FLYW - NASDAQ

Good day, and thank you for standing by. Welcome to the Flywire Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Masha Kahn, VP, Investor Relations. Please go ahead.

Thank you, and good afternoon. With us on today's call are Mike Massaro, Chief Executive Officer; Rob Orgel, President and Chief Operating Officer; and Cosmin Pitigoi, Chief Financial Officer. Our fourth quarter 2025 earnings press release, supplemental presentation and when filed, Form 10-K can be found at ir.flywire.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. Unless otherwise mentioned, all financial measures discussed on this conference call are non-GAAP. Please refer to our press release and SEC filings for more information under 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. 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 in our conciliations relating 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, Masha, and thank you all for joining us here today. Before we share more details about an outstanding quarter across all our operating metrics, I want to step back and revisit the progress we've made, the structural advantages of our model and how we've positioned Flywire for continued durability and growth. Since our IPO nearly 5 years ago, we have scaled Flywire into a diversified, resilient and increasingly profitable business. We have grown across multiple verticals and geographies, expanded margins reached GAAP net income profitability and continue to generate increasing levels of free cash flow, all while navigating significant macro disruption across payments, software and global education and travel markets. That progress reflects consistent execution against a deliberate strategy designed to leverage our competitive strengths, deepen our moat and deliver long-term shareholder value. Our strategy remains just as relevant and differentiated today as it has ever been. At our core, Flywire operates across multiple industries, but we execute a single, scalable playbook we embed deeply into mission-critical financial workflows, solve complex payments end-to-end and expand over time as clients turn to us for more of their critical operations. A defining characteristic and key competitive advantage of our business is the complexity of the environments in which we operate. We specialize in large value, cross-border receivables in highly complex verticals, where payments must be processed with precision, compliance and full reconciliation. This complexity creates real barriers to entry and allows us to embed deeply within systems of record and core financial workflows of our clients. Once embedded, expansion becomes a natural motion. We process a greater share of payment volume and attach value-added software that improves client outcomes, creating a flywheel that reinforces our position and value to our clients over time. Today, approximately 90% of our education revenue and over 70% of our travel revenue come from enterprise clients, which we define as clients generating more than $100,000 in the last 12 months revenue. With more than 100 direct integrations into ERP and vertical systems, including over 70 in education alone, we are embedded into the operational fabric of our clients. As a result, revenue churn across education and travel was below 1% last year. This advantage compounds through our proprietary global payment network, which supports transactions across more than 240 countries and territories, in over 140 currencies and through more than 1,200 local payment methods, fully integrated into enterprise platforms. That infrastructure is difficult to replicate and becomes more valuable with scale. As our volumes grow, our routing intelligence, compliance capabilities and localized economics improve. Access to direct relationships with China UnionPay, leading Indian banks and in-country accounts across markets such as Vietnam, Mexico and Brazil are just a few examples of our network in action. These specialized partnerships allow us to localize payment flows and deliver outcomes that generic providers cannot. As AI adoption accelerates, we believe value will increasingly concentrate in platforms that already control trusted financial workflows and proprietary transaction data. Flywire operates at that control point where data, compliance, workflow and transactional execution intersect. We are embedding automation and AI across routing, reconciliation, compliance and our client-facing software. Enhancing productivity and lowering friction while the underlying system of record remains ours. The takeaway is simple. Flywire delivers an end-to-end embedded receivables platform, not a stand-alone payment solution or a point software tool. We are structurally integrated into mission-critical workflows of our clients, where reliability, compliance, trust and scale matter most. That structural position translates into measurable, consistent outcomes, durable client relationships expanding gross profit per client over time and increasing lifetime value. Our competitive position continues to strengthen, not because of market cycles, but because of how deeply we are embedded in enterprise systems in the industries we serve. These advantages are durable. They do not fluctuate quarter-to-quarter, they compound as we scale. With that proven foundation established, let me now shift to how we are extending our advantage, balancing revenue growth with gross profit expansion, margin progression and disciplined capital allocation. As CEO, I'm focused on 3 core metrics. First, revenue and gross profit dollar growth. Together, they reflect demand for our platform, the durability of our client relationships, expansion of payment volume over time and the incremental value created through software adoption across verticals and geographies. Second, EBITDA margin progression. Over the last 3 years, we've increased adjusted EBITDA margins from nearly 6% to 20%. This reflects the scalability of our operating model and our ability to grow profitably while driving disciplined operating leverage including continued discipline around stock-based compensation and dilution. Third, multiple year annual free cash flow growth. Free cash flow generation and capital efficiency are central to how we think about long-term shareholder value. Over the past several years, we have meaningfully inflected and scaled free cash flow from $5 million in 2021 to $62 million in 2025. Together these metrics, define how we run Flywire and how we allocate capital. As we have scaled, we have deliberately shifted from a pure revenue lens towards gross profit growth, margin expansion, GAAP profitability, free cash flow generation and capital efficiency. That shift reflects the strength and maturity of our business model. With that context, we continue to transform Flywire into a more scalable and efficient company. This transformation is structural, not cyclical. We are strengthening the core drivers of our business: pricing, routing, productivity, capital allocation, so that our performance is powered by execution, not external conditions. Our execution is anchored around 3 operating priorities that reinforce our strategy and support durable value creation. First, accelerating product and platform innovation. We are not focused on incremental features. We are focused on solving high-value problems, deeper in client workflows. We are consolidating our platforms into a unified modular architecture where core services like payments, FX, risk and compliance are shared across verticals. This build once deploy everywhere model increases development velocity, improved durability and supports margin expansion as we scale. Second, building a scalable enterprise growth engine we are increasingly focused on larger clients, higher value deals in repeatable vertical playbooks that we are successfully executing across geographies. Flywire already operates as a global platform with deep local integrations and payment infrastructure across major markets. That means we can scale efficiently within our existing footprint and capture a significant portion of our global TAM. This is driving measurable improvements in pipeline creation, sales productivity and lifetime value per client while strengthening revenue durability and expanding unit economics. As a result, our go-to-market model is becoming structurally more efficient and globally scalable, supporting durable growth and long-term margin expansion. Third, accelerating our internal transformation, scaling the company through data automation and high-performing teams. We are building a unified data architecture, automating core internal processes and deploying AI-enabled decision support across the business. Our transaction data, reconciliation data and workflow data are all strategic assets, not just reporting tools. They improve routing economics, reduce manual intervention, enhance risk management and accelerate innovation. The impact is clear in our financial results. From 2022 to 2025, revenue has compounded at approximately 31% annually, with gross profit growth only slightly below revenue, while non-GAAP operating expenses have grown just 17%. That spread reflects operating leverage driven by systems, automation and execution discipline rather than short-term cost reductions. At the same time, we are strengthening high-performing teams with clear accountability and strong pay-for-performance culture. The combination of proprietary data, automation and operational discipline enables us to scale revenue and gross profit without proportional cost growth. Together, these pillars reinforce one another. They enable faster innovation, more efficient execution and disciplined scaling, while staying aligned with the outcomes that matter most to clients and long-term shareholders. You see this reflected in financial outcomes that matter, expanding EBITDA margins, sustained GAAP profitability and growing free cash flow even amid macro headwinds. As AI adoption accelerates, we believe AI will amplify platforms that already control trusted financial workflows and proprietary data. The winners in the Agentic era, will combine innovation with end-to-end workflow ownership, embedded data, measurable ROI and disciplined capital allocation. Because we own the workflow, the reconciliation layer and the underlying transactional data across complex and highly regulated verticals, we believe Flywire is structurally positioned to be one of those winners. Together, these priorities are reinforcing Flywire structural advantages and positioning us to scale efficiently, expand margins and capture our global market opportunity. With that context, Rob will walk you through how our go-to-market execution is driving this model across our verticals.

Thank you, Mike. I'll focus on how our go-to-market execution is driving durable efficient growth across the business. Our go-to-market engine is built around deep vertical expertise. We organize our teams around specific industries, develop specialized integrations and embed directly into the systems and workflows our clients rely on every day. This vertical specialization allows us to solve complex financial workflow challenges and positions Flywire as a long-term infrastructure partner rather than a transactional provider. This model continues to scale effectively. In 2025, we signed approximately 750 net new clients. This reflected strong demand across our verticals and geographies with solid new logo momentum as we exited Q4 2025. That 750 net new clients, a number of which are named in our earnings supplement exclude additional properties added through Sertifi, invoiced only software clients and upsells across our existing client base. Because Flywire is deeply embedded in mission-critical workflows, our client relationships are highly durable. Revenue churn across our core verticals remains below 1%, reflecting the strength of our integrations and the long-term value we deliver. Education remains a strong example of our expansion-led model. Growth in EDU is driven primarily by expansions within our existing client base supported by adoption of our student financial software, broader full suite deployments and deeper ERP integrations. We are seeing particularly strong momentum in the U.S., where projected ARR from signed SFS deals grew more than threefold year-over-year. This reflects accelerating demand as institutions modernized financial infrastructure and demonstrates the increasing efficiency of our sales engine. In the U.K., growth is driven by deeper integrations, including SFS deployments and expansion of coverage of domestic tuition and accommodation payments. We remain early in full platform penetration but continue to make progress with full suite wins at University of Cumbria and the University of the West of England. As previously mentioned, we are working on our SFS support for Oracle Fusion and expect to have our initial U.K. launch clients signed and live this year. We are also seeing strong growth outside our traditional Big 4 markets with more than 50% of new education clients signed in 2025, coming from outside those countries and revenue from these markets growing more than 30% year-over-year. Beyond education, our vertical expertise continues to drive strong growth across the business. In travel, Flywire purpose-built platform allows travel providers to streamline global payment workflows and improve operational efficiency. Clients such as Villa Finder, a leading villa rental platform in Asia, serving a highly international client base, selected Flywire to modernize their global payment infrastructure and fully integrate payments into their booking workflows. This win highlights the strength of our vertically specialized platform and its ability to support complex cross-border travel providers at scale. Since acquiring Sertifi, we have increased the number of properties served and payment volume has nearly doubled year-over-year, driven primarily by higher attachment within the installed base. As we continue to make progress on integrating contracting, booking workflows and Flywire Payments into a unified platform, we expect to see continued cross-sell and international expansion opportunities. In health care, we tailor our integrated solutions to the complexity of each health system, particularly those running Epic or Cerner as their core EHR platforms. Success in this market requires deep domain expertise intricate integrations across pre-service, point of service and post-service workflows, seamless patient and administrative experiences and payment excellence. During the quarter, we signed Jackson Health System, an integrated health network based in the Southeast alongside several midsized and community hospital wins. We are also progressing through the phased rollout at Cleveland Clinic. Initial payment processing components are live with additional phases, including our robust patient financial experience solution expected to roll out in Q2. In B2B, we are seeing strong adoption of our integrated Software and Payments platform as businesses modernize their invoice to cash workflows. Increasingly, new Flywire B2B clients are adopting both Software and Payments from day 1, strengthening workflow embedment and improving long-term monetization and retention. Our invoice platform already delivers enormous automation to the accounts receivable process, but will shortly be introducing new AI-powered features that amplify the power of the platform for our clients and further streamline its implementation. As Mike mentioned, enterprise clients represent the majority of our revenue and provide significant expansion opportunities due to the depth of integration and breadth of workflows we support. At the same time, our go-to-market engine is becoming structurally more efficient. Pipeline creation entering 2026 increased by approximately 35% year-over-year, reflecting strong demand and improved market positioning. Sales productivity continues to improve, and we are generating significantly more ARR per sales rep than in prior years. These productivity gains are translating into meaningful operating leverage in 2025, signed ARR grew over 35% year-over-year, and that's excluding the impact of large payment processing contracts in health care. This ARR growth reflects strong underlying sales momentum across our core verticals. From 2022 to 2025, and sales and marketing expenses declined from approximately 25% to approximately 20% of revenue, all while delivering significant yearly revenue and gross profit growth. This demonstrates the scalability and efficiency of our go-to-market model. Stepping back, our go-to-market engine is delivering durable, efficient growth driven by vertical expertise, deep workflow integration and expansion within our existing client base. This model strengthens revenue durability, increases gross profit per client and supports continued operating leverage as we scale. With that, I'll turn it over to Cosmin.

Thanks, Rob. I'll cover our financial performance, margin dynamics and our outlook on profitability and capital allocation. Starting with Q4 performance. In a year that demanded agility and discipline, we finished with strength. We delivered Q4 revenue almost 8 points above the midpoint of our guidance while continuing to expand EBITDA margins, outperforming consensus expectations. Importantly, performance was broad-based across verticals and geographies, reflecting disciplined execution and the durability of our diversified model. Starting with our top line performance, revenue was $152.7 million, growing 32.6% on an FX-neutral basis. FX-neutral organic growth, excluding Sertifi, was 20%. The guidance beat was primarily driven by strength in the health care payment processing ramp, followed by travel as well as better-than-expected macro conditions across many of our education markets. On a reported basis, foreign exchange contributed a 270 basis point tailwind relative to Q4 of the prior year. Transaction revenue increased 33%, driven by 42% growth in transaction payment volume, continued contribution from education as well as travel. Quarter-to-quarter, you may see variation in blended yield due to mix. For example, higher domestic volume or greater credit card penetration, which naturally carry different economics than cross-border effects. Importantly, on a like-for-like basis, pricing remains stable and competitive behavior continues to be disciplined. Our spreads reflect the value we deliver, compliance, reconciliation, ERP integrations and enterprise-grade infrastructure rather than commodity payment processing. Platform and Other revenues grew organically with the inclusion of Sertifi and continued momentum in health care patient affordability solutions contributing to 50% year-over-year growth, platform-related volumes increased 11%. Adjusted gross profit was $93.7 million, up nearly 24% year-over-year. Adjusted gross margin was 61.3%, reflecting mix and ramp dynamics as well as roughly 2 points of FX settlement pressure versus a benefit last year. Excluding FX and payment processing ramp activity, the normalized mix-driven margin decline was within our expected roughly 200 basis points annual range. As we attach Payments with deepen monetization and expand lifetime value, even when gross margin percentage shifts with mix as evident this quarter, gross profit dollars increased and those incremental dollars carry minimal incremental operating expenses. That operating leverage drove EBITDA to scale faster than revenue. Adjusted EBITDA margin was 16.6% in Q4, expanding 190 basis points year-over-year and exceeding guidance. Our objective remains clear, operating expenses must grow more slowly than gross profit. We are simplifying and modernizing our architecture, consolidating platforms, eliminating tech debt automating workflows and optimizing routing economics. We are making a focused near-term investment to build a unified end-to-end data foundation designed for an Agentic AI future. By embedding AI directly into our existing infrastructure, we are strengthening the platform today while expanding structural operating leverage over time. For the full year, we generated $13.5 million in GAAP net income and expect to build on that profitability as we scale. Our balance sheet remains strong with a $200 million net cash position. Since launching our repurchase program, we have deployed $118 million towards share buybacks with approximately $180 million remaining authorized under the program. Diluted weighted average shares outstanding declined year-over-year as share repurchases more than offset dilution, resulting in negative net dilution for 2025. Our capital allocation priorities remain unchanged with continued focus on growth and disciplined share buybacks, especially at current dislocated valuation levels. Turning to 2026 guidance. Starting our full year revenue, we've seen the strong momentum from Q4 continued into Q1. We expect approximately 15% to 21% FX-neutral revenue growth, including roughly 2 points from B2B migrations and the Cleveland Clinic ramp and approximately 1 point from inorganic contribution as we lap the Sertifi acquisition. First, some guidance context around our margin dynamics and macro assumptions. As those payment processing programs scale, they create temporary mix pressure, particularly in gross profit margin due to early stage ramp economics. As a result, we expect adjusted gross profit margin to decline approximately 200 to 300 basis points year-over-year. Excluding the impact of these payment processing ramps, we would expect gross profit margin dynamics to be closer to the lower end of that range, roughly in line with our historical approximately 200 basis points annual mix-driven shift as Software and Payments scale together. As discussed, our focus is balanced around expanding gross profit dollars. For 2026, at spot rates, we expect gross profit dollar growth in the mid-teens. Importantly, the incremental pressure from ramp activity is temporary and largely complete by the end of 2026. As we move beyond the ramp phase and into 2027, we expect margin dynamics to normalize towards the 100 to 200 bps annual decline and reflect steady state mix and demand. From a macro perspective, our 2026 outlook reflects a prudent set of country level assumptions. We have modeled U.S. first year visas down approximately 30%, Canada down 10%. And and flat visa issuance in the U.K. and Australia. In the U.S., total education revenue is expected to grow low single digits, with cross-border modestly down under our visa assumptions more than offset by domestic strength and continued SFS penetration. In Australia, we are assuming flat visa volumes and expect modest low single-digit revenue growth driven by continued strong execution and expansion within our existing client base, while closely monitoring tighter visa requirements for Indian students. In Canada, despite the visa headwinds given new client additions and continued expansion into domestic payments expecting education revenue growth to exceed 10% year-over-year, reflecting the impact of new contracts signed last year. EMEA and U.K. Education revenue growth is expected at or above company average. Importantly, our guidance does not assume a rebound in global student mobility. Growth is driven by share gains, SFS expansion and deeper enterprise penetration. Moving to margin guidance. We have now crossed the 20% mark on a full year basis. We expect approximately 150 to 350 basis points of EBITDA margin expansion, reaching 22.5% at the midpoint of our guidance. Since 2022, we've scaled revenue while reducing operating expense intensity across every major category. Sales and marketing declined from 24.8% to 20.1% of revenue, reflecting higher annual contract value platform deals and improve productivity. Technology and development declined from 13.7% to 8.3%, driven by platform consolidation and greater engineering efficiency. Our expense leverage reflects productivity gains, not reduced ambition. We continue to fund product, engineering, data and enterprise expansion where we see strong return on investment. General and administrative declined from 24% to 15.8%, supported by automation and system simplification. As we invest behind our accelerated data strategy and digital transformation advanced analytics and AI, these investments sit within G&A, but function as enterprise infrastructure, strengthening data architecture, automation and risk management across the platform. Our guidance assumes some deceleration in revenue growth from the first half to the second half, primarily due to more difficult year-over-year comparisons in the second half of 2026 and the timing of ramp-related contributions and as we remain prudent given the dynamic macro. Margin expansion, however, is expected to be more pronounced in the second half given normal seasonality and as operating leverage flows through the model. Looking beyond this year, we continue to invest for growth while scaling gross profit dollars faster than operating expenses. That operating discipline underpins our confidence in achieving 24% to 25% adjusted EBITDA margin for 2027. For 2026, we are focused on efficiently converting every dollar of adjusted EBITDA into sustainable free cash flow. After normalizing our historical conversion rates to remove onetime items, we expect conversion in the 70% to 75% range. Importantly, our equity program is directly aligned with our pay-for-performance culture. As a result, dilution remains disciplined and performance-based and is increasingly offset by growing free cash flow and opportunistic repurchases. Equity compensation is tightly aligned with long-term shareholder value and we carefully manage both gross, equity issuance and net dilution. Our goal is to limit gross dilution and maintain net dilution at approximately 3% over time, while continuing to reduce stock-based compensation as a percent of revenue with a target of approximately 10% in 2026. Finally, as a result of this focused discipline on profitability, we expect GAAP net income to grow approximately 3 to 4x versus 2025. Our objective remains durable free cash flow growth, supported by disciplined expense management and capital allocation. For Q1 2026, at the midpoint of guidance, we expect approximately 28% FX-neutral revenue growth and a 225 basis points of margin expansion. Revenue growth includes a 7-point contribution from lapping the Sertifi acquisition as well as approximately 3 to 4 points from the payment processing ramp. At current spot rates, we expect a 4- to 5-point FX tailwind in the quarter. Q1 includes multiple tailwinds that will moderate as the year progresses, particularly as we lap the Sertifi acquisition, and payment processing ramps from health care and invoiced clients. Gross profit dollar growth is expected in the 20% to 22% range at spot rates with approximately 7 points of that growth attributable to Sertifi, consistent with its contribution to revenue. In summary, in 2026, we expect to demonstrate the durability of our diversified platform, the scalability of our operating model, and our continued commitment to disciplined capital allocation. We remain focused on driving sustainable growth and expanding profitability over time. Stepping back, I spent more than 2 decades working through major data and technology transformations and moments like this are rare. The work we've done to modernize our systems, simplify our architecture and build a unified data foundation is not just an efficiency program. It positions us to participate fully in the next wave of intelligent AI-driven software from a place of architectural strength and financial discipline. What excites me most is that we are building a company designed to compound over time. I'll now turn it back to the operator for questions.

[Operator Instructions] Our first question comes from Nate Svensson with Deutsche Bank Securities.

Just on the guidance, some of the macro assumptions, I think the prudent approach as you put at Cosmin is the right 1 to take. But just kind of wanted to dig down into the assumptions in the U.S. and Australia. So I guess I'll just ask both of them. So in the U.S., you're assuming visa is down 30%. Obviously, we aren't getting F1 data anymore, but based on some recent reports that seems like a pretty material step down in '26 relative to '25. And I guess relative to that common app data you called out in the slides. So I just wanted to ask if there's anything you're seeing or hearing that makes you think things are maybe getting worse versus how much of this is prudence or conservatism? And then in Australia, you're assuming flat visas but you also called out 9% growth in places for new international students. So just, again, trying to hope you can break down the delta between the 9% increase in new places and the flat visa growth.

Yes. Thanks, Nate. I would say the summary is trying to be prudent. Obviously, we've seen this very dynamic environment in both of those markets. In the U.S. look, we've seen -- we don't have external data yet, but just looking at our own data last year, looking at first year payers sort of down in the first -- in the high teens. Of course, that is offset for us, as you've heard us talk about stronger retention and some of the improved or higher tuition kind of sized payments. So there are different dynamics always that play out beyond just visas. But looking at 30% for this year is, again, trying to be prudent as we look ahead still early in the year. So not necessarily, obviously, the same as all of you don't have a lot of data, and we have to wait for the usual peak season later this year to really kind of quantify it. But so far, just trying to take a prudent approach around the U.S. in particular. And then on Australia, Again, last year, we assumed that was going to be worse. It turned out to be a lot better than we thought, not just the external environment but also kind of our performance against it. But again, starting out the year early, I want to remain prudent around it. So again, we're seeing good performance there. Otherwise, in the market, as you saw the team keeps winning deals and growing above market in both of those markets. So good performance so far, both in the U.S. and Australia.

Yes, it makes sense. And I think the proven approach is the right one. I guess for the follow-up, I wanted to ask on SFS. I think Rob had some interesting stats in his prepared remarks there. So I think ARR growing 3x, if I recall correctly. So I just wanted more color on new signings, maybe impact to '26 numbers, what the pipeline looks like. And I guess, the area in SFS I'm really interested in, like you've talked a lot about the non-Big 4 success that you're seeing. I think revenues were up 30%. And I don't think SFS is live outside of the Big 4. So I guess specifically on that opportunity, can we start to roll SFS out in these new geographies? So kind of a broad-based question on SFS, but really interested in the non-Big 4 opportunity.

Yes. So let me start with the U.S. SFS part of your question, and then I'll talk non-Big 4. So look, it was a very successful year last year for SFS. We talked about the threefold increase in ARR signed. We also saw -- it was about 13 wins for full suite deals over the course of last year that helped build that 3x growth and we entered the year feeling very good about our position with the product, very good about the amount of pipeline and deals that look to be opportunities for us in the year ahead. So we've done a lot to improve the caliber of our sales team. We've got great senior leaders around that team and looking forward to a good 2026. On-- you said it about right on the outside the Big 4, you are right in saying that SFS is not what's driving the success there. Rather that is our core offering of both cross-border and domestic payment capabilities that we are taking around the world, and we do that with sort of the lighter solution than the full SFS, but those markets are very dynamic. They are seeing lots of student growth and we are very successful in penetrating those markets. I think the last part of your question was around just sort of SFS expansion. We are focused primarily on the U.S. and U.K. There are other opportunities that we'll continue to evaluate around the world, but don't expect us to be focused on those in the near term.

Our next question comes from Dan Perlin with RBC Capital Markets.

The area I wanted to focus on just briefly, you're talking about winning, obviously, much bigger deals more products per kind of these transactions and then higher ARR per deal. You touched on it a little bit in the prepared remarks, but I would love to just hear more about that sales motion. And I guess, how we should be thinking about all of that rolling throughout the year as those deals continue to kind of, I guess, come in at bigger ticket sizes?

Yes. I mean you -- it's Rob again here. So you correctly sort of summarized my comments there. We did see a nice growth in overall ARR, but we also saw growth in average deal size across the business, that would be true across our different verticals. So it's not just an EDU story, but you will have seen that across other verticals as well. And in all cases, it's partly a function of what we target. We are targeting more clients that would generate larger ARR. We are also targeting, especially in EDU sort of the full suite presentation of our platform. that, combined with our success in the U.S. and the U.K., all of that sort of drives the higher ARR that we've been talking about.

Yes. That's great. Just a quick follow-up. I think over 30% of the business now is kind of noneducation verticals. I'm just wondering kind of as we sit here today and we think about the diversification going forward, the balance sheet you've got, obviously, you're going to put money to work, it sounds like in buyback. But just -- how are you thinking about M&A opportunities in the context of the way the business is currently structured?

Dan, this is Mike. I would say, obviously, you've heard us talk, we think our own stock is quite dislocated. So you can expect us to use capital to to buy back stock and continue to be active in the market. Clearly, the valuation environment right now is quite dynamic. You've got a huge dislocation between private and public markets. I think for us, we have a core belief that is still our core M&A strategy, which is we like to sit in critical workflows. We like that combination of software and payment monetization. And so of course, we're going to be continuing to monitor companies that fit that profile. But at the same time, we're going to be very disciplined. I mentioned kind of the dislocation of our own value an opportunity for capital deployment there. I also think we have great acquisitions that we've accomplished in the last 18 months. We've got synergies that are playing out quite well there. And so we're going to continue to kind of land those planes. And and stay focused on our organic investment plan and then those synergies. So that's probably what I'd say on that.

Our next question comes from Charles Nabhan with Stephens.

Would love to drill into Canada and some of the underlying macro assumptions. It looks like there's pretty wide outperformance versus the visa, where the visas are expected to come in next year. And I was hoping to get a little color as to the drivers of that outperformance. And just to broaden that, if we think about the guide, it's about a 6% -- 6-point delta from the top to the bottom. Could you maybe talk about like the key variables overall in the model, what would lead you to come in at the top versus the bottom end of the range for the year?

Two-part question. Maybe so I'll start with the first part on Canada. Look, after 2 years of Canada being down last year, over 50% visas, and you're right, we outperformed that, right? Because if you look at revenue for us last year in Canada was down just a little bit short of the down 30%. So we still have done better than the market, both years. And that's the accumulation of the work that the team has done to continue winning clients, and we've mentioned that. Now as you saw in our expectations going into this year, visas will be down around 10%. So again, a big reduction still down, though, with growth up 10%, and that is driven because of that accumulation of client wins on the domestic side and just strong execution by that team despite that market being down. So all of that kind of obviously compounds and starts to drive benefits finally seeing Canada now on a positive going into this year. And then as far as your question about overall guidance, look, at the high end of that range, I would say. You would be looking at things like macro being a little bit better, continuing some of those ramps that we talked about across a lot of large clients that we've talked about, that could also drive some of that upside. And just general strength in the execution in the overall business. So -- and similarly, kind of on the downside of some macro remains something that we're watching. But I would say we've -- as you've noticed, we've captured most of that quite well and taken a very prudent approach to the overall. So we feel the midpoint is a solid starting point.

Our next question comes from James Faucette with Morgan Stanley.

This is Michael Infante on for James. Apologies if I missed it in the prepared remarks, but any color you can share on what's embedded in the outlook from a travel perspective, both including and excluding Sertifi and maybe how you're thinking about resource allocation to travel to sustain the growth that you guys saw in '25?

Yes. No, look, at a high level, we continue to believe travel will grow at or above company average. So solid growth for the year. And again, it's a large growing, as you saw, our share of the overall business. And that's really both on the Sertifi side where we continue to see strong performance in that business. Obviously, the payment monetization side, as we talked about, seeing that performing well, but also our legacy Luxury Travel business is doing well. And so overall, I would say Travel continues to be a big growth driver for us. And look, obviously, we're excited about all the wins there, adding a lot in terms of new clients, as you saw -- we're -- in terms of investments, we're growing the sales team. That is one big area of focus for us as far as investments and then, of course, investing in the overall Sertifi global expansion. So definitely a lot of focus in terms of investment dollars around the Travel vertical.

That's helpful, Cosmin. And then just for my follow-up. On the stablecoin topic, you guys have obviously spoken about payment costs there, large sort of being in line with some of your lower-cost payment modalities. But what are you actually seeing from a demand perspective, if anything? And any key quarters that you would call out there to the extent you are seeing some level of demand?

Yes, this is Mike. I think we talked late last year on just our initiatives around stable coin and getting into the platform and focusing on markets that were, I would say, more volatile currency markets, right, where we could see payer usage from those areas. And so happy to say that we are live, we are testing demand actively and actually processing payments. And so we'll continue to kind of talk about that in the future and maybe break out a little more details. But right now, it's a small bit of usage, but we have high hopes it's going to grow. And then I would say the second use case is really an internal one, like many companies looking at what internal processes we can use from a stablecoin perspective to either settle different currencies, quicker, more cost effectively and our teams are really pursuing both acceptance and internal use of stablecoin.

Our next question comes from Darrin Peller with Wolfe Research.

It looks like gross margins and the monetization rate is a little bit lower just given the progress you're making on domestic payments. And so I think if you could just first give us a little bit more color on what's going well there. Anyway it's been an initiative of the company is really since you've been public. But any further acceleration you're seeing there or something sticking more than before, but it looks like it's obviously going well and to some degree, having an impact on the numbers. And then as you continue to upsell domestic to customers, just how should we be thinking about gross margins this year where they could reasonably normalize?

Yes. Thanks, Darrin. So I'll start. So look, overall, like we said, although gross margin is under some pressure, and look, it's payment processing. It's what the -- what we're calling out specifically is Cleveland Clinic ramping up and some of the B2B cross-sell from invoiced. So those are sort of unique and mostly temporary actually playing out this year. Historically, as you said, domestic has been 1 area where the domestic payments piece does create some mix. But look, stepping back, you've heard me say it, and you see it in the supplement, our spreads are quite stable over time. That's kind of what we normally look at, and that's just understanding kind of pricing, so stable spreads across, especially our transaction side. But again, as we've looked at gross margin, what we really wanted to also include, and you saw me even talk about guidance around gross profit dollars, that's really what ultimately matters in these deals, whether it's domestic deals in the U.S. or in the U.K. and B2B, as you saw in our prior disclosures, all of those add incremental gross profit dollars. And as you probably know, they actually had less -- you don't have to add a lot of OpEx to that. So then what that does actually drive incremental EBITDA dollars with it. So, look, from a gross margin perspective, again, as we said, this year, we'll be in that 200 to 300 bps decline range. But if you exclude some of those -- so the timing of those ramps, we would be back in the kind of 100 to 200 bps range, which is kind of our historic as you go into next year overall. And again, for Q4, I would say 1 last thing just on Q4. You saw FX also can have an impact. So in Q4, in particular, one of our impact was about 2 points or about $1 million of FX lapping from last year, which actually drove about 2 points of decline in Q4 last year just from FX. And another couple of points or so actually from the same payment ramp. So Cleveland Clinic doing really well along with B2B. So those created some additional pressure in Q4.

All right. Guys, maybe just one quick follow-up would be your expectations around the potential success of health care in '26. Just following the wins you've seen now with Cleveland Clinic and it's more broadly. I know you've been trying to put a lot of emphasis in investing back into that segment for at least a year now. And so I'm curious where you see that going?

Yes. So Rob here. And obviously, we are -- we've talked explicitly about Cleveland Clinic. And not only is that a big deal for its sort of economics and how it rolls through our numbers, but it's also a big deal in terms of signaling to the rest of the health care marketplace. Cleveland Clinic has been kind enough to talk a bit about what we're doing with them and for them, and that has also gotten out. So, if you look at the combination of deals we've already signed both in our core patient financial experience and in the payment processing. Those are very positive. But you'll also see that in that pipeline expansion that I talked about in my comments, a good piece of that is from health care, where they are also seeing on the backs of recent success, a lot of opportunity opening up for them.

Our next question comes from Ken Suchoski with Autonomous Research.

I wanted to ask about education just outside of the Big 4. I think I heard 50% of new education clients signed came from these markets, revenue up 30%. And can you just talk a little bit more about where these share gains are coming from, how you're organizing the sales team around this effort? And just anything on the growth algorithm as to how it might differ versus some of the mature -- more mature education markets?

Yes. I can jump in and start with that. So the major markets the next group, the group outside the Big 4 sort of cluster around main markets in Europe and main markets in Asia, right? So as you think about Europe, France, Germany, Switzerland and the like, spain, as you think about Asia, you start seeing places like Singapore, Malaysia and others that are being successful. And so what -- what's happening is, first of all, those markets are being opened to the international students. And what you're seeing is a lot of interest intra regionally as well as interest of people moving around. So as you see patterns evolve, you may find more students and families from Asia choosing to stay somewhere in the region for their international experience. Again, these are not the Big 4, but the next group, but you do see some of that kind of corridor dynamics that we're observing here. From a Flywire perspective, we're investing in making sure we have good coverage across those markets. So we are present in all those markets. We have strength and capacity in all the places I've named, and we're seeing good wins in these markets that are being successful. Places like Singapore and so on that are emerging are places where we're enjoying really good client additions.

And just I think I heard a comment on just on the payment processing programs ramping. I think you -- I think Cosmin, you might have mentioned that this is going to hurt the gross profit margin due to the early stage ramp economics, can you just give a little bit more detail as to why it takes some time for that to ramp or just what the economics look like upfront and how that changes over time?

Yes. I think if you think of Cleveland Clinic, for example, but also the B2B invoiced cross-sell, which already started in Q4, you can see the dynamic kind of starting to play out. And so if you look at the materials and disclosures, that's where we talked about some of the pressures that come from. You had a larger dollar amount on the revenue side with still some incremental positive gross profit dollars that naturally puts some pressure on the gross margin. We've kind of called that out for this year. You have some of those ramps basically running through most of the first half of the year, and then it comes off in the second half. Now you've also heard Rob in his prepared remarks, talk about that you start -- we started with Cleveland Clinic in the payment processing. And now sort of in Q2, you'll see us go live with some of the other sort of higher margin components of the products there. So that's why we -- as we exit this year into next year, we expect the gross margin kind of profiles to then decline to kind of go back to normalized levels. But again, we've also provided everyone with gross profit dollar growth guidance for the year in that mid-teens with this in mind and also for Q1, obviously, strong gross profit dollar growth in the 20% to 22% range with 7 points from Sertify. So still a very strong growth when you look at it from a gross profit dollar growth for these deals. But that's the timing dynamic that kind of plays out in the first half versus second half.

Our next question comes from Tien-Tsin Huang with JPMorgan.

Mike, you mentioned private public market differences I'm just curious from being opportunistic on the private side, are there assets out there like Sertifi that are on your radar that you and Rob and team are considering and be opportunistic? I'm just curious sort of what the where you are there with what you've done so far with acquisitions and the appetite to do more as they become available.

Yes. Tien-Tsin, I would say the strategy still holds. I mean, we think there's -- we have a proven track record of being able to do this of driving synergies post deal. And again, we really think that intersection of around the financial transaction and critical workflows and our payment network is a really, really powerful combination. Again, I think what makes it challenging is there's dislocation, a lot of private companies think their values are still very high. Public companies probably don't think that or most of them don't. And so that dynamic is a little more challenging. Our team has always got a great pipeline of targets and is always looking at the market. The good news for us is we've got great organic investments, and we've got great synergies to continue to execute on. So we'll be ready. We'll be opportunistic if we see it and no change in strategy. Just obviously some complexities around valuation, and it's really hard to bet against our own stock price right now.

Yes. That's all fair. It makes a lot of sense. Then just quickly, I always like to ask about visibility around just guidance, but how you see new sales booking across all the different businesses. How would you view it today versus this time last year? I would think it's better? I know things changed in April last year, but how would you qualify it?

Yes. I mean I think for us, Bob did a great job just talking about some of the sales metrics and the go-to-market metrics. The thing I'd also just encourage people to realize is that transformation we're doing, and Cosmin mentioned about systems, about data, even how we're organized, we're really focused on investing more behind that go-to-market engine. And so sometimes increased capacity. Sometimes it's the way we organize, the way we deal with contract negotiations, the way we minimize distractions for our sales team and our client-facing teams. And what gets me most excited is we're doing all of those things, right, which I think is going to continue to help us increase velocity and really benefit us across industries and across geographies. And that's what gets me excited is setting the company up for going faster and doing more.

Our final question comes from Timothy Chiodo with UBS.

I want to talk a little bit about the mechanics behind optimizing international payment flows. So, my understanding is that this relates to when there is a student going into year 2, 3, 4, they might have opened up a local banking account and all of a sudden, their payments are being made more domestic. I was wondering if you could talk a little bit about how do you entice or change the behavior to keep those payments cross-border and running through Flywire on a cross-border basis?

Right. So bigger picture, as you well know, our strategy has always been around moving all the money. Now one of the reasons why we like to move all the money is you get the opportunity to monetize both domestic and international flows. Both of those are lucrative for us, and both of those help us serve the clients better. There is a particular dynamic that I had referred to in all of that, which is that there is a fair bit of payment that shows up through what looks like a domestic channel. But -- and it is, in fact, from an international payer oftentimes using an international payment instrument, but it's just been showing up on the domestic payment routing website, where we take over all of it, we can make sure that payment gets routed properly. It also means we can make sure that we present to that family the best set of choices they have. It is oftentimes beneficial for them to understand the local payment options that we would make available to them. actually quite a bit better for them than the choices that they may be making, not realizing what we could be doing for them. So it's an opportunity to better serve the payer. It's certainly an opportunity to better serve the school, and it is also beneficial for us.