SEC Filing – Flywire Corporation

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10-Q

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, 2023


☐	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 3, 2023, the registrant had 119,539,868 shares of voting common stock, $0.0001 par value per share, outstanding and 1,873,320 shares of non-voting common stock $0.0001 par value per share, outstanding.

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		Page
	Special Note Regarding Forward-Looking Statements	2

PART I.	FINANCIAL INFORMATION	4
Item 1.	Financial Statements (Unaudited)	4
	Condensed Consolidated Balance Sheets	4
	Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)	5
	Condensed Consolidated Statements of Stockholders’ Equity	6
	Condensed Consolidated Statements of Cash Flows	9
	Notes to Condensed Consolidated Financial Statements	11
	Note 1. Business Overview and Summary of Significant Accounting Policies	11
	Note 2. Revenue and Recognition	14
	Note 3. Allowance for Credit Losses	15
	Note 4. Fair Value Measurements	15
	Note 5. Derivative Instruments	17
	Note 6. Accrued Expenses and Other Current Liabilities	18
	Note 7. Property and Equipment, net	18
	Note 8. Business Combinations	18
	Note 9. Goodwill and Acquired Intangible Assets	20
	Note 10. Debt	21
	Note 11. Stockholders’ Equity	22
	Note 12. Stock-Based Compensation	23
	Note 13. Net Income (Loss) per Share	25
	Note 14. Income Taxes	26
	Note 15. Commitments and Contingencies	26
	Note 16. Subsequent Events	27
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	47
Item 4.	Controls and Procedures	48

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	93
Item 3.	Defaults Upon Senior Securities	93
Item 4.	Mine Safety Disclosures	93
Item 5.	Other Information	93
Item 6.	Exhibits	96
Signatures		97

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on 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, and ability to access, our cash and cash equivalents to meet our liquidity needs;

•

political, economic, foreign currency exchange rate, inflation, banking, legal, social and health risks and 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 financial institutions and 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 and sub-verticals, including our relatively new business-to-business 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 other financial services, economic and trade sanctions, anti-money laundering and countering the financing of terrorism, taxation, privacy and data protection;

•

economic and industry trends, projected growth, or trend analysis;

•

our response to global events and geopolitical conflict, including without limitation the continuing hostilities in Ukraine and Gaza;

•

our ability to adapt to changes in U.S. federal income or other tax laws or the interpretation of tax laws, including the recently enacted Inflation Reduction Act of 2022;

•

our ability to attract and retain qualified employees;

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•

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 Quarterly Report on Form 10-Q. Other sections of this Quarterly Report on 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 Quarterly Report on 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.

Unless otherwise noted or unless the context provides otherwise, all references in this Quarterly Report on Form 10-Q to our “common stock” refer to our voting common stock.

Investors, the media, and others should note that we intend to announce material information to the public through filings with the Securities and Exchange Commission (SEC), the investor relations page on our website (https://ir.flywire.com), blog posts on our website (www.flywire.com), press releases, public conference calls, webcasts, and social media channels, including our X (formerly known as Twitter) feed (@flywire) and LinkedIn page (https://www.linkedin.com/company/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 the websites provided above are not incorporated into this filing or in any other report or document we file with the SEC. These website addresses are intended to be inactive textual references only.

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PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

FLYWIRE CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

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


	September 30, 2023			December 31, 2022
Assets
Current assets:
Cash and cash equivalents	$	638,205		$	349,177
Restricted cash		—			2,000
Accounts receivable, net		18,151			13,697
Unbilled receivables, net		6,779			5,268
Funds receivable from payment partners		80,499			62,970
Prepaid expenses and other current assets		18,793			17,531
Total current assets		762,427			450,643
Property and equipment, net		15,241			13,317
Intangible assets, net		88,287			97,616
Goodwill		97,173			97,766
Other assets		19,288			14,945
Total assets	$	982,416		$	674,287
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	17,574		$	13,325
Funds payable to clients		132,467			124,305
Accrued expenses and other current liabilities		38,255			34,423
Deferred revenue		3,812			5,223
Total current liabilities		192,108			177,276
Deferred tax liabilities		11,271			12,149
Other liabilities		3,719			2,959
Total liabilities		207,098			192,384
Commitments and contingencies (Note 15)
Stockholders’ equity:
Preferred stock, $0.0001 par value; 10,000,000 shares authorized as of September 30, 2023 and December 31, 2022; and no shares issued and outstanding as of September 30, 2023 and December 31, 2022		—			—
Voting common stock, $0.0001 par value; 2,000,000,000 shares authorized as of September 30, 2023 and December 31, 2022; 121,700,424 shares issued and 119,382,702 shares outstanding as of September 30, 2023; 109,790,702 shares issued and 107,472,980 shares outstanding as of December 31, 2022		11			10
Non-voting common stock, $0.0001 par value; 10,000,000 shares authorized as of September 30, 2023 and December 31, 2022; 1,873,320 shares issued and outstanding as of September 30, 2023 and December 31, 2022		1			1
Treasury voting common stock, 2,317,722 shares as of September 30, 2023 and December 31, 2022, held at cost		(748	)		(748	)
Additional paid-in capital		953,522			649,756
Accumulated other comprehensive loss		(2,411	)		(1,912	)
Accumulated deficit		(175,057	)		(165,204	)
Total stockholders’ equity		775,318			481,903
Total liabilities and stockholders’ equity	$	982,416		$	674,287

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

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FLYWIRE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

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


	Three Months Ended September 30,						Nine Months Ended September 30,
	2023			2022			2023			2022
Revenue	$	123,323		$	95,232		$	302,549		$	216,322
Costs and operating expenses:
Payment processing services costs		42,900			32,275			110,559			78,348
Technology and development		14,591			13,385			45,130			37,565
Selling and marketing		27,084			21,674			78,791			58,169
General and administrative		26,862			24,246			79,559			63,089
Total costs and operating expenses		111,437			91,580			314,039			237,171
Income (loss) from operations	$	11,886		$	3,652		$	(11,490	)	$	(20,849	)
Other income (expense):
Interest expense		(99	)		(400	)		(280	)		(884	)
Interest income		3,841			1,273			7,711			1,457
Loss from remeasurement of foreign currency		(4,233	)		(7,520	)		(3,518	)		(15,087	)
Total other income (expense), net		(491	)		(6,647	)		3,913			(14,514	)
Income (loss) before provision for income taxes		11,395			(2,995	)		(7,577	)		(35,363	)
Provision for income taxes		752			1,277			2,276			2,855
Net income (loss)	$	10,643		$	(4,272	)	$	(9,853	)	$	(38,218	)
Foreign currency translation adjustment		(2,581	)		(273	)		(499	)		(408	)
Comprehensive income (loss)	$	8,062		$	(4,545	)	$	(10,352	)	$	(38,626	)
Net income (loss) attributable to common stockholders – basic and diluted	$	10,643		$	(4,272	)	$	(9,853	)	$	(38,218	)
Net income (loss) per share attributable to common stockholders – basic	$	0.09		$	(0.04	)	$	(0.09	)	$	(0.36	)
Net income (loss) per share attributable to common stockholders – diluted	$	0.08		$	(0.04	)	$	(0.09	)	$	(0.36	)
Weighted average common shares outstanding – basic		116,492,191			107,925,637			112,495,539			107,562,799
Weighted average common shares outstanding – diluted		125,480,393			107,925,637			112,495,539			107,562,799

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

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FLYWIRE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

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


	Three Months Ended September 30, 2023
	Voting Common Stock				Non-Voting Common Stock				Treasury Voting Common Stock						Additional Paid-In			Accumulated Other Comprehensive Income			Accumulated			Total Stockholders’
	Shares		Amount		Shares		Amount		Shares			Amount			Capital			(Loss)			Deficit			Equity
Balances at June 30, 2023		112,229,190	$	10		1,873,320	$	1		(2,317,722	)	$	(748	)	$	677,343		$	170		$	(185,700	)	$	491,076
Issuance of common stock in connection with public offering, net of underwriter discounts and commissions		8,500,000		1		—		—		—			—			261,119			—			—			261,120
Costs incurred in connection with public offering		—		—		—		—		—			—			(1,058	)		—			—			(1,058	)
Issuance of common stock upon exercise of stock options		669,158		—		—		—		—			—			2,474			—			—			2,474
Issuance of common stock upon settlement of restricted stock units		198,084		—		—		—		—			—			—			—			—			—
Issuance of common stock under employee stock purchase plan		89,826		—		—		—		—			—			1,827			—			—			1,827
Issuance of common stock for retention bonus		14,166		—		—		—		—			—			497			—			—			497
Foreign currency translation adjustment		—		—		—		—		—			—			—			(2,581	)		—			(2,581	)
Stock-based compensation expense		—		—		—		—		—			—			11,320			—			—			11,320
Net income		—		—		—		—		—			—			—			—			10,643			10,643
Balances at September 30, 2023		121,700,424	$	11		1,873,320	$	1		(2,317,722	)	$	(748	)	$	953,522		$	(2,411	)	$	(175,057	)	$	775,318

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	Three Months Ended September 30, 2022
	Voting Common Stock				Non-Voting Common Stock					Treasury Voting Common Stock						Additional Paid-In		Accumulated Other Comprehensive			Accumulated			Total Stockholders’
	Shares		Amount		Shares			Amount		Shares			Amount			Capital		Loss			Deficit			Equity
Balances at June, 2022		104,230,946	$	10		5,988,378		$	1		(2,317,722	)	$	(748	)	$	623,611	$	(534	)	$	(159,803	)	$	462,537
Issuance of common stock upon exercise of stock options, net of shares withheld		674,872		—		—			—		—			—			2,519		—			—			2,519
Conversion of non-voting common stock to voting common stock		1,379,537		—		(1,379,537	)		—		—			—			—		—			—			—
Issuance of common stock upon settlement of restricted stock units		23,037		—		—			—		—			—			—		—			—			—
Issuance of common stock under employee stock purchase plan		84,812		—		—			—		—			—			1,271		—			—			1,271
Issuance of common stock as consideration for acquisition		200,314		—		—			—		—			—			4,287		—			—			4,287
Foreign currency translation adjustment		—		—		—			—		—			—			—		(273	)		—			(273	)
Stock-based compensation expense		—		—		—			—		—			—			8,529		—			—			8,529
Net loss		—		—		—			—		—			—			—		—			(4,272	)		(4,272	)
Balances at September 30, 2022		106,593,518	$	10		4,608,841		$	1		(2,317,722	)	$	(748	)	$	640,217	$	(807	)	$	(164,075	)	$	474,598

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	Nine Months Ended September 30, 2023
	Voting Common Stock				Non-Voting Common Stock				Treasury Voting Common Stock						Additional Paid-In		Accumulated Other Comprehensive		Accumulated	Total Stockholders’
	Shares		Amount		Shares		Amount		Shares			Amount			Capital		Loss		Deficit	Equity
Balances at December 31, 2022		109,790,702	$	10		1,873,320	$	1		(2,317,722	)	$	(748	)	$	649,756	$	(