Greetings, and welcome to the Flywire Corporation First Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation [Operator Instructions]. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Akil Hollis, VP of FP&A and Investor Relations. Please go ahead.

Thank you, and good afternoon. With me on today's call are Mike Massaro, Chief Executive Officer; Robert Orgel, President and Chief Operating Officer; and Mike Ellis, Chief Financial Officer. Our first quarter 2023 earnings press release, supplemental presentation and when filed, Form 10-Q can be found at ir.fir.com. During the call, we will be discussing certain forward-looking information. Actual results could differ materially from those contemplated by these forward-looking statements. We will also be discussing certain non-GAAP financial measures. Please refer to our press release and SEC filings for more information on the risks regarding these forward-looking statements that could cause actual results to differ materially and the required disclosures and reconciliations related to non-GAAP financial measures. This call is being webcast live and will be available for replay on our website. I would now like to turn the call over to Mike Massaro.

Thank you, Akil, and thank you to everyone that is joining us this afternoon. We are excited to share our Q1 2023 results that show strong performance and momentum across the business. In a few minutes, Rob Orgel, our President and COO; as well as Mike Ellis, our CFO, will go into greater detail about our results for the quarter, but I will first share some highlights from our Q1 performance. Revenue less ancillary services was $89.1 million during the quarter, representing year-over-year growth of 50% or 57% on a constant currency basis. Adjusted gross profit for the quarter was $59.9 million, an increase of 50% year-over-year. And adjusted EBITDA was $7 million for the quarter, representing a 470 basis point increase in our adjusted EBITDA margin versus Q1 2022. So as you can see, Q1 2023 was a great quarter for Flywire, driven by the efforts of our fly mates all around the world, continuing to execute against our growth strategies while also making progress against our 3 investment areas that I will provide more updates on now. First, we continue to invest in enhancing and optimizing our go-to-market efforts with a key focus on high ROI areas. As we have shared before, a key part of our focused go-to-market this year is around accelerating our channel and technology partners across all verticals. When we integrate directly with our partners, it makes the onboarding process and technology implementation faster and more effective for our clients. And it further deepens Flywire defensible moat. As validation of our focus in this area, we are proud to share that Flywire was recently named the 2022 Partner of the Year for integration excellence by Illusion, one of our strategic partners in education and a leading ERP with major market share in North America.…

Thanks, Mike. Good afternoon, everyone. It's been a great quarter, which included impressive growth on the top line while also demonstrating our ability to efficiently scale. On top of our strong revenue and adjusted EBITDA results, we had our largest sales quarter ever with a record number of clients signed. During the quarter, we signed more than 170 new clients, including a record within the travel vertical and one of our largest projected revenue clients ever signed in the education vertical. Q1 NRR remained strong and consistent with our previous reporting. This performance further validates our investment strategy towards efficient growth. As a reminder, our growth strategies include growing with existing clients, adding new clients, expanding our ecosystem through channel partnerships, expanding to new industries, geographies and products; and finally, strategic value-enhancing acquisitions. I will spend a few moments reviewing some recent success stories reflecting these strategies, but we've also added information on our strategy within our supplement and invite you to visit ir.flywire.com to review it. First, an example of how we grew with new clients includes going live with our cross-border payments offering at UCLA for UCLA's main campus. UCLA is a public research university founded in 1881 that takes great pride in bringing together diverse students from around the world. Many of UCLA's over 31,000 undergrad students and over 14,000 graduate students have an international visa status. We are very excited to offer best-in-class software and payments to UCLA's main campus and A+ service, and that's according to UCLA's payments and compliance manager, and we look forward to building upon our relationship with UCLA going forward. We also added new clients in our health care vertical, along with seeing productivity improvements across our sales team. That included an increase of pipeline generated and higher projected deal value…

Thank you, Rob. Good afternoon, everyone. Today, I'll provide an overview of our excellent results for the first quarter, and we'll then discuss our outlook for full year and Q2 2023. Revenue less ancillary services was $89.1 million in Q1, representing a 50% growth rate compared to Q1 2022. On a constant currency basis, our revenue less ancillary services growth rate for Q1 2023 was 57%. As expected, we experienced a revenue headwind of approximately $4 million due to the strength of the U.S. dollar compared to the GBP and Euro during Q1 2023 versus Q1 2022. Foreign exchange fluctuations since our Q1 guidance, which was based on exchange rates at December 31, 2022, did not significantly impact our Q1 revenue performance. Our revenue growth rate was driven predominantly by an increase in total payment volume, particularly due to strong growth from our international cross-border payment volumes in our education and travel verticals. With respect to payment volumes, we processed $5.7 billion during Q1 2023, which represented an increase of 36% from the $4.2 billion processed during Q1 2022. Specifically, transaction revenue with ancillary services increased 57% compared to Q1 2022, driven by a 50% increase in transaction payment volume. Platform and usage Phase II revenue increased 20% compared to Q1 2022, driven by a 14% increase in platform and usage-based payment volume as well as nonpayment volume-related increases in SaaS-based and other platform and usage-based fees. We generated $59.9 million in adjusted gross profit during the quarter, representing a 50% increase compared to the $40.0 million earned during Q1 2022. Specifically, our adjusted gross margin was 67.2% for Q1 2023, down just 30 basis points from the 67.5% reported as adjusted for Q1 2022. The strength of our adjusted gross margin during Q1 2023 was driven primarily by higher-margin…

[Operator Instructions] First question, Bob Napoli with William Blair.

Thanks for the question. Good afternoon. Nice results. Good to see. I mean, 170 new clients added. I think that's -- I think it's a record for you guys. And what do you -- given the macro seems to be choppier there's certainly a lot more concern broadly and between banks and just broad macro concern. Is that -- Mike, what are you seeing do as far as your business and response from clients. It doesn't seem like you're noticing any slowdown.

I'd just highlight, again, we're solving a lot of problems that exist for our clients in the back office, right? The core tenet of our value prop of software and payments coming together, it resonates. And I think when people are being asked to do more with less, which I think so many of our clients are being asked to do that, looking at software solutions like ours that bring with it payment optimization that usually hits the mark for them. So I think it's a combination of that isn't changing in our clients' world and our prospects world. And we're also spending a lot investing in go-to-market, right, increasing our team size, focused on efficiencies, as we said in some of the prepared remarks earlier. That, I think, is where you're seeing that growth come from, and we're pretty excited about it.

And where are you -- what's surprising you? Where are you exceeding your expectations? And what areas of your business may you have some incremental concerns? Obviously, the overall business is doing very well.

Do you want to take that one, Rob?

The business really performed well across all the verticals. So one of the things that I would say was particularly gratifying was seeing good activity across each of the verticals. We did call out that it was a particularly strong quarter for travel, right? So in that count is a significant number of client wins across travel. They do tend to be our smaller-sized clients relative to the other verticals. So I want to keep all of this sort of in proportion. But a great quarter across geographies, meaning success around the world, across the verticals and delivering what was a record projected ARR signing across the aggregate of all those customer wins.

Next question, John Davis with Raymond James.

I think, Mike, a couple of quarters ago, you had mentioned that international students were running, call it, 85% of pre-COVID levels. Just curious kind of where we stand today with China reopening if you have any kind of ballpark idea versus pre-COVID.

JD, it continues to trend back positive. We had mentioned some of those traveler numbers coming out of China and frankly, even just Asia opening up in general. And so we're encouraged by it, but I would highlight those comments I made were also referencing how we plan for the year, which is kind of that rolling recovery, right? So we expect students to show up in markets like Australia and Canada and the U.S., they all have different timing throughout the year, and we expect some combination of 23 and 24 to get back to pre-pandemic levels. So not assuming any type of snapback to that number, just a steady recovery to pre-pandemic levels. And then I'd remind you of that decade-to-decade set of staff that shows that international student growth number around low single digits, low mid-single-digit growth. And I think once you get past that pre-pandemic level, you'll see a kind of return to that kind of growth trajectory.

And then Mike, maybe just an update on WPM. Obviously, when you announced the deal, the volume opportunity was pretty exciting. So just curious where are we on converting WPM schools or customers onto the Flywire platform from a payment processing perspective? And just maybe a broader update on the WPM acquisition.

So things are going very well. Rob jumping in here, JD. So I think we're really pleased with the progress. The first step was signing on clients, having them understand and adopt the value proposition that we were presenting. That's gone very, very well. We shared some of those numbers in past calls. Now it's about getting those clients live with optimized implementations and making sure that we are ready for the increased peaks that happen later in the year. Certainly, Mike mentioned in his comment, he and I were both in Edinburgh for the conference. And I think we feel really good about the position we have with these clients and their belief that we will provide a great solution for them and the work that we're doing to do that. So I think what we go into the busier part of the year, very bullish that the volumes will be there that we had anticipated. Last year was good, and I think we think this year will be better.

One last quick one for Mike Ellis. Obviously, very impressive EBITDA margin expansion in 1Q also guiding to some nice -- or I guess, better margins in 2Q, but it would kind of imply more muted in the back half, maybe 100 basis points of expansion in the back half of the year. So maybe just a couple of things that are weighing on it, anything that we should be thinking about from a margin expansion in the back half of the year.

Are you making reference to adjusted gross margin or the adjusted EBITDA margin?

Adjusted EBITDA margins.

So we're really pleased with the flow-through that we saw during Q1, and we are guiding to even better than last year flow through for Q2. I still think we're early on in the quarters of 2023. And you also have some impact as it relates to the Cohort Go acquisition that will get lapped in the latter part of July. And those things all taken into consideration, J.D., is where we're coming out as it relates to our adjusted EBITDA. But we're really pleased with the results so far in Q1 and what we're seeing early on in Q2, which is why we're increasing our full year adjusted EBITDA margin to that 340 basis points up from just above 300 when we first provided guidance.

Next question, Jason Cufferburg with Bank of America.

This is Tyler DuPont on for Jason. Thanks for taking my questions. So first, I just want to start off with like 1Q rev seems to be pretty strong and the updated 2023 revenue estimates appear quite healthy. So I guess I was just wondering sort of what segments or geographies are seeing more substantial outsized performance and driving that growth? I know you mentioned APAC travel has seen some pretty nice recovery of COVID lows. But for example, is the European luxury capital market still robust as well despite the choppy macro? And I guess, jumping off that point, I'd be curious to know if your macro assumptions have changed anyway when looking at full year guidance?

I'd call out a couple of areas. If you look at education in the U.S. also into the U.S., the numbers were quite strong. In addition to that, we don't talk a lot about this, but non-higher education. So if you remember just the return of K-12 boarding schools, language programs, those have come in quite strong in prior years, right, those were not the things to come back first as the age of the student goes down, your willingness to send them halfway across the world was not there in prior years due to the pandemic. And we're starting to see strong recovery and performance of those subsectors of education, which is important to note. And then I just highlight travel. Whether you look at the comments from this call or the prior call, we're seeing the opening of Asia, both from a traveler outbound and a destination. Our clients are now receiving travelers from all over the world at levels that they haven't seen since the pandemic. I was fortunate myself to visit one and use one of our clients in Vietnam on a recent trip to Vietnam. And you're just -- you're hearing anecdotally just people moving around the world more and that's benefiting us.

And then just as a follow-up, it looks like the updated guidance implies around an additional 40 basis points of adjusted EBITDA margin upside for 2023, if you look at the midpoint. Where within the business, do you expect to see the majority of that upside? And what has surprised you, if anything there?

I think the continued performance of the business as it relates to our revenue growth rate and the adjusted gross profit growth rate is really what's driving our incremental adjusted EBITDA margin. And I think in connection with that, it's a very disciplined approach around our cost structure and ensuring that we're phasing our hiring properly. We're looking at investments from an ROI perspective in order to ensure that we can deliver that incremental 340 basis points for the full year.

Next question, Darrin Peller with Wolfe Research.

I just want to touch first on going back to NRR and just same-store sales and how you're executing in each of the verticals with your existing customers to obviously continue to land and expand strategy that you guys have done so well. Maybe a quick update on what's been succeeding in the last few months versus what we've seen, obviously, particularly in the education vertical, but if there's more room there, if you can kind of deconstruct the growth between that same-store land and expand and some of the new business coming on, new customers.

Darren, I can try to step in and start that one. So like I said in my comment, NRR totally consistent was actually probably slightly up for the quarter. But as you know, we like to frame that in terms of the 3-year average and so on. When you look at it on that basis, it was very steady with what we previously shared on prior calls. If you look at it and start looking at it by the verticals, again, very consistent performance. If you look at education, it's the same drivers that have been driving us before. If you look in the U.S., for example, still the biggest client market. what you'd see is continued success in that domestic education push. Those clients, not only are we adding clients, but the clients are growing nicely. If you look at the U.S. cross-border, it grew strongly, as Michael was saying, so those are clients, many of whom have been with us for many years and just the strength in sort of the international student numbers and the cross-border are all helping support that Cohort Go that you heard us talk about in the past where clients continue to grow year-over-year, even those that have been with us for a good long time. We do have new product initiatives as well. But I think really it's the strength of land and expand in all of its flavors that's helping us in education. If you move to travel, we are benefiting in travel from a group of clients that are seeing this outsized growth that Mike just talked about a second ago. So those are also helping feed less mature and health care, the NRR there isn't as strong, but it's something that we're working on as we continue to expand with clients. And we do see good growth in a bunch of existing clients, not as strong a contributor to overall NRR, but that overall NRR has been great.

Just a quick follow-up. I just want to make sure I understand the Cohort Go contribution for the quarter, if there's any dollar amount you can give us just as a reminder. But more importantly, I mean, it's obviously an area that should be succeeding pretty well now, and I know you called it out. So maybe just revisit the strength there, whether it's the regional exposure or it's just the reopening in some of those regions? And what it really does provide for you now and in the future again?

I'll start and then hand it to Mike for a bit more clarity on the numbers. So we cover go really, if you remember kind of pillars of inorganic, what helps us accelerate in an industry or a region being pillar number one. Number two, being -- delivering new capability that we think we can use to drive NRR or enhance our offering. And really cohort hits pillar one and number two for us, right, where it gave us not only a presence in further presence in Asia Pacific and Australia. It also gave us capabilities around agent capabilities to make payments to additional schools that we're not yet contracted with, as we mentioned in the last call and also payer services, which I mentioned on this call, specifically around international student insurance, right? And so that's really tied to that expanding of that Flywire advantage. So see those as areas in which fit into the strategy we talked about at Investor Day, but help accelerate that with capabilities and our teams now kind of being one. So that hopefully frames the kind of capabilities, both from a payer perspective, payer services as well as our ability to make payments through the agent solution to schools that are not yet working with Flywire yet. Those are the two functional capabilities we got through that acquisition and we're investing behind those. I'll let Mike double-click on the growth.

Consistent with what we said at the beginning of the year with respect to guidance on the inorganic business. And just so we're clear, the only inorganic impact for 2023 will be the Cohort Go business, and that is consistent. So we do expect it to contribute about 3 percentage or low single-digit percentages to our overall growth rate for the full year.

[Operator Instructions] Next question comes from Ken Suchoski with Autonomous Research.

Hi, good evening every one and congrats on the Ellucian partnership. That's great to see. And maybe I can just ask about that. Just can you expand on that partnership a bit more? I mean how much does that help you on the domestic side versus cross-border or international, I guess, within education? Is it an exclusive arrangement because I know TouchNet has worked with them in the past? So any thoughts there would be great. And I guess, any thoughts on how that partnership changes the growth rate in the education business?

We're really excited about it. I mean, to get that level of endorsement through Lucien in that award and also just the participation level we had at their annual event this year was really just next level for us. And they are a big player. I mean, obviously, in the United States, but also someone that we can partner with in different parts of the world as well. And remember, we're -- as you kind of said, we're kind of a new kid on the block in the domestic game here in the United States. And so getting that level of endorsement that kind of detailed integration that clients can leverage, it really gives us great exposure to getting people to migrate off legacy platforms onto Flywire's full suite offering here in the United States. So we're super excited about it. We have had a relationship with them for a while, but I'd say that relationship has definitely gone to the next level. It's not an exclusive relationship. So just to clear up that point that you made, but we feel really well positioned there that with that level of integration that we have, which we think is kind of best-in-class really is going to put us as a competitive differentiator for the years ahead.

And maybe just as my follow-up, I wanted to ask about the adjusted revenue growth guidance throughout the year. When we try to adjust for the acquisitions that were mentioned previously, it looks like you're baking in some softer growth throughout the year with adjusted revenue going from, say, high 40s on an organic FX-neutral growth basis down to maybe mid-30s in 2Q and then, I guess, high 20s in second half of the year. And I guess I'm just curious, like how much of that is just conservatism just based off of it being early in the year versus something that you're seeing in the trends and the data?

Suggest that you have to remember the seasonality of the business, and again, we grew up in education. So Q3 in absolute dollars is a very large quarter relative to the other quarters. So the growth rate that you would find in Q3 will naturally, even though it brings on a lot of absolute dollar growth, that growth rate is just going to be lower. It doesn't mean that we have less confidence in our business in the second half of the year. But there is still macro concerns in the environment that we operate in, but we're really pleased with the resiliency of the verticals in which we operate. And we believe that our growth rate and the incremental adjusted EBITDA that we're guiding to is appropriate given the backdrop of macroeconomic concerns in light of the resiliency of our verticals.

Next question Dan Perlin with RBC.

I just had a question around travel, in particular. You've won a ton of new business there, and I appreciate that maybe the sizing of those are not quite as big as maybe some others. But I would appreciate maybe a little bit of an update in terms of how we need to be thinking about the implementation pipeline rollout, both in terms of kind of throughout the year and maybe even if it sets up into next? And then kind of secondarily, can you just remind us again kind of the financial mechanics here with travel growing so much faster in the credit card usage. I just want to make sure on the same page in terms of your commentary on gross profit.

I'll start with just sort of that implementation part and then Mike, I'll hand off to you for the sort of implications of travel growth on the overall picture. So we designed a great number of clients travel and in the other vertical, so I'll touch on all of it. The travel implementations are really quite quick indeed, right? We've talked about it in the past as being measured in a small number of weeks. And so we expect these to go quickly. That's been our track record, and we see a very fast path to monetization for those. So we think that continues true even with the upsized number of wins. And really, we're seeing the other verticals continue to implement. Well, I know there's been some talk out there of that being less so. But in our case, we continue to see good progress against implementations across the other verticals as well.

With respect to the adjusted gross margin, as you know, that similar to monetization rate, our adjusted gross margin to some extent is an output. Based on what our client payers choose to pay with and the accounting of a credit card transaction, you just have a fee over a cost, and that just results in a lower adjusted gross margin as it relates to those transactions. But our spreads across all of our transaction types have remained stable over the last number of reported quarters. So we're very pleased with that consistency of the spread that we're able to charge. What you find is that as that travel and B2B segment grow, you'll have more credit card utilizations, which just carry a lower adjusted gross margin, but really good excellent unit economics and driving adjusted gross profit dollars, which is really what we're focused on.

Got it.

The only thing I'd add to that is as you see more software come through, that may offset in some quarters, and you'll see growth in B2B and travel that will pull that adjusted gross margin down. But that's kind of the puts and takes of that dynamic.

I mean there's a high-quality problem. Just a quick one on the student health insurance. I thought if you are -- if I heard right, you're calling out just kind of one market for doing that at this point. I just want to know; how do you think about leveraging that across all these other opportunities you got from international student perspective.

Yes, it's a great call out. We're really excited on obviously, the success we've had in rolling that out more broadly to students and agents with the combination of cohort and Flywire software now offering that capability. And that's our primary focus is that market. You have a huge amount -- it's a requirement in Australia, and you have a huge amount of students driven through the agent channel, 75% or more use an agent to go study in Australia. And so that's our kind of short-term focus. But you're exactly right. There's needs in the top 4, top 5 destination markets around international student health insurance. Now there's different requirements in different markets, different providers or capabilities. But you're exactly right to point out that we have the capability in that point between payments and the agent relationship to really kind of put that offering, we think, in a really compelling location. So I would say, you're right to call it out. There is opportunity there. Our short-term focus is on Australia, and we'll, of course, be researching and working hard on seeing where else we could take that.

Next question, Tien-Tsin Huang with JPMorgan.

I know the travel piece has been highlighted, really strong wins. Just I'm curious just your ability or confidence in refilling the pipeline and the backlog here. Just I guess as a pull-forward question, if you saw some of that or is there still ample opportunity here to sort of sustain the momentum?

Really confident. I mean our travel team is doing a great job. We're scaling that team in a very thoughtful way. I think I made the comment in prior call that Australia and New Zealand is a market where we didn't actually even have a fly mate dedicated to travel for us. and now being able to add more FlyMates there to help drive pipeline. We mentioned some of the South Africa expansion efforts. So think of it as kind of going deeper into the subsectors, think about expanding, potentially finding new areas of certain types of tourism that we're able to add to a given subsector and then opening up new geographies, right? I think you can assume that our team knows that playbook as you've seen us kind of roll it out across different industries, that geographic expansion. And the travel team knows they need a lot of leverage to grow to keep maintaining that. And I think you can assume they're pulling a lot of those levers now.

And just my follow-up. I know we've talked about this before, but I figured I'd ask you again, just given now that we've seen the results with all the banking turmoil going on, just curious what -- of course, operationally, you guys navigated that well. But is there any impact on demand in any way and flight to quality, that kind of thing? I know you're also involved in domestic payment plans and all the complexity around that. And so be thinking about flight to quality as a theme. And I don't know if you have an opinion on that on how it shapes demand.

I mean for us, we've been fortunate to partner with some of the largest global financial institutions in the world, and that's how our client funds are moved through those accounts. So again, for us, unlike probably a lot of others that maybe leverage smaller regional banks for money movement. That's never really been what Flywire has done just partially because of the global nature of our business, right? You need banks that have that kind of global footprint. -- and a lot of the regional ones don't. And then as it comes to demand, really no shift or no change in demand. We're seeing from clients that are not kind of slowing down their decision-making. If anything, the fact that we're processing payments with those large global financial institutions is a positive for us in this type of environment.

We have a follow-up from Bob Napoli with William Blair.

Just curious on the travel vertical. And just broadly, the wins that you have, is there -- has there been any change in your win rate? And how much of the business like in travel, I mean, a vertical that's really jumping is white space versus takeaways? And who are you -- what is in place with the customers before you win that business?

So typically, we're replacing kind of a local maybe card acquirer that's in the mix and then maybe our client in travel is seeing a lot or some bank transfers and wires kind of coming in that they're having to manually deal with. So that's typically what we're replacing. And when you think of us coming in with software that provides value to them and the ability to process payments from all over the world, that value proposition compared to someone that can just accept a certain type of payment method. It doesn't deliver the software is obviously quite compelling. I would also just highlight our teams really know these industries. They know the types of challenges that exist, the product and tech team to enhance that product is adding features that matter to those travel clients, and that helps with that flywheel. And then I just also underscore our customer service model, our client service model is very different than probably a traditional acquirer, right? They're actually picking up the phone. It's one of the things we hear so often from our travel clients, they're picking up the phone and getting a real person. And so if they have a question, if they're trying to use a new feature, if they're wondering how to handle a unique situation or want to enhance their offering, they can really reach out and actually talk to someone on our client service team. And that's a real big differentiator. Oftentimes, these types of clients don't get that type of kind of white glove service from other providers that are kind of going with more of a volume-based model.

I think you had one…

You had one comment about is it white space. I mean I think when it comes to geographic expansion in subsectors, I think it definitely -- we have a lot of confidence there, right? Our team has proven the ability to come up with new subsectors, finding new types of tour groups, all the core categories, maybe I should say. And then in addition to that, we have a playbook to open up new geographies for clients within these sectors. So we feel really good about opening up new ways to sell and grow pipeline.

Understood, very well on the customer service, the targeted sales force, knowledgeable sales force. How about on the software side? What is unique about your software that's allowing you to win these businesses? And any simple example would be helpful.

Really, it's a combination of a couple of good things we've got here, Bob, this is Rob speaking. So obviously, one of the core capabilities of the company is around doing integrations. And one of the things we've done is integrated into a lot of the systems that are familiar inside the travel space. That allows us to do specialized functionality that makes sense in travel. So for example, you probably have the experience, you book a trip. There is a schedule of payments that gets created, right? You pay a certain amount at booking, a certain amount, maybe three months before the trip and more as you get close to the trip. That's all kind of functionality that we enable for our clients to be able to roll out simply, and that allows sort of the collection of the full sum for that trip to just be way more administratively easy for them to manage. And so that's an example where it's functionality. There's the dimensions about the global payment network that are really very differentiated, right? The ability to take payments from so many countries. And so when you combine sort of the service with the functionality -- sorry, final point being our full invoice engine, right? So for many of these clients, they will rely on our software to be sort of their platform for doing invoicing. So they don't have to do that if they've got something of their own, but a great many do take advantage of that invoicing. And of course, once you're using our platform, you're using our invoicing, you've got that integration that I described, reconciliation gets way simpler for those clients.

We have a follow-up from Ken Suchoski with Autonomous Research.

Can you just provide some color on the lay of the land on the domestic education side? I mean who are the big players there. And I'm just curious who you're taking share from in that business.

Ken, so the way the US market has really evolved in domestic payments. There's really been three players that have played in that market. There's a division of Global Payments that plays in there. It's called TouchNet is a loan servicing company that has a payments division called Nelnet. And then there's historically been a business previously called Higher One and CashNet which has been bought by private equity and owned by private equity. So those three players had really kind of started that domestic payment market in the United States. And those players had limited exposure outside the United States. And so again, that's why there's kind of a difference between the U.S. market and then the rest of world. where, as we mentioned before, we're seeing a lot of success bringing kind of our full offering all around the world. And so when it comes to the U.S., it's really typically one of those incumbents that has a client and as it either goes out to bid or as we get the Flywire brand and the full capabilities known by those clients, that's where we're pulling business from and feel really good about our competitive position. Obviously, the Ellucian partnership helps us a lot there. But we compete really well and we -- our teams set up to compete and we like to compete.

And maybe just one more, if I can sneak it in. I think I heard some of the comments on the settlement gains, and there was some offset for those in the quarter. But just in terms of FX volatility, I think we're facing some harder comps kind of year-over-year. Does that impact your business? And I guess, is there any way to size that maybe in the second half if it does impact your business at all?

So what we did was we provided guidance as of March 31, 2023. And if you look at the impact for FX as it relates to the currencies in which we operate comparing 12/31 ‘22 versus 3/31 ‘23, there weren't really significant changes that would result in a change to our full year revenue guidance at this time. You certainly saw some improvements in April, but we do not adjust our guidance based on monthly trends. We actually want to wait and see what the full quarter looks like because it's anyone's guess is a good guess as it relates to what will happen in the currency markets. So no further changes or impacts as it relates to FX improvements or deteriorations that may have occurred during post 331.

I guess I was focused a little bit more just on the FX volatility. Like are you guys, I guess, benefiting anyway from just currencies kind of moving around and taking advantage of spreads and just the kind of the harder comps that we're growing over just on a year-over-year basis in the coming quarters.

So from an operational standpoint, we do get the benefit and sometimes the negative impact as it relates to currency swings from the initiation of a payment to when we settle. What I did mention in Q1 is that we did see the weakening of the U.S. dollar occurred during some of those windows of time, predominantly in January that allows us to buy dollars less expensive. So therefore, we can recognize those gains. Whether or not we see those in the future is not something that we guide or change our guidance for. But I will tell you that our hedging strategy, which is basically an insurance model that we put in place offset those improvements at the adjusted gross profit line and really making it neutral to our adjusted EBITDA generation.

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