares |
Amount |
Shares |
Amount |
Capital |
(Loss) |
Deficit |
(Deficit) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balances at December 31, 2019 |
$ | |
— | — | $ | — | — | ( |
) | $ | ( |
) | $ | $ | $ | ( |
) | $ | ( |
) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock upon exercise of stock options |
— | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of Series E redeemable convertible preferred stock, net of issuance costs of $ |
— | — | |
|
— | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accretion of redeemable convertible preferred stock |
— | — | — | — | — | — | — | — | — | ( |
) | — | — | ( |
) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock warrants |
— | — | — | — | — | — | — | — | — | — | — | — | |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Forfeiture of unvested restricted stock awards |
— | — | — | — | ( |
) | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment |
— | — | — | — | — | — | — | — | — | — | — | ( |
) | — | ( |
) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense |
— | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income |
— | — | — | — | — | — | — | — | — | — | — | — | ( |
) | ( |
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| Balances at June 30, 2020 |
$ | $ | $ | |
— | — | ( |
) | $ | ( |
) | $ | $ | ( |
) | $ | ( |
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7
FLYWIRE CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Amounts in thousands)
Six Months Ended June 30, |
||||||||
2021 |
2020 |
|||||||
| Cash flows from operating activities: |
||||||||
| Net loss |
$ | ( |
) | $ | ( |
) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: |
||||||||
| Depreciation and amortization |
||||||||
| Stock-based compensation expense |
||||||||
| Amortization of deferred contract costs |
||||||||
| Change in fair value of preferred stock warrant liability |
||||||||
| Change in fair value of contingent consideration |
||||||||
| Deferred tax provision |
( |
) | ||||||
| Bad debt expense |
||||||||
| Non-cash interest expense |
||||||||
| Other |
||||||||
| Changes in operating assets and liabilities, net of acquisition: |
||||||||
| Accounts receivable |
( |
) | ( |
) | ||||
| Unbilled receivables |
||||||||
| Funds receivable from payment partners |
||||||||
| Prepaid expenses and other assets |
( |
) | ( |
) | ||||
| Funds payable to clients |
( |
) | ( |
) | ||||
| Accounts payable, accrued expenses and other current liabilities |
||||||||
| Contingent consideration |
( |
) | ( |
) | ||||
| Other liabilities |
( |
) | ||||||
| Deferred revenue |
( |
) | ( |
) | ||||
| |
|
|
|
|||||
| Net cash used in operating activities |
( |
) | ( |
) | ||||
| |
|
|
|
|||||
| Cash flows from investing activities: |
||||||||
| Purchases of property and equipment |
( |
) | ( |
) | ||||
| Asset acquisition, net of cash acquired |
( |
) | ||||||
| Acquisition of businesses, net of cash acquired |
( |
) | ||||||
| |
|
|
|
|||||
| Net cash used in investing activities |
( |
) | ( |
) | ||||
| |
|
|
|
|||||
| Cash flows from financing activities: |
||||||||
| Proceeds from initial public offering, net of underwriting discounts and commissions |
||||||||
| Payment of costs related to initial public offering |
( |
) | ||||||
| Proceeds from issuance of long-term debt |
||||||||
| Payment of long-term debt issuance costs |
( |
) | ||||||
| Payment of long-term debt |
( |
) | ||||||
| Proceeds from issuance of redeemable convertible preferred stock, net of issuance costs |
||||||||
| Proceeds from exercise of warrants |
||||||||
| Contingent consideration paid for acquisitions |
( |
) | ( |
) | ||||
| Proceeds from exercise of stock options |
||||||||
| |
|
|
|
|||||
| Net cash provided by financing activities |
||||||||
| |
|
|
|
|||||
| Effect of exchange rates changes on cash and cash equivalents |
( |
) | ||||||
| |
|
|
|
|||||
| Net (decrease) increase in cash, cash equivalents and restricted cash |
( |
) | ||||||
| Cash, cash equivalents and restricted cash, beginning of period |
||||||||
| |
|
|
|
|||||
| Cash, cash equivalents and restricted cash, end of period |
$ | $ | ||||||
| |
|
|
|
|||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
8
FLYWIRE CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited) (Amounts in thousands)
Six Months Ended June 30, |
||||||||
2021 |
2020 |
|||||||
| Supplemental disclosures of cash flow and noncash information |
||||||||
| Cash paid during the period for interest |
||||||||
| Accretion of redeemable convertible preferred stock |
( |
) | ( |
) | ||||
| Issuance of common stock warrants |
||||||||
| Issuance of Series C convertible preferred stock upon net exercise of warrants |
||||||||
| Conversion of preferred stock warrants to common stock warrants |
||||||||
| Conversion of convertible preferred stock to common stock upon initial public offering |
||||||||
| Conversion of redeemable convertible preferred stock to common stock upon initial public offering |
||||||||
| Offering costs related to initial public offering included in accounts payable, accrued expenses and other current liabilities |
||||||||
| Reconciliation of cash, cash equivalents and restricted cash |
||||||||
| Cash and cash equivalents |
$ | $ | ||||||
| Restricted cash |
||||||||
| |
|
|
|
|||||
| Cash, cash equivalents and restricted cash |
$ | $ | ||||||
| |
|
|
|
|||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
9
FLYWIRE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Business Overview and Summary of Significant Accounting Policies
Flywire Corporation (“Flywire” or the “Company”) was incorporated under the laws of the State of Delaware in July 2009 as peerTransfer Corporation. In 2016, the Company changed its name to Flywire Corporation. The Company is headquartered in Boston, Massachusetts and has a global footprint in 11 countries across 5 continents.
Flywire provides a secure global payments platform, offering its clients an innovative and streamlined process to receive reconciled domestic and international payments in a more cost effective and efficient manner. The Company’s solutions are built on three core elements: (i) a payments platform; (ii) a proprietary global payment network; and (iii) vertical-specific software backed by its deep industry expertise.
Initial Public Offering
On May 28, 2021, in connection with the Company’s initial public offering (“IPO”), the Company filed an amended and restated certificate of incorporation, which became effective on that date. The amended and restated certificate of incorporation authorized the issuance of 2,000,000,000 shares of voting common stock, 10,000,000 shares of 10,000,000 shares of preferred stock. Each class of stock has a par value of $0.0001
non-voting
common stock and On May 28, 2021, the Company completed its IPO, in which the Company issued and sold 12,006,000 shares of 24.00 per share, which included 1,566,000 shares of 263.8 million in net proceeds from the IPO, after deducting underwriting discounts and commissions of $19.4 million and other offering costs of $4.9 million.
voting
common stock at a public offering price of $voting
common stock issued pursuant to the exercise in full of the over-allotment option by the underwriters. The Company received $Immediately prior to the closing
of the IPO, all shares of the Company’s outstanding convertible preferred stock and redeemable convertible preferred stock, including 182,467 shares of preferred stock issued upon exercise of a warrant immediately prior to the closing of the IPO,
Prior to the closing
IPO, the Company had
to purchase
shares of its convertible preferred stock outstanding, such warrants
immediately prior to the closing of the IPO
warrants to purchase 190,500 shares of the Company’s voting
re-measured
to its fair value of $paid-in
capital. Prior to the IPO, deferred offering costs, which consist of legal, accounting, consulting and other direct fees and costs relating to the IPO, were capitalized in other long-term assets. Upon the completion of the IPO, these costs were offset against the proceeds from the IPO and recorded as a reduction to additional
paid-in
capital. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries and have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. The interim unaudited condensed consolidated financial statements have been prepared on the same basis as the annual audited consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair statement of the Company’s financial position, results of operations, comprehensive loss, changes in convertible preferred stock, redeemable convertible preferred stock and stockholders’ equity
(
deficit)
and its cash flows for the periods presented. ,
The results of operations for the six months ended June 30, 2021, are not necessarily indicative of results to be expected for the year ended December 31, 2021, any other interim periods or any future year or period. The accompanying consolidated balance sheet as of December 31, 2020 was derived from the Company’s audited consolidated financial statements for the year ended December 31, 2020. Certain information and note disclosures normally included in the annual consolidated financial statements prepared in accordance with GAAP have been condensed or omitted from the interim unaudited condensed consolidated financial statements.
These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the Company’s prospectus dated May 25, 2021 and filed with the SEC pursuant to Rule 424(b)(4) under the Securities Act of 1933, as amended on May 26, 2021 (Prospectus).
Principles of Consolidation
The condensed consolidated financial statements include the accounts of Flywire Corporation and its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.
10
Segment Information
The Company has a single operating and reportable segment. The Company’s chief operating decision maker is its Chief Executive Officer, who reviews financial information presented on a consolidated basis for purposes of making operating decisions, assessing financial performance and allocating resources. For information regarding the Company’s revenue by geographic area, see Note 2.
Impact of
COVID-19
On March 11, 2020, the World Health Organization (“WHO”) declared the outbreak of a novel coronavirus
(“COVID-19”)
as a global pandemic, which continues to spread throughout the world. The Company’s primary sources of revenue are related to international tuition payments and domestic healthcare payments for elective procedures. These areas have been adversely impacted by the pandemic. Colleges, universities, private primary schools and language schools are still deciding on their re-opening
plans; international travel has been reduced to stop the in-flow
of COVID-19;
and hospitals have cut back on elective procedures to ensure there are available resources to treat waves of COVID-19
cases. In response to the
COVID-19
pandemic, the Company executed a reduction in force in May of 2020, cut corporate bonus programs, eliminated corporate travel and reduced professional service and other fees. Further, the Company implemented remote working capabilities and measures focused on the safety of employees. The Company continues to monitor the rapidly evolving conditions and circumstances as well as guidance from international and domestic authorities, including public health authorities. The Company does not currently foresee the need to take additional actions; however, it continues to evaluate the ongoing impact of COVID-19
as facts and circumstances change. Stock Split
In May 2021, the Company filed an amendment to its amended and restated certificate of incorporation to effect a forward stock split of its common stock, convertible preferred stock and redeemable convertible preferred stock. In connection with the forward stock split, each issued and outstanding share of common stock, automatically and without action on the part of the holders, became three shares of common stock, each issued and outstanding share of convertible preferred stock, automatically and without action on the part of the holders, became three shares of convertible preferred stock and each issued and outstanding share of redeemable convertible preferred stock, automatically and without action on the part of the holders, became three shares of redeemable convertible preferred stock. The par value per share of common stock, convertible preferred stock and redeemable convertible preferred stock was not adjusted. All references to the convertible preferred stock, redeemable preferred stock, common stock, treasury stock, options to purchase common stock, restricted stock awards, warrants to purchase convertible preferred stock, warrants to purchase common stock, per share amounts and related information contained in the condensed consolidated financial statements have been retroactively adjusted to reflect the effect of the stock split for all periods presented.
3-for-1
convertible
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with U.S GAAP requires management to make estimates and assumptions that affect the amounts reported and disclosed in the condensed consolidated financial statements and the accompanying notes. Significant estimates and assumptions reflected in these financial statements include, but are not limited to, the valuation of common stock prior to the Company’s IPO and stock-based awards, the valuation of the preferred stock warrant liability up until the date of the Company’s IPO, impairment assessment of goodwill, intangibles and other long-lived assets, the valuation of acquired intangible assets and their useful lives, and the valuation of contingent consideration. The Company bases its estimates on historical experience, known trends and other market-specific or other relevant factors that it believes to be reasonable under the circumstances. On an ongoing basis, the Company evaluates its estimates as there are changes in circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known. Actual results may differ from those estimates or assumptions.
Concentrations of Credit Risk, Financial Instruments and Significant C
lients
Financial instruments that potentially subject the Company to concentration of credit risk consists principally of cash, cash equivalents, accounts receivable and funds receivable from payment partners. The Company maintains its cash and cash equivalents with financial institutions that management believes are of high credit quality. To manage credit risk related to accounts receivable, the Company evaluates credit worthiness of its clients and maintains allowances, to the extent necessary, for potential credit losses based upon the aging of its accounts receivable balances and known collection issues. The Company has not experienced any material credit losses for the three and six months ended June 30, 202
1
and 2020
. 11
The Company has corporate deposit balances with financial institutions which exceed the Federal Deposit Insurance Corporation (“FDIC”) insurance limit of $250,000 . As part of the cash management proces
s
, the Company performs periodic reviews of the financial institution credit standing. Accounts receivable are derived from revenue earned from
Clients
located in the U.S. and internationally. Significant Clients
are those that represent 10% or more of accounts receivable, net as set forth in the following table: June 30, |
December 31, |
|||||||
2021 |
2020 |
|||||||
| Client A |
% | % | ||||||
| Client B |
% | % | ||||||
Funds receivable from payment partners consist primarily of cash held by the Company’s global payment processing partners that
have
not yet been
remitted to the Company. Significant partners are those that represent 10% or more of funds receivable from payment partners as set forth in the following table: June 30, |
December 31, |
|||||||
2021 |
2020 |
|||||||
| Partner A |
% | % | ||||||
| Partner B |
% | % | ||||||
| Partner C |
% | % | ||||||
| Partner D |
% | * | ||||||
| * | Less than 10% of total balance. |
During the three and six months ended June 30, 202
1
and 2020
, no clients accounted for 10% or more of revenue. During the three months ended June 30, 2021 and 2020, revenue from clients located outside of the United States in the aggregate accounted for 37.9 % and 20.8 % of the Company’s revenue, respectively, with the United Kingdom accounting for 12.0 % and 10.4 %, respectively and Canada accounting for 19.7 % and 8.5 %, respectively. No other countries accounted for 10% or more of revenue for the three months ended June 30, 2021 and 2020.
During the six months ended June 30, 2021 and 2020, revenue from clients located outside of the United States in the aggregate accounted for 31.0 % and 23.0 % of the Company’s revenue, respectively, with the United Kingdom accounting for 9.6 % and 10.7 %, respectively and Canada accounting for 15.6 % and 9.3 %, respectively. No other countries accounted for 10
Summary of Significant Accounting Policies
The Company’s significant accounting policies are discussed in “Index to Consolidated Financial Statements - Note 2. Summary of Significant Accounting Policies” in the Notes to Consolidated Financial Statements contained in the Prospectus. There have been no changes to these policies as described in the Prospectus.
12
Deferred Offering Costs
The Company capitalized certain legal, accounting and other third-party fees that were directly associated with 1.0 million of deferred offering costs that are unpaid, of which $0.9 million was recorded in accounts payable and $0.1 million was recorded in accrued expenses and other current liabilities.
in-process
equity financings as deferred offering costs until such financings were consummated. After consummation of the IPO, these costs were recorded in stockholder’s equity as a reduction of the additional paid-in
capital generated as a result of the IPO. As of June 30, 2021, the Company had $Software Developed for Internal Use
The Company capitalizes costs related to 5.0 million and $1.8 million in costs related to internal use software as of June 30, 2021 and December 31, 2020, respectively. The Company capitalized $3.2 0.7 million in costs related to internal use software during the six months ended June 30, 2021 and 2020, respectively. Software developed for internal use is amortized on a straight-line basis over its estimated useful life of five years .
internal-use
software during the application development stage including third-party consulting costs and compensation expenses related to employees who devote time to the development of the projects. The Company records software development costs in property and equipment. Costs incurred in the preliminary stages of development activities and post implementation activities are expensed in the period incurred and they are included in technology and development expense in the consolidated statements of operations and comprehensive loss. The Company also capitalizes costs related to specific upgrades and enhancements when it is probable the expenditures will result in additional functionality. Once the additional functionality is available for general use, capitalization ceases and the asset begins being amortized. The Company capitalized $million
and $Advertising Costs
Advertising costs are expensed as incurred and are included in selling and marketing expenses in the consolidated statements of operations and comprehensive loss. Advertising expenses for the three months ended June 30, 2021 and 2020 were $0.6 million and $0.3 million, respectively. Advertising expenses for the 1.1 million and $0.6 million, respectively.
six months
ended June 30, 2021 and 2020 were $Recent Accounting Pronouncements Not Yet Adopted
The following Accounting Standards Updates (“ASUs”) were issued by the Financial Accounting Standards Board (“FASB”) and not yet adopted by Flywire:
ASU and subsequent related ASUs: The new lease standard sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e., lessees and lessors). The standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether the lease is effectively a financed purchase by the lessee. This classification determines whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. In addition, a lessee is required to record (i) a asset and a lease liability on its balance sheet for all leases with accounting lease terms of more than 12 months regardless of whether it is an operating or financing lease and (ii) lease expense for operating leases and amortization and interest expense for financing leases. Leases with a term of 12 months or less may be accounted for similar to the prior guidance for operating leases. In 2018, the FASB issued
2016-02,
Leases (Topic 842)
right-of-use
ASU 2018-11,
which added an optional transition method under the new lease standard that allows companies to adopt the standard as of the beginning of the year of adoption as opposed to the earliest comparative period presented. ASU 2016-02
is effective for the Company on January 1, 2022, with early adoption permitted. The Company is currently evaluating the impact of this standard on its consolidated financial statements and disclosures. ASU : ASU simplifies the accounting for income taxes by removing certain exceptions for intra period tax allocations and deferred tax liabilities for equity method investments and adds guidance on whether a
2019-12,
Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes
step-up
in tax basis of goodwill relates to a business combination or a separate transaction. ASU 2019-12
is effective for the Company on January 1, 2022, with early adoption permitted. The Company is currently evaluating the impact of this standard on its consolidated financial statements and disclosures. ASU ASU
2021-04
Earnings Per Share (Topic 260), Debt - Modifications and Extinguishments (Subtopic
470-50),
Compensation - Stock Compensation (Topic 718), and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40):
2021-04
requires issuers to account for modifications or exchanges of freestanding equity-classified written call options (e.g., warrants) that remain equity classified after the modification or exchange based on the substance of the modification or exchange (e.g., a financing transaction to raise equity versus one to raise debt). ASU 2021-04
is effective for Flywire on January 1, 2022, with early adoption permitted. The Company is currently evaluating the impact of this standard on its consolidated financial statements and disclosures. 13
ASU 2016-13
Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments
2016-13
replaces the current incurred loss impairment model that recognizes losses when a probable threshold is met with a requirement to recognize lifetime expected credit losses immediately when a financial asset is originated or purchased. ASU 2016-13
is effective for the Company on January 1, 2023, with early adoption permitted. The Company is currently evaluating the impact of this standard on its consolidated financial statements and disclosures. ASU reduces the number of accounting models for convertible debt instruments and convertible preferred stock as well as amends the derivatives scope exception for contracts in an entity’s own equity. ASU
2020-06,
Debt - Debt with Conversion and Other
Options (Subtopic
ASU 470-20)
and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40):
Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity: 2020-06
2020-06
is effective for the Company on January 1, 2024, with early adoption permitted. The Company is currently evaluating the impact of this standard on its consolidated financial statements and disclosures.Emerging Growth Company Status
The Company qualifies as “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 and has elected to “opt in” to the extended transition related to complying with new or revised accounting standards, which means that when a standard is issued or revised and it has different application dates for public and nonpublic companies, the Company will adopt the new or revised standard at the time nonpublic companies adopt the new or revised standard and will do so until such time that the Company either (i) irrevocably elects to “opt out” of such extended transition period or (ii) no longer qualifies as an emerging growth company. The Company may choose to early adopt any new or revised accounting standards whenever such early adoption is permitted for nonpublic companies.
14
Note 2. Revenue and Recognition
The following tables present revenue from
contracts
with clients disaggregated by geographical area and major solutions. The categorization of revenue by geographical location is determined based on where the client resides.
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
(in thousands) |
2021 |
2020 |
2021 |
2020 |
||||||||||||
| Primary geographical markets |
||||||||||||||||
| United States (“U.S.”) |
$ | $ | $ | $ | ||||||||||||
| Canada |
||||||||||||||||
| United Kingdom (“U.K.”) |
||||||||||||||||
| Other Countries 1 |
||||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Revenue |
$ | $ | $ | $ | ||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Major solutions |
||||||||||||||||
| Transactions |
$ | $ | $ | $ | ||||||||||||
| Platform and usage-based fees |
||||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Revenue |
$ | $ | $ | $ | ||||||||||||
| |
|
|
|
|
|
|
|
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(1) |
No single country included in the other countries category represented 10% or more of revenue. |
Contract Balances from Contracts with Clients
The following table provides information about accounts receivable, unbilled receivables and deferred revenue from contracts with
clients
(in thousands):
June 30, 2021 |
December 31, 2020 |
|||||||
| Accounts receivable, net of allowances |
$ | $ | ||||||
| Unbilled receivables |
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