Flywire Corporation (FLYW) Q3 2021 Earnings Call Transcript

Flywire Corporation (FLYW -2.75%)
Q3 2021 Earnings Call
Nov 09, 2021, 5:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Thank you for standing by. This is the conference operator. Welcome to the Flywire Corporation third quarter 2021 earnings call. [Operator instructions] I would now like to turn the conference over to Akil Hollis, VP financial planning and analysis.

Please go ahead.

Akil Hollis -- Vice President, Financial Planning and Analysis

Thank you, and good afternoon. With me on today's call are Mike Massaro, chief executive officer; Rob Orgel, president and chief operating officer; and Mike Ellis, chief financial officer. Our third quarter 2021 earnings press release, supplemental presentation, and associated Form 8-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. We also will 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, risk factors associated with our business, and required disclosures 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.

Mike Massaro -- Chief Executive Officer

Thank you, Akil, and thank you to everyone that is joining us today on our Q3 2021 earnings call, our second as a publicly traded company. We truly appreciate all the interest, so many of you have shown in Flywire in getting to know our business as a recently listed public company. The third quarter was another strong quarter for Flywire. Rob Orgel and Mike Ellis will go into great detail later on.

But first, let me start with some financial highlights. Revenue less ancillary services year-over-year growth was 67%, with total payment volume increasing 76% compared to Q3 2020. This growth was driven by our successful land-and-expand strategy in the U.K., a strong U.S. education growth in the quarter, and the easing of travel restrictions around the world, allowing more travelers to begin to take those long-awaited leisure trips.

Adjusted EBITDA for the quarter was 17.6 million, which is an increase of 7.4 million or 73% from last year's third quarter, another great result that truly shows the strength of our unit economics. These great results this quarter have been driven by the continued execution of our multiple growth strategies across industries and geographies. Our performance this quarter is also due to the commitment of over 600 FlyMates around the world who work each and every day to deliver value for our clients. We are so fortunate to have these amazing FlyMates who continue to stay focused and execute exceptionally well in this complex world.

Our Q3 results further validate what we have discussed along our journey to become a public company nearly six months ago. First, there is a strong need for Flywire's powerful combination of software and payment capabilities, especially for high-stakes, high-value payments. Second, the core markets in which Flywire operates provide a massive opportunity for long-term growth. Industries like education, healthcare, travel and business payments are massive parts of the global economy, representing nearly 12 trillion of addressable market.

These sectors are complex and have been poorly served by incumbent payment solutions, providing Flywire a great opportunity to modernize the payment flows within these sectors over the next decade. At Flywire, our mission is simple. We help our clients get paid and their customers pay with ease from anywhere in the world. This combination of software, technology platform, and payment network, our Flywire Advantage, is truly a differentiated offering that uniquely positions Flywire for success in these massive addressable markets.

With Flywire, our clients do more than just track money and collect payments. They integrate our software into their existing back office systems and processes, display Flywire functionality to their customers via their websites and mobile applications, and deliver great payment experiences with value-added services, like modern invoice presentment, flexible payment plans, seamless local and global payment methods, and much, much more. So while clients benefit from operational efficiencies, they also are able to delight their customers with a digital engagement platform throughout the entire payment experience. We've been at this for more than 10 years.

And in that time, we've achieved significant scale and reach. As of quarter-end, we accept and settle payments in over 240 countries and territories and in over 140 currencies. Today, we deliver some of the most important and complex payments for more than 2,450 customers around the world. And as many of you have noted, our business has numerous defensible moats, such as our deeply embedded, industry-specific software, our proprietary global payment network that enables Flywire to mitigate the complexities around the movement of money for our clients, and our unique go-to-market approach, ensuring that we have a great team of experts from the industries that we serve, engaging with our clients and our prospects.

We believe the next decade will bring a wave of digitization across the industries we serve and that Flywire is uniquely positioned to lead this trend with our powerful combination of software, payments, and our people. Not only do we believe that Flywire is uniquely positioned in the market, but we continue to see positive trends in the industries where we operate. In education, where we serve private and public universities, colleges, boarding schools, language, and vocational programs all around the world, we see strong demand for our solutions. Providing flexibility to students, families to pay their tuition and fees over time and with a preferred payment method is truly top of mind for institutions.

In Q3, our education clients saw a continued return to normalcy as vaccination rates increased in students' return to campus. This apply to international students as well. This summer, even with the uncertainty around the delta variant, American Consulate issued almost as many visas for international students as during the same period in 2019. In this positive macro environment for education domestically and internationally, our software continued to drive value, consistent with our company's thesis and focus.

In a recent survey of finance professionals at U.S. education institutions conducted by Payments.com, more than 80% of bursars at four-year universities said flexible payment plans tailored to individual students can be attractive alternatives to traditional paper-based payments. Our strength in our domestic solutions and the global nature of our education business positions us well for the future. In healthcare, providing more consumer-friendly and digital-first payment options continues to be a priority for hospitals and health systems.

We recently commissioned a survey of more than 2,000 consumer patients in the United States. Our data found that 65% of Americans who paid their medical bills online for the first time during the pandemic plan to continue to make payments online going forward. In addition to the great benefits for consumers, a streamlined payment experience can have a dramatic impact on the financial health of the hospital or health system. We recently completed a Total Economic Impact report with Forrester Research to measure the return on investment of deploying Flywire.

Their research found that Flywire can help our clients achieve 318% ROI over three years and see a payback period in less than six months. Our travel clients continue to see growth as borders open back up and restrictions ease. The United States announced it is reopening to fully vaccinated air travelers from around the world starting in early November, ending a ban that's been in place for 18 months. In addition, the United States also said it will lift restrictions for travelers in from Canada and Mexico, allowing fully vaccinated foreign nationals to travel, ending the ban on nonessential travelers that was in place since March 2020.

As we approach the holidays, our recent research suggests that travelers plan to spend more money and stay longer. In our recent survey of more than 800 frequent travelers, 65% said they would expect to take a longer vacation than usual post-pandemic, and 75% said they will seek a remote destination but they would not be around large groups of people. And in our B2B business, where we support technology companies as a key target subsegment, we are seeing demand for our solutions as more businesses realize that digital payments are an integral part of the customer experience. At our recent Flywire Forward event, 42% of business respondents cited improving the customer experience as the top payment strategy priority for them, followed by automation, security, and international expansion.

Speaking of the Flywire Forward event, we were so glad to see so many of you at our inaugural event, where we brought together business professionals from a wide variety of industries, as well as leaders in fintech and banking, to discuss the future, from payments to crypto, and much, much more. It was clear from the event that digitized payments are becoming table stakes across every industry, no longer just in retail and e-commerce. The feedback from the event was very positive, and our team is well underway in planning similar events in the future. I would now like to turn the call over to Rob Orgel, our president and COO, to review some operational highlights from the quarter in the context of our growth strategy.

Rob?

Rob Orgel -- President and Chief Operating Officer

Thanks, Mike, and good afternoon, everyone. As Mike indicated in his opening comments, we had an excellent Q3. Our results this quarter reflected continued execution of our growth strategies. Summarize the quarter's success before going into some details.

Revenue grew across each of our verticals, new client signings were strong with 94 new customers in the quarter, and we were successful in hiring, bringing our year-to-date total hiring to over 200 FlyMates, adding a globally distributed and highly talented group to the company. I'll now go into a bit more depth on the dimensions of strength across our growth levers in Q3. To begin, we continue to see growth with our existing clients. Our net revenue retention has rebounded strongly in Q3 and for the year-to-date period, achieving levels at or above our performance over the last three years.

This strength in NRR reflects our success with our clients as they recover from the pandemic, as well as the value of our broad product suite. One example of this in the quarter was moving Manchester Metropolitan University, or MMU, from our cross-border solution, which was implemented in 2016, to deploying a fully integrated software suite to improve efficiencies across the campus. MMU, based in the United Kingdom, has over 30,000 students. This is our first full suite fully integrated solution in the U.K., and we are providing broad and deep functionality that spans from online payments, monthly payment plans, accommodation payments and deposits, e-stores, and also supporting their on-campus Met Card.

We're managing all domestic and international payments for MMU. The ability to meet our clients' needs from simple integrations to our powerful full suite solution, including the full breadth and depth of the MMU solution, illustrates how Flywire's platform lets us serve and grow with our clients. Obviously, we appreciate forward-thinking universities like MMU that are driving new, innovative ways of working. In U.S.

higher education, we had expanded our presence at Northeastern University through the addition of payment plans for both international and domestic students. This top 50 university according to U.S. News & World Report was originally signed as a cross-border client in 2016, and we are pleased with our expanding relationship with them with this great added set of capabilities we're supporting. To illustrate our ability to expand with clients in our healthcare vertical, Flywire is deployed broadly across the Banner Health system, including 30 of Banner's acute care hospitals, 50 urgent care centers, and hundreds of healthcare centers and clinics.

Banner Health is using Flywire's pre-service, point of service, and post-service solutions, allowing their patients to pay their medical bills easily. In this quarter, we've expanded with Banner Health to include their 16 Wyoming locations, including two hospitals and 14 clinics, an expansion we expect will help more Banner patients and also deliver great results for Banner. In our emerging B2B segment, we have benefited from the expansion of our clients as they recover from the pandemic and as they increase their use of our services. For example, an existing advertising technology client has recently committed to use Flywire as their single digital accounts receivable solution for all customers.

After beginning with our cross-border solutions, they are now rolling out our domestic receivables capabilities. Our expectation is that this will allow us to increase our revenue in this account while providing a high ROI service and simplifying their accounts receivable function. As we move to our second growth lever, we also continue to win new clients at a rapid rate. The quarter was especially strong in education and travel, representing the majority of the new clients in the quarter.

In travel, we have continued to invest in client acquisition despite the impacts of COVID and are especially happy to add clients like Nordic Visitor, which is a large DMC in Iceland, where we completed an enterprise-level deployment. We replaced all payment options and are now the only way to pay Nordic Visitor. Another travel win during the quarter was a large residential accommodations company in Australia and New Zealand, highlighting the segment breadth and global nature of our travel business. We added many new clients in the education space as well, including wins across multiple geographies.

An example of a competitive win is our exclusive agreement to manage cross-border payments for the University of Portsmouth, a top-ranked university in the U.K. hosting about 25,000 students, including around 6,000 international students. We also recently went live with our cross-border product at Vanderbilt University, a top 15 university according to U.S. News 2021 report.

Located in Nashville, Tennessee, the school has a student body of about 13,500, of which approximately 1,500 students are international. Our ability to process both foreign currencies to U.S. dollars, as well as domestic wires, were important in securing the client. In our B2B segment, we continue to build momentum.

We are finding great interest in our ability to help the enterprise simplify accounts receivable, get paid faster, and reduce the cost of the entire receivable process. Based on the acceleration we're seeing in B2B, including a strong start to signings and expected ARR in Q4, we are continuing to expand our investment in our team and our pursuit of B2B opportunities. In total, we added over 300 new clients year-to-date as of September 30th with continued success in all verticals in Q3. As we move to our third primary growth lever, our channel partnerships also continue to be a great source of growth for the company.

During the quarter, we announced our new partnership with Finvi, formerly known as Ontario Systems, a leading provider of enterprise workflow automation software for accounts receivable management. Finvi's focus is on accelerating revenue recovery in healthcare, business, and government markets. For context, Finvi drives results for over 600 hospital networks, including five of the 15 largest systems in the U.S., while also serving eight of the 10 largest accounts receivable recovery companies. They also serve numerous state and municipal governments across the United States.

As a result of the partnership, Finvi's healthcare customers will have access to a new digital patient engagement solution powered by Flywire, all as part of an integrated solution with Finvi that will help increase healthcare receivable collections at decreased cost. We're also thrilled with our Cerner partnership and currently have multiple healthcare clients in late stages of integration through that relationship. In addition, Flywire is this year's winner for Cerner's Partner Collaboration Award, which is in recognition of our ongoing collaboration with Cerner and for our successful contributions to ongoing partner and sales support. We also continue to add partners around the world that are providers of core student information systems in the education space.

We signed a partnership agreement and are actively launching new client integrations with Adapt IT, a primary student information system in South Africa. This increases our number of global partners and integrations in the education space to 35 at the end of the quarter. Lastly, we continue to see a large and significantly underserved opportunity for clients internationally that can benefit from our services. During the quarter, we expanded our education services to add initial clients in Hungary and Thailand, as well as continuing to build our presence in LatAm, where we've seen growth in terms of traditional campus-based higher education, as well as some very exciting LatAm-based online-focused education providers.

As you can see, on top of the encouraging trends Mike mentioned earlier, we are enjoying success across all areas of our business. I would now like to turn the call over to Mike Ellis, our CFO, to review other results for the third quarter and guidance for the remainder of the year. Mike?

Mike Ellis -- Chief Financial Officer

Thank you, Rob. Good afternoon, everyone. Today, I'll be discussing our non-GAAP financial metrics for our third quarter of 2021, including revenue less ancillary services, adjusted gross margin, and adjusted EBITDA. For our financial results prepared in accordance with U.S.

generally accepted accounting principles, please read the financial statements included within our earnings release and our Form 10-Q when filed with the SEC. Revenue less ancillary services for the quarter was 62.0 million, which represented a 67% growth rate compared to the third quarter of 2020, which was driven by an increase in our total payment volume. As a reminder, Q3 and Q1 are historically our strongest quarters of the year. This revenue growth exceeded our expectations due to very strong performance across the business, including all of our verticals and across all of our major geographies.

While the business was broadly strong, we would call out, in particular, the strength of our U.K. and U.S.-based education business, which benefited from excellent performance from new clients launched so far during 2021 and an accelerating recovery from COVID across higher education. In addition, we continue to see improvement in the travel industry, benefiting our clients and our revenue. As Mike mentioned, we processed 5.3 billion in total payment volume during the quarter, an increase of 76% from the 3.0 billion we processed during the third quarter of 2020.

We experienced revenue and total payment volume growth across all regions when compared to Q3 2020, and we achieved strong growth in both transaction and platform and usage-based payment volume and revenue during the quarter. Specifically, transaction revenue increased 76% compared to the third quarter of 2020, driven by a 92% increase in transaction payment volume. Platform and usage-based fee revenue increased 32% compared to the third quarter of 2020 due to a 52% increase in platform and usage-based payment volume. Adjusted gross margin was 71.9% for the quarter, which represented a decrease of 90 basis points compared to the 72.8% reported for the third quarter of 2020.

Though this was an increase in adjusted gross margin on a sequential quarter basis, this decrease in comparison to Q3 2020 was due to changes in our revenue mix and smaller FX gains in Q3 2021 compared to Q3 2020. In the aggregate, we've generated a very strong adjusted gross margin given the 67% revenue growth achieved during the quarter. We manage our business based on three key performance indicators: revenue less ancillary services, adjusted gross margin, and adjusted EBITDA. And we are pleased with the reported results for the quarter.

While not a key KPI, revenue less ancillary services as a percentage of total payment volume was slightly lower than Q3 2020, driven in part by two reasons: number one, payment method mix where bank transfers were more widely used for transaction payments; and number two, our expansion within domestic education consistent with our strategy of winning more domestic clients within our platform and usage-based revenue stream. Changes in payment method mix, as well as changes in vertical mix, payment size and currency payers processed may impact the percentage obtained from quarter to quarter when dividing revenue less ancillary services by total payment volume. Said another way, those changes are outputs reflecting the composition of the business in the quarter, and that percentage will be impacted by where and how we grow. The key point is that our platform and proprietary global payments network allows us to support many payment types for several verticals across many currencies that all have strong economics for Flywire.

Moving on to operating expenses. Technology and development expenses were 7.8 million, an increase of 28% over the 6.1 million incurred during the third quarter of 2020. This increase was the result of our hiring activities during the trailing 12 months ended September 30, 2021, where we increased the number of FlyMates within our technology and development departments by 31%. Selling and marketing expenses were 12.5 million, an increase of 64% over the 7.6 million incurred during the third quarter of 2020.

This increase was primarily due to, number one, our hiring efforts as we added 48 new FlyMates within these departments during the trailing 12 months ended September 30, 2021; and number two, higher sales commissions due to our favorable revenue results. General and administrative expenses were 14.7 million, an increase of 60% over the 9.2 million incurred during the third quarter of 2020. Many factors impacted our general and administrative costs incurred during the quarter, but the primary factors included our hiring activities, incremental costs associated with operating as a public company, including professional services and insurance costs, and charges associated with stock-based compensation. Adjusted EBITDA for the quarter was 17.6 million compared to the 10.2 million generated during the third quarter of 2020.

This improvement was due to the contribution from our incremental adjusted gross margin, driven by the 67% revenue less ancillary services growth rate realized during the quarter, partially offset by increased compensation-related costs as we invest in our technology, product, and sales and marketing teams as well as increased costs associated with operating as a public company. This exceeded expectations due to higher-than-expected revenue growth at stable margins. Moving to the balance sheet. With respect to capitalization as of September 30, 2021, we had 449.1 million in cash and cash equivalents and 25.9 million in long-term debt.

As of September 30, 2021, we had 104.9 million shares of common stock outstanding. Based on our financial results for the third quarter of 2021 and current trends, we are updating our full year 2021 guidance. For 2021, we expect revenue less ancillary services to be in the range of 174 million to 176 million, and we expect adjusted EBITDA to be in the range of 22 million to 24 million. As with prior quarters, this range assumes no further unforeseen COVID-related impacts, which could influence the remainder of 2021.

To summarize, we had a very strong quarter with respect to our revenue growth, which we achieved at stable adjusted gross margins. We were pleased with our ability to generate 17.6 million in adjusted EBITDA during the quarter, but we will continue to pursue growth opportunities and invest meaningfully in future quarters to drive revenue growth. I would now like to turn the call back over to Mike to wrap things up before taking your questions.

Mike Massaro -- Chief Executive Officer

Thanks, Mike. We believe here at Flywire that we have a clear and compelling value proposition that will continue to help us win. We have built a business that has exceptional unit economics, a highly defensible business model, and we could not be more excited about the future. I would like to wrap up by thanking over 600 FlyMates, our team members around the world.

We have an outstanding group of people made even stronger by the over 200 new additions that have joined us so far this year. Our global nature, flexible work environment, and fast-paced growth positions us well as an employer of choice in this challenging time. We continue to be able to hire amazing talent around the world, representing many cultures and backgrounds. And we all deeply believe in our mission to deliver the world's most important and complex payments.

With that, I'd like to turn the call over to the operator for questions. Operator?

Questions & Answers:

Operator

[Operator instructions] The first question comes from Bob Napoli with William Blair. Please go ahead.

Bob Napoli -- William Blair -- Analyst

Thank you very much, and congratulations on great results. Well done. So just looking at the profitability that you generated in the quarter and as we, you know, think about 2022 and 2023, I mean, you're well ahead of any expectations that we had, I think, for the full year of 2023. And I know the third quarter is a seasonally stronger quarter for you.

But how should we think about the profitability of the business versus investments? Obviously, you over-performed, and I know you're investing aggressively for growth. So how should we think about balancing the two?

Mike Massaro -- Chief Executive Officer

Yes. Thanks, Bob. This is Mike. I'll go first.

I'd say a few things. One, obviously, again, great quarter results. And you see the flow through the business model, which again, we're really proud of. One thing I'd just highlight, we are looking for growth investments pretty much everywhere.

You see the number of FlyMates we're hiring. We have aggressive hiring plans throughout the year and into 2022. So we're looking for those growth levers and continually expect us to pull the trigger on those. You know, at the same time, it's a very healthy business.

So, you know, expect us to keep investing in growth. Don't expect us to be transitioning to focusing on EBITDA. It isn't where we're going to go. It's going to be continued investment within product, within go-to-market with across all industries, across all geographies.

So I would say that's the best we can give you. Obviously, you know, happy to share more details later.

Bob Napoli -- William Blair -- Analyst

Then maybe as a follow-up, just -- so in the education business, MMU, you're transitioning to domestic Texas A&M, Northeastern. You know, just on -- when we think about clients, the revenue per client, what is the -- I guess incrementally on those education clients, when you make that type of a transition, what does that mean to revenue? And then can you give any color on like the average revenue per client by segment or just some color on how people -- you know, we get that question a lot and how thinking about modeling your business and the client growth and revenue per client.

Rob Orgel -- President and Chief Operating Officer

Yes. Hi, Bob. Rob here. So thanks for the question.

What you see from the expansion of domestic in these accounts is a real revenue multiplier for us. So we -- as you know, when we're serving in the cross-border capacity, we're only serving, you know, some percentage, a relatively smaller percentage of the overall population on campus. When we move to doing the domestic, we have the opportunity really to serve the entire campus community, and that really results in a revenue multiplier for us as they take advantage of things like the payment plans and the other capabilities that we extend to the university. So it's a revenue multiplier for us.

You see the, you know, revenue per account go up very meaningfully.

Mike Massaro -- Chief Executive Officer

Yeah. And, Bob, the only thing I'd add to what Rob said is just, you know, really encouraged by what we're seeing in pipeline as well, right? These new capabilities that we didn't have years ago, right? That's what's helping drive that great NRR number that we've talked about before.

Bob Napoli -- William Blair -- Analyst

Great. Thank you. Congratulations.

Mike Massaro -- Chief Executive Officer

Thanks, Bob.

Operator

The next question comes from Dan Perlin with RBC Capital Markets. Please go ahead.

Dan Perlin -- RBC Capital Markets -- Analyst

Thanks, and good evening, everyone. Fantastic results. I had a question on education, in particular, really trying to understand, I guess, parse out the difference between how much of the outperformance came from the education vertical that's really just bouncing back. And I guess, partially, are we at normalized levels when we look at going back to 2019, which it sounds like maybe we are based on the Visa comment, versus kind of the incremental new cohorts or extensions that maybe you were just even talking about on the domestic side with Bob?

Rob Orgel -- President and Chief Operating Officer

This is Rob speaking. It's really a very healthy combination of both. Again, it was a great quarter of performance in the education vertical, as well as across each of the verticals. If you hone in on the education piece, what you'll see is that we are benefiting from very good growth in the new clients.

So what you'll see is that they are performing very well in both the '20 and even the '21 cohort are contributing meaningfully to the success that we just reported for the quarter. But if you look back across all the cohorts, and as you know, we often talk about the cohorts going all the way back several years, those cohorts also grew very well. So I think what you see here is both a combination of, you know, an environment as it relates to COVID that was better than the environment that we might have anticipated many months ago in terms of the ability to get students on campus and fully participating. But what you also see is the success of our execution in terms of bringing more students in contact with different aspects of our platform, different aspects of our software.

And with that, you're seeing sort of, I think, really strong execution by our teams and serving those clients. And with that, both the clients benefit and so do we.

Mike Massaro -- Chief Executive Officer

Yeah. Dan, and, you know, the only thing I'd add to that is just, you know, you're also seeing parts of the world that still aren't back, right? So, you know, if you look at places like Australia and New Zealand, still just coming out of some of the pandemic across Asia Pacific, even parts of Europe. So again, you know, I think if you look at geographies, you can also look at subsectors, right? Remember, our definition of education is quite broad. So not only higher education, boarding schools, but also vocational and language programs.

You know, those shorter-term programs, right, they still haven't come back fully, right? So I think, you know, our belief has always been '21 into '22 is you're going to see things come back by geographies and by industry and subsector and continues to be true for us.

Dan Perlin -- RBC Capital Markets -- Analyst

Yup. No, that's great to hear. I wanted to just go back to this EBITDA margin expansion, the flow-through commentary. I mean the original guidance, I think, was 4 million to 6 million.

You guys are now calling for 22 million to 24 million. I mean it was a very impressive quarter. The question is, when you have these periods of kind of over-performance, is it just that -- I know you want to invest for growth, but there is a certain level of investment that would be required to kind of tamp down the flow-through in your model. And I'm just wondering, you know, is there anything that you're seeing that would suggest that this investment cycle that you want to kind of ramp for is going to meaningfully increase in the near term? Or should we kind of expect, you know, some of this outperformance to the extent that, you know, your payment volumes and your topline continue to outperform? Thank you.

Mike Massaro -- Chief Executive Officer

Yeah. I'll start and then maybe hand it over to Mike Ellis. So I'd first say, you know, look at the FlyMates number -- record number of FlyMates added, a whole bunch more positions out there being added. As you mentioned, you know, great kind of unit economics that flow right through the business.

But look for us to continue to invest aggressively in hiring, right? That is go-to-market. That is product engineering. Go-to-market isn't just sales. It's also client service, again, connecting to that NRR that we've talked about, getting customers to do more with us.

So I would say that by far is biggest investment area, but I mean, across, you know, things like marketing is a huge part of go-to-market, right? A lot of the skill sets we learned in the pandemic around digital engagement, those are areas where we can continue to invest more and more and continue to just do more, right? So there's just kind of opportunity everywhere to do it. But for us, it comes down to people and that investment to go faster. I don't know, Mike, anything you'd add?

Mike Ellis -- Chief Financial Officer

Yes. The only thing I would add is that the ramp that we're really talking about is really occurring starting in Q2 of this year and Q3. So we're just starting to make these investments. And what we found is that we're able to really hire some really talented people, and I think Rob said approximately 200 people that we brought on this year, which is the majority coming in, in Q2, Q3.

They're just starting to get ramped, and we're ramping our talent acquisition team. So my perspective is that the good results that you're seeing is predominantly driven by, you know, driving revenue growth at stable adjusted gross margins. And the smaller point of that is actually the cost savings that we're seeing by maybe not as investing as quickly as we wish we could, but that's going to reverse itself, I think, very quickly coming into Q1 of 2022.

Dan Perlin -- RBC Capital Markets -- Analyst

Got it. Thank you.

Operator

The next question comes from Darrin Peller from Wolfe Research. Please go ahead.

Darrin Peller -- Wolfe Research -- Analyst

Thanks, guys, and nice job. Can we just follow up a bit on the education side first for a minute, given what you guys are seeing in terms of the cross-border dynamic and borders reopening again? I mean, you talked about how there could be more in '22. But love to get a better sense of what you think would be the opportunity that's coming from not new customers per se in terms of the universities but actually the cross-border momentum on students. Even if we were back to '19 levels, I imagine we normally should have been notably above that.

So what do you think is the normal run rate we have upside for as borders reopen, putting aside just the typical growth of the business? And then, also, in the current quarter, you know, I know the net retention number was strong for the -- when you look on a trailing basis. But if you can give us a sense of how much of your growth right now is coming from your existing customers, you know, the land-and-expand model versus new customers would be great.

Rob Orgel -- President and Chief Operating Officer

So obviously, it was a great quarter across the existing customers. It's a great quarter in terms of NRR. The underlying sort of momentum drivers for that are a couple, right? So you asked the question, you know, what's going on in sort of the student population generally and cross-border flows. Certainly, this year saw a return relative to last year.

But if you look at the trends across the industry, some of which Mike mentioned in his comments, they're still very favorable for expansion of cross-border opportunities for learning for students, right? And again, going back to Mike's comments, remember, education as broadly defined, vocational schools, technical schools, you know, language learning, summer programs and the like, and the second thing being that not all geographies have opened up yet. There are still significant portions of the world where travel has not returned. The idea of welcoming international students has still not sort of opened up the way we've seen it here in the U.S. And so we see macro trend of increasing appetite and passion for growth in student studies.

And then, we see this opportunity that will be specific to the regions and the segments that we also see as opportunities.

Darrin Peller -- Wolfe Research -- Analyst

OK. I mean -- and then, in terms of the magnitude of upside in '22 versus what you would normally expect to see just based on reopening and borders reopening, or any sense directionally and quantitatively?

Rob Orgel -- President and Chief Operating Officer

Hard to put a number on that, but I think what we said all along was that we expected and anticipated that this year would see a meaningful recovery toward normalcy, with that normalcy being achieved in 2022. You know, I think we saw essentially very much along those lines, right? We've seen a return to normalcy in a number of places, although I think still not all the way there, and then certain markets that are -- segments that are meaningfully behind. And those will hopefully have a chance to be significantly more normal next year as well. So still a lot of upside opportunity.

Darrin Peller -- Wolfe Research -- Analyst

OK. Thank you. Just very quickly on the healthcare side. I mean you're obviously benefiting from these trends where digital demand continues to grow.

Going forward, I mean, some -- COVID may have helped that to some degree, but I think you're seeing that even before. And so I'm just curious what -- during this quarter, you know, any inflections you're seeing or any kind of signs of progress that could be important for us to watch for the next few quarters and into next year?

Rob Orgel -- President and Chief Operating Officer

Our healthcare growth was really solid for the quarter. Existing accounts displayed really good NRR through Q3. We believe we have the proposition that's the right proposition in this space, right? We are able to go in and solve the challenges of complex integrated health system environments. We're able to integrate with systems like the Cerners and the Epics and MEDITECHs of the world that are sort of native in those environments and deliver a great ROI for the clients, a great experience for their consumers and their payers.

So we still view this as early innings in the digitization of healthcare. And we think that the problem we solve is the hard one, right? And we go and we solve that hard problem, and we believe that will continue to -- there'll be a lot of opportunity for that going forward in the quarters ahead.

Mike Massaro -- Chief Executive Officer

Yes. Darrin, the only thing I'd add to what Rob said is, you know, we're also enhancing the product, right? So we mentioned in Q2, there continue to be opportunities where by improving the product, improving the capabilities, you're seeing users adopt payments in different ways. You're seeing clients get more benefit, right? So that's the other factor that's going on. Because we have the software and the payment capability combined, as we're optimizing that software, you're seeing performance across customers improve as well.

Darrin Peller -- Wolfe Research -- Analyst

Thanks, Mike. Thanks, Rob.

Operator

The next question comes from Jason Kupferberg from Bank of America. Please go ahead.

Jason Kupferberg -- Bank of America Merrill Lynch -- Analyst

Good afternoon, guys. Just wanted to start with a revenue question. I mean, I know your medium-term target, I think, is 25%, 30% on average. And I'm sure you'll give us more specific guidance next quarter, but you're really outdoing yourself this year to the tune of, you know, over 50% growth.

So just preliminarily, does it feel like that range would in theory still be achievable next year despite some difficult comps? But recognizing you may still have some, you know, reopening tailwind that you're back still to come.

Mike Massaro -- Chief Executive Officer

Yes. So thanks for the question. What I would say is, obviously, you know, the year is turning out quite well for us. We're really encouraged as we look at 2022.

You know, what we've said before is everybody should continue to think of us as that compounding growth story, right? These industries that we're serving really have a digitization trend that we expect over the next, you know, decade to materialize. So, you know, we're investing aggressively. You're right. We will have more details coming in relation to 2022.

But I would just focus on -- you know, expect us to keep investing, expect us to keep focusing on those things that are driving our business today, those multiple growth levers, right, strong pipeline, more clients doing more with us and growth across all sectors. And again, that gives us a great position to start 2022. And again, you know, couldn't be happier with the results showing up this year, but don't have that takeaway for our excitement for 2022 as well.

Jason Kupferberg -- Bank of America Merrill Lynch -- Analyst

OK. And then just as a follow-up, within your platform, I'm wondering if you're seeing any noticeable or notable increase in any particular types of alternative payment methods being adopted.

Rob Orgel -- President and Chief Operating Officer

I think the patterns are pretty consistent for us. Obviously, it varies a bit by geography. You know, we invest a lot in having what we consider the relevant local payment capabilities for the different markets in which we serve. So being able to have alternatives like Alipay and WeChat Pay in China to complement the other payment offerings that we offer in markets like that, similarly, offerings that are relevant in places like Brazil and others that we also invest in.

But I don't think there's any notable change in the patterns across all of those types.

Mike Massaro -- Chief Executive Officer

Yes. One thing I'd just maybe highlight is, you know, consumers do want choice. And so when you see things like what our software does around, you know, payment plans and allowing different payment plans over time and have them be configurable, we're definitely seeing a trend toward more configurability, more choice left with the payer. And those clients that are eager to provide great payment experiences and those flexible ways to pay, you know, they're definitely speeding up their investment in those types of things.

And I think that's part of why you're seeing so much success in our domestic capability.

Jason Kupferberg -- Bank of America Merrill Lynch -- Analyst

OK. Well, thank you for the comments.

Operator

The next question comes from Ashwin Shirvaikar from Citi. Please go ahead.

Ashwin Shirvaikar -- Citi -- Analyst

Thank you. Let me add my congratulations as well. Solid quarter, guys. I guess my first question is when I consider the 300-plus clients that you signed year to date, could you provide maybe a split across verticals, as well as, you know, same question with regards to the pipeline that you're seeing? And are you noticing any sort of behavioral changes among these clients, you know, faster implementation ramps, desire to, you know, get onboard quicker, things like that?

Rob Orgel -- President and Chief Operating Officer

Ashwin, it's Rob. I'll start here, and then the others may follow on here. But in terms of customers first, the pattern represents our historical pattern. So we saw the most customer adds across education and travel with nice contributions from healthcare and B2B as well.

So growth across all four of the verticals, new customer additions across all of them. And in terms of those customers, our view is that they're, you know, very representative of the kinds of customers we've added historically. So sort of similar in size and opportunity. We're very pleased with sort of the new group that is added to the client roster.

In terms of pipeline, it's really been a really strong quarter. We've mentioned the investment in go-to-market capabilities and our expansion in all those areas. And we are seeing it flow through into the strength of the pipeline. So that pipeline is up sort of double-digit percentages in terms of the ARR that we see building there, and we're very pleased with both the vertical distribution, the geographic distribution, really everything about the pipeline is going in the direction that we want to see it.

You know, I mentioned in my comments that we were particularly excited about the growth in B2B and that we're, you know, seeing good progress through the quarter and -- sorry, through Q3 and into this quarter as well. And so, we really see that pipeline being very healthy and very encouraged by what -- the opportunities that are represented there. In terms of implementation, not a lot of news there. We continue to implement very successfully across the clients.

So one of the things that contributed to the success in Q3 was our ability to get a whole bunch of clients live so that they could contribute to that. So I would say that the ability to deploy and bring customers to revenue is continuing to improve. You know, there are certainly, you know, ranges of stories depending on some clients that impress us with how fast we go, some that are a bit slower, but the overall delivery capability is improving. And of course, that's another area in the company that we're expanding our capability, more hiring across implementation and delivery and support.

Ashwin Shirvaikar -- Citi -- Analyst

Got it. Got it. And you kind of sort of addressed a part of this question, but let me maybe ask it a bit holistically. As you think of 2022 and given where we are, I know you all expected a recovery, but now there is more visibility into perhaps the strength of that recovery positive news with regards to vaccines, and so on and so forth.

So as you sit here doing your planning process in more detail for 2022, are you thinking primarily opportunities or spend more? And why should the growth rate expectations not mirror perhaps the more near-term trends that we've seen rather than sort of the longer-term expectations you've set up?

Rob Orgel -- President and Chief Operating Officer

So Ashwin, Rob again here. We're really focused on investing in the growth, right? And that means investing in the new client acquisition, investing in new product, investing in the execution that was so successful for us with our existing clients this year. And so we expect that we'll continue to build on that. And we believe that the kind of NRR and the history that we've -- of that pattern is something that we're committed to trying to continue going forward, and that will feed the kind of steady but strong compound growth that Mike referenced earlier.

Anything more particular there, please feel free to follow on if there's something more particular you want.

Ashwin Shirvaikar -- Citi -- Analyst

Yes. No, I appreciate the steady but strong comment. I was kind of thinking more about, you know, exit rates going from this year into next. And I appreciate the seasonality of the business.

But my thought process was that the near term, you know, should be much stronger than certain of the -- than, say, for example, what's in consensus. And I wanted to ask about --

Mike Massaro -- Chief Executive Officer

Ashwin, yeah, this is Mike. You know, the thing I'd say is, you know, if you think back to even our, you know, conversation on our Q2 earnings call in August, right, there were things like if you looked at delta variant spikes, there were hospitals and elective procedures, there were certain borders that had restrictions for travel. We weren't sure whether students would be on campus or Visas would be issued. So, you know, I'd say we're still in a very dynamic environment.

And so I think as our team finalizes 2022 planning, it's not lost on us that, you know, there's a lot of great things going on in the business. You know, at the same time, hopefully, people are getting an impression for us. We're people that put numbers out there and work hard to execute against them. So, you know, we got to finish doing our work here in Q4 and excited about the future ahead in '22.

Mike Ellis -- Chief Financial Officer

Yes. The only thing I would add -- this is Mike Ellis. You have to remember, during the COVID pandemic, the most impacted quarters for us were, in fact, Q2 and Q3 of 2020. So those are the bases that we're going up against.

We started to see recovery in Q4 of 2020, and that continued in Q1 in '21 through now our current quarter. So just so we understand level setting relative to what we think growth may be for '22.

Ashwin Shirvaikar -- Citi -- Analyst

Thank you, and I appreciate all additional comments.

Operator

The next question comes from John Davis with Raymond James. Please go ahead.

John Davis -- Raymond James -- Analyst

Hey, thanks. Good evening, guys. Mike, maybe just to start off, I think you guys talked a lot about in the IPO and since then about making significant investments for growth. You've obviously done that.

But I think the topline would suggest that maybe those investments are yielding better-than-expected returns. So maybe just any comments there on, you know, how much you've invested and what your expectations were for those return on investment and where are they kind of coming in so far, realizing it's still pretty early.

Mike Massaro -- Chief Executive Officer

Yeah. Hey, JD, thanks for the question. So I would say, you know, think of Flywire in two ways, right? We're focusing on that execution aspect, right? There's so much opportunity in the existing client base and executing on clients that have been signed up. In addition to that, we're making significant investments in new opportunities that exist.

Those can be products. Those can be geographies as we talked about before, adjustments or enhancements to our go-to-market strategy, that land-and-expand strategy we've talked about extensively, not to mention new industries, new subsegments of travel, the B2B expansion, right? So, you know, all of those are significant investment areas for us, and we're just getting started in those investments. And so, you know, the financial position that we're in right now, frankly, just emboldens us to invest more and to go faster, right? You know, complex talent market, we think we differentiate ourselves quite well. It's why I had those comments in the opening remarks around talent.

We think this market is set up well for us to recruit great talent, continue to bring in great new FlyMates. So we're super excited, but, you know, definitely think of us in both those camps of investing in execution and further scaling a business on a global scale. And we're doing that quite well, as you see in the results. In addition to that, finding big new opportunities to invest in significantly.

John Davis -- Raymond James -- Analyst

OK. Great. That's super helpful. And then maybe one for Mike Ellis.

I think if I look at this quarter's results, obviously, they were pretty eye-popping to say the least, at least from a revenue perspective. But if I break it down further, volume was quite a bit better than we expected. I know you guys don't manage to the monetization rate. That's more of an output.

But, you know, maybe, Mike, any comments on was that really -- was it vertical mix? Or was it payment-type mix? At the end of the day, obviously, the revenue was there, but just curious how we should think about that going forward because volume was quite a bit better, but monetization rate was a little bit lower than as we expected.

Mike Ellis -- Chief Financial Officer

Yeah. Thanks. So let me just start off by saying the key point is that the business dynamics are very healthy for Flywire, right? We saw that with very stable adjusted gross margin and the revenue growth. Now, with respect to monetization rate, you'll see a payment method mix shift that similar to Q2 within our transaction payment volume due to the size of payments, the seasonality of the business, you'll see that in education, higher price points typically result in lower monetization rates due to the payment method selected.

And then when you think about the expansion, which I mentioned in the -- when I gave my presentation, is essentially that you'll get a lower monetization rate within your platform and usage-based fee revenue due to the land-and-expand strategy that we've actually done in order to develop and expand our domestic offerings. So as more clients have payers using domestic solutions, you'll have different price points, payment methods used that may carry lower monetization rates. And that can be seasonal depending on what period of time we are in the year, whether it's a payment plan-type quarter or it's a, you know, full tuition-like quarter. So really, that's what you're seeing in both of them.

And if you look at the decline, I think it's approximately 6 basis points. And in the large scheme of things, again, not a number we track, but that's not a number that concerns us given the exceptional growth rate of revenue at that really strong gross margin level. So as you can see -- you know, that's why we've always said this monetization rate is an output. It's not a driver of our business.

It's just based on what people select. And again, really strong economics across all of the payment methods and across both revenue types that really drive that incremental margin and adjusted EBITDA results.

John Davis -- Raymond James -- Analyst

OK. So if I was to surmise it, basically lower monetization rate offset by higher gross margin. So on a net basis, when you look at gross profit, those transactions are similar to you. It's just really kind of, you know, geography of the P&L based on payment type.

Is that fair?

Mike Ellis -- Chief Financial Officer

Yeah, that's probably fair.

John Davis -- Raymond James -- Analyst

OK. All right. Thanks, guys. Appreciate the color.

Operator

The next question comes from Ken Suchoski from Autonomous Research. Please go ahead.

Ken Suchoski -- Autonomous Research -- Analyst

Hi. Good evening, everyone. Thanks for taking my question. I just wanted to ask about cross-border education payments.

I'm just curious how penetrated is Flywire across its existing customer base on the cross-border side. And you mentioned that, I think, Vanderbilt adopted your cross-border offering. Maybe you can talk about how penetration of cross-border payments for that university might ramp over the next three years just because it's hard to tell as an outsider how these clients ramp over time.

Mike Massaro -- Chief Executive Officer

Hey, Ken. How are you doing? So first on just the total addressable market. You know, so think of us in that kind of probably 6 billion plus now, a couple more billion for the year in that sector and just in cross-border education and volume. And at the same time, you know, you're approaching $100 billion total addressable market on just that product, right? So plenty of room to grow and expand.

And as you think about, you know, the ways in which we're expanding that, remember, the geography expansion, things like Latin America, Europe doubling down in places like Canada, the U.K., Australia, New Zealand, Southeast Asia, right, from a client acquisition perspective, super important to understand. And then in addition to that, other products and capabilities we can roll out to drive more payment volume, right? There's also that subsector aspect of education, I mentioned, right? Part of this is higher education. But then you have all other areas of education that we invested, right, things like the shorter-term programs, the vocational programs, summer programs, right? So all of that is about kind of upselling clients to make sure that Flywire is deployed where all of that cross-border comes from. So really important to get those two points.

So still feel like we're in the very early innings. And in addition to the cross-border business, we're also sitting there going to market with, as Rob likes to say, domestic internationally, right? So, you know, really going after the entire amount of payment volume is how we're going to market. Now globally, even though our operating -- our first 6-plus years of the company, we're really in a cross-border-only solution. So, Rob, I don't know if you want to speak specifically about Vanderbilt.

Rob Orgel -- President and Chief Operating Officer

Well, I won't speak specifically to a school but just to the experience of really any new school that signs on. Obviously, there are a couple of things going on that all are part of this NRR growth effect that you see over time. So there's a specific thing to that first year, which is that they'll only have a very partial year this year. They'll obviously have an opportunity for a full year next year with multiple semesters of eligibility rather than just one.

But that only speaks to part of that sort of cohort growth trajectory that you see for us. Obviously, when we talk about the 2017 cohorts growing and all the prior cohorts growing, what that's reflecting is a couple of things. So first, even where it's just a cross-border client, we continue to improve their best practices, their utilization of our platform. We find more ways to penetrate the campus.

It might be adding grad schools, adding other kinds of programs within the school. All of that is part of sort of a standard expansion and a very healthy one that we experienced just in cross-border. But of course, with many of our clients, there is that land-and-expand that involves their choice to work with us on a broader element of our product suite. So whether that's adding payment plans, international payment plans, e-stores, our A/R Collect module or the full domestic suite that obviously we are always hoping to add across almost any account, all of that is upside opportunity for us.

And so, all of that reflects sort of positively in the growth curve that you see for really any client over time.

Ken Suchoski -- Autonomous Research -- Analyst

OK. That's very helpful. Thanks for all that detail. And then, can you remind us how the domestic payments are monetized? Does any of that revenue flow through the transaction revenue line? Or does it flow entirely through platform and usage-based revenue? And I guess similar -- almost a similar question, like, how long does it take to ramp domestic payments at a new client or an existing client? Just curious to get your thoughts there.

Rob Orgel -- President and Chief Operating Officer

Yeah. It's Rob speaking. So, you know, most of that revenue a fully domestic client will flow through the platform element, right? So if you remember, we have elements of our pricing model and our economic model where those fees will accrue inside the platform element. There may be parts for -- that will get added to transaction, but most of it will go on the platform side.

Mike Ellis -- Chief Financial Officer

Yes. I'll just add. There's basically three components to our platform and usage-based fee revenue. You basically have a managed AR function that will get the percentage of the AR that we're actually managing on behalf of our clients.

The second component is essentially the establishment and the payments against payment plans. And then the third component is SaaS-based license fees. Those are the three components that make up our platform and usage-based fee revenue.

Ken Suchoski -- Autonomous Research -- Analyst

OK. Very helpful. Thank you very much.

Operator

The next question comes from Tien-Tsin Huang. Please go ahead.

Tien-Tsin Huang -- JPMorgan Chase and Company -- Analyst

OK. Thank you. I know the call is going late, so I'd be quick. Just wanted to ask on travel.

I know you've won some new business there again, it sounds like. It's just -- is there a way to think about how much potential spend there that you've signed that hasn't fully been realized as like you mentioned, borders are going to open. I know there are a lot of eyes on cross-border travel for a lot of reasons in this sector. But just trying to put some context around how much potential business that's on the come for you on the travel side.

Mike Massaro -- Chief Executive Officer

Yes. Sure. Hey, Tien-Tsin. How are you? So this is Mike.

I would say remember the sectors we're focused on are subsectors inside travel. So things like accommodations, luxury tour operators, destination management companies, the boutique travel agencies, those kind of large, massive sectors of the travel industry. You know, I would say think of it more as a geographic snapback in two ways, right, which unfortunately makes it a little complicated. You have, you know, where our clients that we're signing up throughout the pandemic have been.

You know, for instance, we haven't slowed down signing up clients throughout Asia, throughout Europe, you know, Latin America, Africa, the U.S., Canada, pretty much everywhere. And so, part of it is about their ability to receive travelers at this point. And then in addition to that, part of it will also be around, you know, where are we investing in more capabilities, you know, whether it's payment network or areas in which we can drive a fuller solution at existing clients, right? So those two combinations, and I'd say we've been doing both, right, looking at our pre-pandemic travel customer base and making sure we're getting all the payments, not just the cross-border payments but cross-border and, you know, more domestic payments or all geographies, if you will, or that we have all their business units using Flywire. And, you know, I would say, you know, it continues to be significant, right? It's growing quite rapidly for us this year.

We expect it to grow quite rapidly next year. You know, it is well past product market fit. It's in high-scale mode as a travel sector, and we're not slowing down. And we're really happy we didn't slow down even during the pandemic, just kept signing clients, and the Nordic Visitor example that Rob gave, you know, one of the top providers in the Nordics and in Iceland for inbound travel.

And so those accounts are quite frequent when you look at our pipeline and our signed client list.

Tien-Tsin Huang -- JPMorgan Chase and Company -- Analyst

Iceland's on my list of places to hit. So, thanks for that, guys. Good results.

Mike Massaro -- Chief Executive Officer

Yup. Pretty awesome. I went there. I actually used Nordic Visitor to take my family there prior to the pandemic.

Tien-Tsin Huang -- JPMorgan Chase and Company -- Analyst

We'll have to chat about it offline. Good quarter here, guys.

Mike Massaro -- Chief Executive Officer

Yes.

Operator

And this concludes the question-and-answer session. I'd like to turn the conference back over to Mike Massaro for any closing remarks.

Mike Massaro -- Chief Executive Officer

Well, I appreciate everybody's time. Thanks for all the thoughtful questions, all the time and effort that's going into following Flywire and learning more about Flywire. Look forward to continue talking to many of you here over the next few weeks and quarters, and appreciate everybody's time here tonight.

Operator

[Operator signoff]

Duration: 65 minutes

Call participants:

Akil Hollis -- Vice President, Financial Planning and Analysis

Mike Massaro -- Chief Executive Officer

Rob Orgel -- President and Chief Operating Officer

Mike Ellis -- Chief Financial Officer

Bob Napoli -- William Blair -- Analyst

Dan Perlin -- RBC Capital Markets -- Analyst

Darrin Peller -- Wolfe Research -- Analyst

Jason Kupferberg -- Bank of America Merrill Lynch -- Analyst

Ashwin Shirvaikar -- Citi -- Analyst

John Davis -- Raymond James -- Analyst

Ken Suchoski -- Autonomous Research -- Analyst

Tien-Tsin Huang -- JPMorgan Chase and Company -- Analyst

More FLYW analysis

All earnings call transcripts