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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 September 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

 

FLYWIRE CORPORATION

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

27-0690799

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

 

 

141 Tremont St #10

Boston, MA

02111

(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

 

Voting common stock, $0.0001 par value per share

FLYW

The Nasdaq Stock Market LLC
(Nasdaq Global Select Market)

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 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). Yes 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 November 8, 2021, the registrant had 98,693,094 shares of voting common stock, $0.0001 par value per share, outstanding and 5,988,378 shares of non-voting common stock $0.0001 par value per share, outstanding.

 

 

 


 

 

Table of Contents

 

 

 

Page

PART I.

FINANCIAL INFORMATION

4

Item 1.

Financial Statements (Unaudited)

4

 

Condensed Consolidated Balance Sheets

4

 

Condensed Consolidated Statements of Operations and Comprehensive (Loss)

5

 

Condensed Consolidated Statements of Convertible Preferred Stock, Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)

6

 

Condensed Consolidated Statements of Cash Flows

9

 

Notes to Condensed Consolidated Financial Statements

11

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

29

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

46

Item 4.

Controls and Procedures

47

PART II.

OTHER INFORMATION

49

Item 1.

Legal Proceedings

49

Item 1A.

Risk Factors

49

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

88

Item 3.

Defaults Upon Senior Securities

88

Item 4.

Mine Safety Disclosures

88

Item 5.

Other Information

88

Item 6.

Exhibits

89

Signatures

 

91

 

 

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 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.

2


 

 

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.

3


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

FLYWIRE CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited) (Amounts in thousands, except share and per share amounts)

 

 

 

September 30,
2021

 

 

December 31,
2020

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

449,130

 

 

$

104,052

 

Restricted cash

 

 

4,000

 

 

 

5,000

 

Accounts receivable, net of allowance for doubtful accounts of $26 and $481, respectively

 

 

12,949

 

 

 

11,573

 

Unbilled receivables

 

 

1,760

 

 

 

1,698

 

Funds receivable from payment partners

 

 

21,896

 

 

 

22,481

 

Prepaid expenses and other current assets

 

 

10,208

 

 

 

3,754

 

Total current assets

 

 

499,943

 

 

 

148,558

 

Property and equipment, net

 

 

8,690

 

 

 

5,101

 

Intangible assets, net

 

 

63,379

 

 

 

68,211

 

Goodwill

 

 

44,632

 

 

 

44,650

 

Other assets

 

 

6,340

 

 

 

4,922

 

Total assets

 

$

622,984

 

 

$

271,442

 

Liabilities, Convertible Preferred Stock, Redeemable Convertible Preferred Stock and Stockholders’ Equity
   (Deficit)

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

12,799

 

 

$

5,436

 

Funds payable to clients

 

 

66,855

 

 

 

59,986

 

Accrued expenses and other current liabilities

 

 

18,531

 

 

 

14,991

 

Deferred revenue

 

 

1,330

 

 

 

1,227

 

Contingent consideration

 

 

7,580

 

 

 

6,740

 

Total current liabilities

 

 

107,095

 

 

 

88,380

 

Deferred tax liabilities

 

 

657

 

 

 

481

 

Contingent consideration, net of current portion

 

 

 

 

 

5,760

 

Preferred stock warrant liability

 

 

 

 

 

1,932

 

Long-term debt

 

 

25,933

 

 

 

24,352

 

Other liabilities

 

 

1,587

 

 

 

2,129

 

Total liabilities

 

 

135,272

 

 

 

123,034

 

Commitments and contingencies (Note 15)

 

 

 

 

 

 

Convertible preferred stock (Series A, B, B1, B1-NV, C and D), $0.0001 par value; 0 and 62,915,394 shares
   authorized at September 30, 2021 and December 31, 2020, respectively;
0 and 54,208,461 shares issued and
   outstanding at September 30, 2021 and December 31, 2020, respectively; liquidation preference of $
0 and
   $
110,716 at September 30, 2021 and December 31, 2020, respectively

 

 

 

 

 

110,401

 

Redeemable convertible preferred stock (Series E-1, E-2, F-1 and F-2), $0.0001 par value; 0 and 16,023,132
   shares authorized at September 30, 2021 and December 31, 2020, respectively;
0 and 11,239,920 shares issued
   and outstanding at September 30, 2021 and December 31, 2020, respectively; liquidation preference of $
0 and
   $
150,000, respectively at September 30, 2021 and December 31, 2020

 

 

 

 

 

119,769

 

Stockholders’ (deficit) equity:

 

 

 

 

 

 

Preferred stock, $0.0001 par value; 10,000,000 and 0 shares authorized as of September 30, 2021 and
   December 31, 2020, respectively; and
none issued and outstanding as of September 30, 2021 and
   December 31, 2020, respectively

 

 

 

 

 

 

Voting common stock, $0.0001 par value; 2,000,000,000 and 146,898,270 shares authorized as of
   September 30, 2021 and December 31, 2020, respectively,
100,995,903 shares issued and 98,678,181 shares
   outstanding as of September 30, 2021;
22,240,872 shares issued and 19,923,150 shares outstanding as of
   December 31, 2020

 

 

10

 

 

 

2

 

Non-voting common stock, $0.0001 par value; 10,000,000 and 0 shares authorized as of September 30, 2021
   and December 31, 2020, respectively;
5,988,378 and 0 issued and outstanding as of September 30, 2021 and
   December 31, 2020, respectively

 

 

1

 

 

 

 

Treasury Stock, 2,317,722 shares as of September 30, 2021 and December 31, 2020, held at cost

 

 

(748

)

 

 

(748

)

Additional paid-in capital

 

 

603,319

 

 

 

16,970

 

Accumulated other comprehensive loss

 

 

(294

)

 

 

(214

)

Accumulated deficit

 

 

(114,576

)

 

 

(97,772

)

Total stockholders’ equity (deficit)

 

 

487,712

 

 

 

(81,762

)

Total liabilities, convertible preferred stock, redeemable convertible preferred stock and stockholders’
   (deficit) equity

 

$

622,984

 

 

$

271,442

 

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

4


 

FLYWIRE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited) (Amounts in thousands, except share and per share amounts)

 

 

 

Three Months Ended
September 30,

 

 

Nine Months Ended
September 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Revenue

 

$

67,788

 

 

$

42,086

 

 

$

149,755

 

 

$

98,552

 

Costs and operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Payment processing services costs

 

 

21,724

 

 

 

13,777

 

 

 

50,937

 

 

 

36,254

 

Technology and development

 

 

7,752

 

 

 

6,079

 

 

 

22,203

 

 

 

17,805

 

Selling and marketing

 

 

12,540

 

 

 

7,640

 

 

 

35,400

 

 

 

24,342

 

General and administrative

 

 

14,676

 

 

 

9,172

 

 

 

44,145

 

 

 

32,985

 

Total costs and operating expenses

 

 

56,692

 

 

 

36,668

 

 

 

152,685

 

 

 

111,386

 

Income (loss) from operations

 

$

11,096

 

 

$

5,418

 

 

$

(2,930

)

 

$

(12,834

)

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

(542

)

 

 

(584

)

 

 

(1,804

)

 

 

(1,860

)

Change in fair value of preferred stock warrant liability

 

 

-

 

 

 

9

 

 

 

(10,758

)

 

 

(245

)

Other income (expense), net

 

 

(214

)

 

 

(4

)

 

 

(494

)

 

 

72

 

Total other expenses, net

 

 

(756

)

 

 

(579

)

 

 

(13,056

)

 

 

(2,033

)

Income (loss) before provision for (benefit from)
   income taxes

 

 

10,340

 

 

 

4,839

 

 

$

(15,986

)

 

 

(14,867

)

Provision for (benefit from)income taxes

 

 

346

 

 

 

(382

)

 

 

818

 

 

 

(7,791

)

Net income (loss)

 

 

9,994

 

 

 

5,221

 

 

 

(16,804

)

 

 

(7,076

)

Foreign currency translation adjustment

 

 

(343

)

 

 

192

 

 

 

(80

)

 

 

(81

)

Comprehensive income (loss)

 

$

9,651

 

 

$

5,413

 

 

$

(16,884

)

 

$

(7,157

)

Net income (loss) attributable to common stockholders
   – basic and diluted

 

$

9,994

 

 

$

1,157

 

 

$

(16,817

)

 

$

(7,086

)

Net income (loss) per share attributable to common
   stockholders – basic

 

$

0.10

 

 

$

0.06

 

 

$

(0.28

)

 

$

(0.39

)

Net income (loss) per share attributable to common
   stockholders – diluted

 

$

0.08

 

 

$

0.04

 

 

$

(0.28

)

 

$

(0.39

)

Weighted average common shares outstanding – basic

 

 

104,486,136

 

 

 

18,644,502

 

 

 

59,667,434

 

 

 

18,163,078

 

Weighted average common shares outstanding – diluted

 

 

118,445,907

 

 

 

27,286,944

 

 

 

59,667,434

 

 

 

18,163,078

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

5


 

 

FLYWIRE CORPORATION

CONDENSED CONSOLIDATED 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 September 30, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Convertible
Preferred Stock

 

 

Redeemable
Convertible
Preferred Stock

 

 

 

Voting
Common Stock

 

 

Non-Voting
Common Stock

 

 

Treasury Stock

 

 

Additional
Paid-In

 

 

Accumulated
Other
Comprehensive

 

 

Accumulated

 

 

Total
Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income (Loss)

 

 

Deficit

 

 

Equity

 

Balances at
   June 30, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

100,995,903

 

 

$

10

 

 

 

5,988,378

 

 

$

1

 

 

 

(2,317,722

)

 

$

(748

)

 

$

600,236

 

 

$

49

 

 

$

(124,570

)

 

$

474,978

 

Issuance of common
   stock upon exercise of
   stock options

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

205,563

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

305

 

 

 

 

 

 

 

 

 

305

 

Foreign currency
   translation
   adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(343

)

 

 

 

 

 

(343

)

Stock-based
   compensation
   expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,778

 

 

 

 

 

 

 

 

 

2,778

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

9,994

 

 

 

9,994

 

Balances at
   September 30, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

101,201,466

 

 

 

10

 

 

 

5,988,378

 

 

 

1

 

 

 

(2,317,722

)

 

 

(748

)

 

 

603,319

 

 

 

(294

)

 

 

(114,576

)

 

 

487,712

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Convertible
Preferred Stock

 

 

Redeemable
Convertible
Preferred Stock

 

 

 

Voting
Common Stock

 

 

Non-Voting
Common Stock

 

 

Treasury Stock

 

 

Additional
Paid-In

 

 

Accumulated
Other
Comprehensive

 

 

Accumulated

 

 

Total
Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income (Loss)

 

 

Deficit

 

 

Deficit

 

Balances at
   June 30, 2020

 

 

54,208,461

 

 

$

110,401

 

 

 

11,239,920

 

 

$

119,761

 

 

 

 

21,760,848

 

 

$

2

 

 

 

 

 

 

 

 

 

(2,317,722

)

 

$

(748

)

 

$

14,705

 

 

$

(171

)

 

$

(98,962

)

 

$

(85,174

)

Issuance of common
   stock upon exercise
   of stock options

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

259,593

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

86

 

 

 

 

 

 

 

 

 

86

 

Issuance of common
   stock warrants

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accretion of
   redeemable
   convertible preferred
   stock

 

 

 

 

 

 

 

 

 

 

 

4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4

)

 

 

 

 

 

 

 

 

(4

)

Forfeiture of unvested
   restricted stock
   awards

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency
   translation
   adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

192

 

 

 

 

 

 

192

 

Stock-based
   compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,036

 

 

 

 

 

 

 

 

 

1,036

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5,221

 

 

 

5,221

 

Balances at
   September 30, 2020

 

 

54,208,461

 

 

$

110,401

 

 

 

11,239,920

 

 

$

119,765

 

 

 

 

22,020,441

 

 

$

2