What Happened?

Shares of cross border payment processor Flywire (NASDAQ: FLYW) jumped 16.1% in the afternoon session after the company reported impressive third-quarter earnings, which revealed significant gross margin improvement and strong revenue growth, which beat consensus estimates. 

Sales increased due to robust demand across key verticals, particularly in the education sector, which benefited from Flywire's tailored payment solutions.​ Q3 is also a peak quarter in the education sector, with most schools starting a new academic year, which means Flywire is able to record higher transactions related to enrollments and other relevant fees. 

On the other hand, its EBITDA missed, and its EBITDA guidance for the next quarter fell short of Wall Street's estimates. However, with markets more forward-looking, investors seem to be more focused on revenue guidance for the next quarter, which came ahead, while full-year EBITDA also beat expectations. Overall, this quarter was mixed but still had some key positives.

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What The Market Is Telling Us

Flywire’s shares are quite volatile and have had 15 moves greater than 5% over the last year. But moves this big are rare even for Flywire and indicate this news significantly impacted the market’s perception of the business. 

The biggest move we wrote about over the last year was 8 months ago when the stock gained 26.4% on the news that the company reported fourth-quarter results that blew past analysts' revenue expectations. The improved top-line was driven by strong growth in international cross-border payment volumes. Notably, the company observed improved momentum in the education vertical, particularly in the U.K. and from some travel clients. Changes in F.X. rates were also considered a tailwind during the quarter. 

Looking ahead, its full-year revenue guidance came in higher than Wall Street's estimates, and free cash flow showed a strong trend. 

On the other hand, revenue guidance for the next quarter missed analysts' expectations. The Canadian government's recent decisions to limit applications for international study permits influenced near-term growth projections, with provinces delaying the allocation of study permits to schools until late Q1 or early Q2. 

Overall, this quarter's results still seemed positive despite some of the anticipated headwinds, and shareholders should feel optimistic.

Flywire is down 4.3% since the beginning of the year, and at $21.78 per share, it is trading 24.5% below its 52-week high of $28.85 from February 2024. Investors who bought $1,000 worth of Flywire’s shares at the IPO in May 2021 would now be looking at an investment worth $620.51.

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