With its acquisition of Australian company Cohort Go, global payments and software provider Flywire is growing its global footprint in cross-border education payments, said CEO Mike Massaro.
Terms of the deal – which closed July 13 – were not disclosed. The international education payments provider’s 56 employees will join Flywire, Massaro said during a July 14 interview. Flywire has about 800 employees worldwide.
The acquisition was Boston-based Flywire’s second in the education space in about 7 months. In December 2021, the company bought U.K. company WPM to expand its customer base and presence abroad.
Flywire aims to streamline and digitize cross-border payments for companies in the education, healthcare, travel and business-to-business payments sectors. The company sold stock in a first-time public offering in May 2021. This year, it reported $64.6 million in first-quarter revenue and has projected revenue of between $269 million and $279 million for the fiscal year.
Founded in 2009, the company started by facilitating education payments. Large, cross-border payments were difficult to make and challenging for universities to receive, Massaro said. As the company grew, Massaro said Flywire realized other sectors like healthcare dealt with complex payments that were “stuck in 1999.” In higher education, its customers include Stanford University and Texas A&M University.
In 2021, the company processed $13.2 billion in payments volume. It now handles payments for healthcare, travel and business-to-business sectors, in addition to education. It has about 2,700 clients worldwide.
Education is Flywire’s biggest segment, and it’s expected to account for 79% of revenue this year. Massaro downplayed the effects of inflation on the company, noting consumers will spend in education and healthcare even amid an inflationary environment. The higher education business could even see a tailwind if a recession prompts people to pursue additional degrees, he added.
The company reported a first-quarter net loss of $10.15 million, and had net losses in each of the last three years, according to filings with the Securities and Exchange Commission.
For the last two years, Flywire has been profitable on an adjusted earnings basis, before interest, taxes, depreciation and amortization, Massaro said. The company has projected adjusted EBITDA between $10 million and $14 million for fiscal year 2022.
Flywire generates revenue from transactions, such as tuition payments or healthcare bill payments, and from fees customers pay for using its platform. The transactions vary by client size and invoice volume. The company wouldn’t provide ranges for those platform fees.
William Blair analysts believe the company “has a long growth runway” across its verticals and geographies, per a June 8 report from the financial firm. Still, Flywire faces competition “from both traditional payment methods and digital payment providers,” the report said.
Massaro said the company went public to help build its “warchest” related to acquisitions. Even after the Cohort Go deal, “we have quite a large cash position,” he said. The company wouldn’t elaborate, but Flywire had $365.7 million in cash and cash equivalents at the end of the first quarter, as well as about $25.9 million in debt.
William Blair analysts said in a separate July 14 report that they don’t anticipate the Cohort Go purchase price “will put a material dent in Flywire’s cash resources.”
Massaro wouldn’t say whether the company plans to make another acquisition this year, but said Flywire will likely take some time to “make sure we’re executing properly” with recent acquisitions. “We’ll obviously keep looking at the market for deals that we think fit [our] criteria, but no urgency, no rush,” he said.
Those criteria, he said, including bringing on a company that can “accelerate a geography or an industry we’re already in – in this case, it’s the education business – or add additional capabilities that can be used to sell additional products and services to our existing clients,” Massaro said.
The acquisition of Cohort Go, which works with about 1,000 educational agents and providers in 180 countries, “fits into both those check boxes,” he said. The Australian company, which expands Flywire’s footprint in the Asia-Pacific region, helps international students and their parents navigate the study abroad process and enables them to make cross-border tuition payments.
The deal is expected to be “modestly accretive to revenue,” Flywire noted in its release.
Flywire will apply those same criteria to future acquisitions, along with whether a purchase gives Flywire a presence in a new geography or industry, Massaro said. “We’re in that mode to obviously keep growing the business organically, but looking for strategic, inorganic deals to be done,” he said.
Flywire is “quite picky” when it comes to acquisitions and wants “the right group of people as well as the right technology and business,” Massaro said. “We’re not into just doing roll-ups for roll-ups. That’s not our style.”
