In their Q1 2025 investor letter, Voss Capital introduces a new investment in Flywire Corporation ($FLYW), highlighting it as a compelling opportunity in the cross-border payments and software platform space. Voss Capital, known for their contrarian approach and ability to identify undervalued growth companies, presents Flywire as a prime example of a structurally advantaged business trading at a temporary narrative-driven discount. The letter emphasizes the importance of finding companies with durable competitive advantages and relatively weak competition that are being unfairly punished by short-term macro headwinds. Voss’s decision to invest in Flywire comes after recognizing the market’s myopic focus on temporary visa restrictions while overlooking the company’s successful diversification and strong underlying fundamentals.
Investment Highlight: Flywire Corporation ($FLYW)
Business Overview
- Capital-light cross-border payments and software platform
- Originally focused on seamless cross-border payments for students studying abroad
- Expanded into holistic payments platform processing all financial transactions at universities
- Diversified into travel, B2B, and healthcare payment niches
- Operates globally across US, Canada, Australia, UK, and other European countries
Market Position
- Significantly better technology and execution than peers in fragmented markets
- Strong competitive advantages in international markets outside the US
- Building comprehensive, vertically integrated software solutions beyond simple payment processing
- Successfully expanding beyond historical reliance on international student payments
Performance Analysis
- Revenue Diversification Strategy:
- UK segment has now surpassed the US as largest geography
- Student Financial Services (SFS) contracts are 3-5x larger than legacy education agreements
- Higher recurring software revenue with less susceptibility to macro shocks
- Four major wins in UK that had not yet rolled out as of Q1
- Financial Resilience:
- Despite 30% declines in Canada and Australia, delivered double-digit organic revenue growth
- Rising margins and guidance implying growth reacceleration after Q2
- Outside of severe macro shocks in select markets, rest of company is 20%+ organic grower
- Strong balance sheet with large net cash balance
- Strategic Acquisitions:
- Sertifi acquisition showing early promise with EBITDA-positive margins above company average
- Provides DocuSign-like functionality tailored to hotel bookings/excursions
- Early traction with major chains like Hilton and Marriott
- Four identified synergy levers for value creation
Growth Runway
- Healthcare segment (~6-8% of revenues) showing sudden strong performance
- Landing large contracts with hospitals on Epic Systems software
- Continued international expansion opportunities
- Direct-to-consumer revenue growth potential
Market Dynamics and Opportunities
- Market myopically focused on temporary visa restrictions in Australia and Canada
- Sell-side research spending disproportionate time on “worst case scenarios”
- Stock has “decoupled” from fundamentals according to analyst coverage
- Rest of business performing strongly despite macro headwinds in select regions
Valuation and Investment Thesis
- Trading at <2x sales, <3x gross profit, and <10x 2026 FCF
- 60% gross margins with low capex and consistent cash conversion
- Transaction comps like AvidXchange and trading comps like Payoneer at similar/higher multiples despite slower growth
- Voss owns approximately 5.6% of the company with ~5% portfolio weight
Three-Fold Core Thesis
- Study abroad programs are not in secular decline and will normalize, likely in 2026
- Flywire has significantly better technology and execution than peers and will rebound when macro steadies
- Company has successfully broadened revenue base beyond cross-border tuition payments for future insulation
Risks
- Continued macro headwinds in key international markets
- Regulatory changes affecting student visa policies
- Execution risk on recent acquisition integration
- Short-term earnings volatility from geographic concentration
Catalysts and Upside Potential
- Potential acquisition candidate attractive to FinTech players and banks
- Strong balance sheet and cash generation attractive to private equity
- If company executes on current guidance without macro deterioration, meaningful re-rating possible
- In scenario where macro headwinds abate, 20%+ organic growth becomes feasible again
- Multi-bagger potential not remotely priced into current valuation
Other Key Points
- Stock declined from over 20x NTM sales at 2021 IPO to under 2x despite consistent 20%+ growth
- Q4 2024 guidance miss and expensive Sertifi acquisition created “double whammy” selling pressure
- Company building direct line to customers and expanding software capabilities
- Global financial network and university relationships create strategic value
Voss Capital views Flywire as a high-quality business with durable competitive advantages trading at a temporary discount due to narrative-driven selling. They believe the market’s focus on short-term visa restrictions ignores the company’s successful diversification strategy and strong underlying growth trajectory. The combination of compelling valuation, multiple growth drivers, and potential for narrative shift creates an attractive risk-adjusted return opportunity.
