Flywire Corporation (FLYW) Q4 2021 Earnings Call Transcript

Flywire Corporation (FLYW -1.31%)
Q4 2021 Earnings Call
Mar 02, 2022, 5:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Greetings. Welcome to the Flywire Corporation fourth quarter 2021 earnings call. [Operator instructions] Please note, this conference is being recorded. I will now turn the conference over to your host, Akil Hollis.

You may begin.

Akil Hollis -- Vice President of 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 fourth quarter 2021 earnings press release, supplemental presentation and, when filed, associated Form 10-K, can be found at ir.flywire.com. Please note that the financial results discussed on this call are preliminary, unaudited and represent the most current information available to the company's management as financial closing procedures for the year ended December 31, 2021, are not yet complete.

Please refer to our press release for more information regarding these preliminary and unaudited results. During the call, we will be discussing certain forward-looking information. Actual results could differ materially from those contemplated by these forward-looking statements. We will also be discussing certain non-GAAP financial measures.

Please refer to our press release and SEC filings for more information on the risks regarding the forward-looking statements that could cause actual results to differ materially, 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. We are excited to share our Q4 and fiscal year 2021 results with all of you and appreciate the strong interest so many of you continue to show in Flywire. The fourth quarter was another strong quarter for Flywire, completing a very successful year, our first as a public company.

Rob Orgel, our president and COO; and Michael Ellis, our CFO, will go into greater detail later on about our operating and financial performance. But first, let me start with a few financial highlights from our fourth quarter. Revenue less ancillary services was $45.9 million, representing year-over-year revenue growth of 56%. Total payment volume increased 75% compared to fourth quarter 2020.

We also completed our first acquisition as a public company. We acquired WPM, which we believe will further accelerate our market share in the U.K. education sector, adding an additional 40 new FlyMates in that region. Having personally spent time with our U.K.

team and clients last month, I could not be more excited about this combined team and look forward to see what they accomplish together in 2022 and beyond. We believe our Q4 results validate Flywire's powerful combination of software and payment capabilities. This unique combination lets us deliver high-stakes, high-value payments in a series of industries that have historically been poorly digitized, specifically education, healthcare, travel and business-to-business payments. I want to take a moment to celebrate some of the great milestones of 2021, a truly great year for Flywire.

A few highlights include: a 58% increase in revenue less ancillary services when compared to 2020; adjusted EBITDA of $22.7 million for the year, significantly higher than the initial guidance we provided within our Q2 2021 earnings release of $4 million to $6 million. This was driven by faster-than-anticipated growth of our international education business. We also added clients across all regions and verticals for the year. Our total payment volume was over $13 billion.

We saw continued client appreciation for our innovation and execution that Flywire provides, resulting in stronger customer loyalty, driving record net revenue retention of 140% for the year. We also completed our IPO or, as we call it, our FlyPO and have continued to invest heavily in our teams by adding almost 240 net new FlyMates, including those from the recent acquisition. And while we experienced strong growth in 2021, we are really only scratching the surface of what is possible within the industries that we serve. The demand for domestic and cross-border money movement continues to accelerate, presenting a tremendous market opportunity.

For the education, healthcare and travel industries we serve, we estimate the current addressable market for our solutions to be approximately $1.7 trillion in global payment volume. Our B2B business expands the addressable market for our solutions, which we estimate to be over $10 trillion in payment volume. We believe we have the opportunity to capture a meaningful share of this payment volume, and Rob Orgel will go into great detail about some of the momentum we are enjoying in this sector shortly. We also continue to see positive macro trends in the industries that we serve.

In education, where we support universities, colleges, boarding schools, language and vocational schools all around the world, we see strong demand for global education experiences. In a new report from Open Doors, higher education institutions in the United States reported a 68% increase in the number of new international students enrolling for the first time at a U.S. institution, what they described as a notable surge from the 46% decline reported in fall 2020. In healthcare, patient engagement continues to be an important area of investment and focus for hospitals and health systems.

According to a new report from the Center of Connected Medicine, about 74% of health system executives will likely invest in technology that supports patient access and convenience such as self-scheduling, bill pay and price transparency tools. This prioritization of investment matches well with Flywire's focus in healthcare, delivering solutions that solve complexity, create great patient experiences and yield strong ROI for our clients. Despite the ongoing presence of COVID-19 in the world, there is strong demand to travel again, especially among luxury travelers, a key demographic for Flywire travel clients. According to a report we just published, 72% of luxury travelers plan to spend more when traveling this year than they did prepandemic.

The recent positive results reported by some major travel and tourism companies also validates these findings, and we are optimistic about travelers in our target segments leveraging their savings from the past year to spend on travel experiences in 2022 and beyond. And we continue to see a huge opportunity in our B2B segment. As so many businesses are still plagued by inefficient technology when it comes to getting paid, the average U.S. firm now waits 33 days to receive a cross-border payment according to a recent Payments.com study.

And 92% of organizations still receive paper checks for B2B payments according to the 2022 AFP Payments Cost Benchmarking Survey. As a result, many businesses are prioritizing the launch of more efficient systems when it comes to getting paid. These are just some of the macro trends we see, further evidence that our belief that digitization of payments in these industries is not only well underway but also inevitable. As we enter 2022, Flywire is very well-positioned to help these industries digitize.

We have a next-generation payment platform that facilitates global payment flows, allowing the availability of our core technology services to the industries and the regions we serve. We have a proprietary global payment network, which took us over 10 years to build. With a single connection to Flywire, our clients can accept and settle payments in over 240 countries and territories and in over 140 currencies across various types of payment methods. We have vertical-specific software built to solve some of the most complex payment challenges facing our clients.

We have distinctively talented and passionate team of FlyMates with deep industry expertise distributed all around the world to help serve clients and capture new opportunities. At Flywire, we have multiple growth levers in our business such as new client acquisition, geographic expansion and solution expansion with a proven ability to execute on the successful growth strategy. As we look ahead to 2022, our plan is to continue to grow and invest responsibly in the areas we believe will result in long-term success, specifically new product and payment innovation, additional go-to-market capacity to attract and delight our clients and strengthening our FlyMate community to continue to win in the global talent war. Let me take a few minutes to provide you with a little more color on these three major investment areas.

First on product and payment innovation. The industries we operate in have historically been underserved by legacy software providers and outdated payment infrastructure. Flywire has built a strong reputation for innovation. We've solved major pain points for our clients, and we'll continue to accelerate our ability to build, sell and deploy solutions.

We believe this massive market opportunity will be realized over the next decade, and our product technology road map is critical to our future success. Our technology investments entering 2022 have four central themes. First, expanding our payment flows on the receivable side. Our clients believe in our technology and our people.

They want us to do even more for them. We see a huge opportunity in building a deeper relationship by helping automate more of our clients' receivables. This involves broadening our ability to enable domestic payments for clients across all industries, optimizing our global payment network to further enable even more payment flows. One example of this is the work we are doing with the 529 plans in education, which Rob will speak to later.

Another example is in healthcare. We will be looking to meet patients' increasing needs for payment flexibility by enhancing affordability tools such as dynamic discounting and partnerships to enable new powerful client and patient financing alternatives. Another area of investment we are excited about is supporting new use cases within our existing industries. Over the last couple of years, we have seen that our clients and payers are actually part of a larger ecosystem that has complex workflows related to payments.

We've identified ways for Flywire to drive incremental value to the broader ecosystem. For example, think of the role of host agencies and destination management companies in travel or the dynamics between educational institutions and admissions agents in education. These relationships are complex, and there has not been software helping streamline these interactions and the payments that result from them. We see a huge opportunity here, and we have a road map to attack this.

With more embedded software, we have a unique opportunity to become a mission-critical provider to the entire industry ecosystem. Our next area of product investment is to deepen our technical integrations. While this is true across verticals, a good example is in B2B, where we are working increasingly with systems like NetSuite and Salesforce, as well as partners like YayPay to accelerate our deployment. These integrations, whether in the form of certified apps or our connector kits, help validate our ability to work seamlessly in these environments.

Our connections with Cerner and Epic are also important and areas we'll continue to enhance, where we know these investments lead to faster deployments, more effective solution and higher client satisfaction. Lastly, we've talked a lot in the past about solving pain points for our clients. We are also working hard to enable an even more seamless experience for their payers. That involves improving the user experience throughout the entire payment journey, improving payer engagement and adding new offerings in local markets with special attention to Asia Pacific.

These are just some examples of the product and payment investments we expect to make, and we look forward to sharing more about our technology road map at our 2022 investor day and additional progress throughout this year. Moving on to our second investment area. Building an incredible suite of products only gets you so far. So in 2022, we are also significantly expanding our sales, relationship management and delivery teams across all sectors.

After aggressive hiring in our second half of 2021, we plan to continue growing these teams another 50% on average over fiscal year 2022, spanning all verticals and geographies. In our largest verticals, we expect to augment newer regions and look to repeat successful acceleration we saw in Canada, the U.K., Europe, Latin America and Asia. We aim to deepen our relationship management and delivery capabilities for our largest verticals to keep up with the rapid client growth and the expanding software capabilities available to our customer base. We anticipate that our newer verticals will benefit from a disproportionate expansion of our sales teams and marketing lead generation efforts as we take Flywire's story and value proposition rapidly to new clients and capture more of these large addressable markets.

Our strong history of LTV to CAC underscored by our three-year average net revenue retention of 123%, all combined with our proven unit economics, demands this continued go-to-market investment. As for our third investment area, it's our amazing FlyMates. We are all aware that the global pandemic has truly changed the marketplace for talent, making it competitive and global. In 2022, we plan to continue our investment to aggressively grow and strengthen our FlyMate community.

It is critical for Flywire's future success that we compete well in obtaining and retaining our amazing FlyMates. Culture has always been a strategic asset for us, and I'm proud that we continue to be recognized for it. Last quarter, we were named a Great Place to Work and received several additional awards. Maintaining our culture as we build out capabilities necessary to operate as a public company was a key focus of 2021, and we are excited to continue this investment into 2022.

Flywire has also received recognition for our commitment to equity, inclusion and diversity. This year, we look to further our efforts to be an employer of choice and to provide our FlyMates all the resources they need to feel fulfilled in and out of the workplace. I'm extremely proud of the culture and team we have built here at Flywire. Our FlyMates, 700 of them around the world, representing 40-plus cultures, speaking over 30 languages, they truly operate as one team and are the cornerstone of our current and future success.

In closing, we believe the opportunity ahead of us is large and growing. We believe that our investment plan is critical to sustaining long-term compounded growth, ensuring Flywire has the technology, people and culture to digitize and transform how our clients get paid for years and years to come. 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 a strong Q4, capping off a great year for the company. Our results this quarter reflected continued execution of our growth strategies. To begin, growth with our existing clients remained robust.

As Mike mentioned, we ended the year with a three-year average net revenue retention of 123%. We saw strong year-over-year growth across all our verticals with particular strength in our education business, where we had success expanding with new products for both domestic and international students and strong growth in our travel segment as the world returns toward normal activity and even makes up for some lost time. Notably, NRR for this year exceeds recent pre-COVID years. As in previous calls, I will start with some examples of expansions during the quarter at our existing customers, followed by talking about new customers.

Starting with healthcare. Flywire developed and launched an affiliated provider program with client partners AdventHealth and Envision Healthcare, both were existing customers in their core business. AdventHealth is a faith-based, nonprofit healthcare system headquartered in Florida whose integrated network spans 130 healthcare facilities across nine states, serving more than 5 million patients annually. Envision Healthcare, a leading national medical group, is a family of healthcare companies focused on delivering high-quality care to patients.

Envision's 25,000 physicians and advanced practice providers deliver care to 32 million patients each year across the U.S. With the Flywire-enabled affiliates program that builds on the work we have done for each client separately, physician and hospital partners can collectively bill on their individual visits in a shared digital experience. In a typical healthcare billing environment, patients receive multiple bills from providers delivering care, which can create a confusing experience for patients and impose an administrative burden on providers. The Flywire program with Advent and Envision gives patients a consolidated view across their entire patient journey, even though the visits are technically the responsibility of different billing entities.

Flywire applied its deep expertise and enterprise integrations to deliver the program, which is designed to increase patient satisfaction and improve collections for their participating healthcare providers. Switching to education. Another client expansion took place with Stanford University. Stanford started working with Flywire in 2016, primarily around cross-border payments.

In an ambitious and innovative effort to improve the student experience, Stanford selected Flywire to replace its online tuition payment system. Stanford went live with our student billing and payment suite starting in Q3 2021 with the remaining full suite of solutions, including secure checkout and our eStore, slated for implementation in 2022. We are, obviously, very pleased to have partnered with Stanford as part of their commitment around innovation. We work continuously with our education clients on enhancements and expansions of their Flywire-enabled capabilities.

We also saw growth in existing travel customers. To give you a sense with another example, Bella Coola, the largest heli-skiing company in the world, uses Flywire invoicing for both Canadian domestic and international payments. This 2021 winter season, we saw volume notably higher than prepandemic 2019. We've seen a favorable pattern of Flywire travel clients enjoying increasing activity as border and travel restrictions ease.

We continue to believe that our focus segments within the broader travel industry, especially around luxury travel operators and premier DMCs, will return faster than the broader industry. Continuing with travel expansions, Temprano Capital, which is an integrated investor, developer and operator of real estate headquartered in Madrid, signed with us in October 2020 for Portugal and Spain. Temprano focuses on the creation and operations of purpose-built student accommodations and development of co-living residences. Together, they have over 10,000 beds under management within their portfolio.

In the fourth quarter, we deepened our relationship by integrating their resident management system, and now Flywire is the only way to pay outside of paper checks. They've been acquiring new properties, and we see additional upside as they continue to grow. As you can see, our travel segment continues to cover a broad set of subsegments, as illustrated by Bella Coola and Temprano. As Mike mentioned a moment ago, one of the investment areas we are emphasizing in 2022 is the addition of more relationship managers to help us find ways to create value for our clients through our software offerings.

Turning to our second growth lever, new clients. We also continue to win new clients at a rapid rate. We added over 100 new clients in the quarter for a total of over 400 new clients in 2021. We saw impressive growth in our newer verticals as we continue to build out our teams.

For B2B, as examples, we added MongoDB, a database platform provider, and VITAC, which is the largest closed-captioning solution provider in North America. These forward-thinking companies are using Flywire to streamline both domestic and cross-border accounts receivable. They were part of a slate of client wins that represent our best quarter yet of estimated ARR signings in B2B, giving us further confidence in our ability to serve this enormous segment and the foundation on which we plan to continue to accelerate our investment in engineering and our go-to-market team to support this vertical. We also continue to enjoy these wins with a great group of core technology and financial system partners that play pivotal roles in the operation of these companies and then integrate and work seamlessly with Flywire around the payments aspects.

In travel, we signed a great group of new clients. As an example, we added Lufthansa City Center DMC, which is representative of our efforts to grow in our travel vertical through leading global destination management companies. Based in Frankfurt, Germany, Lufthansa was founded in 1991 and has a membership of 67 individual agencies around the world, providing expertise in their local regions and organized around Lufthansa City Center. Lufthansa signed with Flywire in late November 2021 and was live by mid-December 2021.

They signed with Flywire because of our large global footprint and a variety of payment methods. We are excited from the early results based on our initial focus with them on Latin America and look forward to expanding our payment solutions with Lufthansa into new regions in early 2022, as well as growing more broadly in travel operators, DMCs and accommodations. We also saw strong growth in new clients for education and healthcare during the quarter. For education, our international team is growing and proving effective.

One example among many wins in education is KEDGE Business School, which is a premier business school based in Marseille, Bordeaux, Paris and Toulon, offering undergraduate and graduate management programs. We will be helping them improve the student experience across domestic and international payments and are pleased to highlight these kinds of notable wins in exciting markets like France. In healthcare, St. Claire Healthcare is the largest integrated health system in Northeastern Kentucky with over 1,200 staff members representing more than 30 medical specialties.

It includes the largest rural hospital in the area, seven family medicine locations, specialty physician practices and home care and retail services. In 2021, St. Claire went live on Flywire with a primary goal of providing their patients a more robust and clear billing and payment experience. Through Flywire's proven automation and integration into MEDITECH, St.

Claire patients are now able to manage a single balance across all their accounts and receive payment plan options tailored to each patient's capacity to pay, all through a self-service experience. Further, St. Claire is leveraging Flywire to drive digital-first servicing and reduce reliance on inbound and outbound phone calls, allowing them to cut costs and improve the overall patient experience. You can see between the Advent, Envision example and St.

Claire the power of our solutions to help our healthcare clients. You can see from the examples of Bella Coola, Temprano Capital and Lufthansa City Center DMC, along with our many education wins, that we are very effective at adding new customers. As Mike mentioned, we are making significant investments in 2022 to grow our go-to-market capabilities as part of our long-term growth strategy. Our third primary growth lever, our channel partnerships, also continue to be a great source of growth for the company.

For education, we recently announced a partnership with Ascensus, whose technology and expertise help millions of people save for education, retirement and healthcare. The partnership is to digitize and streamline tuition payments from 529 college savings plans to higher education institutions throughout the United States. The solution takes aim at the complexity of 529 payments to schools via checks, which can be difficult for institutions to process and reconcile, while also making it easier for families to manage payments to schools. In addition to generating revenue, our relationship with Ascensus is strategically valuable as it gives us the basis for establishing a relationship with virtually every higher education institution in the country.

Lastly, on M&A and international expansion, late in Q4, we announced the acquisition of WPM, a leading software provider that enables seamless and secure payment experiences for universities and colleges across the United Kingdom. The acquisition of WPM is an opportunity to leverage our world-class payment network with WPM's customers who have grown to trust their team and their excellent vertical software. It also helps us fortify an important geographic end market. WPM has more than 170 clients in the U.K., where we estimate total addressable payment volume to be approximately $30 billion.

Our team has been hard at work integrating the systems and welcoming new FlyMates to the larger team. Things are off to a very good start on the acquisition. We are well underway and on track with the team and product integration, and our joint integrated solution should be available in market in this Q2. WPM held its highly regarded and well-attended annual conference in the U.K.

just a few weeks ago, and we were very encouraged by the positive client reaction to the joint Flywire-WPM vision, strategy and execution plan. Given the substantial market opportunity of the joint solution, we'll be investing even more in the U.K. market, in go-to-market and product innovation. Our teams are hard at work, making sure we will deliver great results for clients.

And we're very focused and confident that the acquisition will deliver on increased opportunities for Flywire in the U.K. in 2022. I would now like to turn the call over to Mike Ellis, our CFO, to review our results for the fourth quarter and guidance for 2022. Mike?

Mike Ellis -- Chief Financial Officer

Thank you, Rob. Good afternoon, everyone. Today, I will be discussing our non-GAAP financial metrics for our fourth 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 preliminary and unaudited financial statements included within our earnings release and the audited financial statements that will be included in our Form 10-K when filed with the SEC. Revenue less ancillary services for Q4 2021 was $45.9 million, representing a 56% growth rate compared to Q4 2020. This increase was driven by an increase in our total payment volume and exceeded our expectations due to strong performance, particularly from our international cross-border payment volumes, in our education and travel verticals, as well as domestic education payment volumes. We processed $3.1 billion in total payment volume during Q4 2021, which was an increase of 75% from the $1.8 billion we processed during Q4 2020.

We experienced revenue and total payment volume growth across all regions, verticals and our revenue types when compared to Q4 2020. Specifically, transaction revenue increased 69% compared to Q4 2020, driven by an 81% increase in transaction payment volume. Platform and usage-based fee revenue increased 16%, compared to Q4 2020 due to a 65% increase in platform and usage-based payment volume. Platform and usage-based fee revenue growth would have been higher but for the loss of a client in our healthcare vertical.

However, we continue to be successful expanding existing clients and adding new clients in healthcare. Platform and usage-based fee revenue is driven by the accounts receivable we manage, the initiation of new payment plans and payments made against those payment plans and not solely a function of payment volume. Adjusted gross margin for Q4 2021 was 66.9%, down from 68.5% in Q4 2020. This decrease was primarily the result of our transaction revenue outpacing our platform revenue, driven by the growth of our transaction payment volume from both cross-border and domestic transactions within our education vertical and cross-border transactions from our travel clients.

For context, adjusted gross margin for full year 2021 was 69.1%, compared to 69.4% for full year 2020. The lower adjusted gross margin of 66.9% in Q4 2021 as compared with full year 2021 of 69.1% is consistent with the previous seasonality in adjusted gross margin. We expect continued quarterly seasonality in our adjusted gross margin based on multiple factors, including changes in revenue and vertical mix, changes in payment method mix, the average transaction payment size and cross-border currency mix. The key points to take away are that we expect to continue to have strong adjusted gross margins and that our platform and proprietary global payments network allows us to support many payment types for multiple verticals across many currencies, all of which have strong economics for Flywire.

During Q4 2021, revenue less ancillary services as a percentage of total payment volume was lower than Q4 2020, driven primarily by mix changes along the lines I just mentioned. In particular, when clients add domestic services, revenue as a percentage of that payment volume is lower. And as a reminder, this expansion of our product offering drives both revenue growth and incremental adjusted gross profit dollars. Moving on to operating expenses.

Technology and development expenses were $9.1 million for Q4 2021, an increase of 36% over the $6.7 million incurred during Q4 2020. This increase was the result of our hiring activities during 2021, where we increased the number of employees within our technology and development teams by over 40%. Selling and marketing expenses were $15.9 million for Q4 2021, an increase of 92% over the $8.3 million incurred during Q4 2020. This increase was primarily due to our hiring efforts as we added over 100 new employees within these departments during 2021, as well as higher sales commissions due to our 58% revenue less ancillary services growth rate achieved in 2021.

General and administrative expenses were $17.5 million during Q4 2021, an increase of 80% over the $9.7 million incurred during Q4 2020. Many factors impacted our general and administrative costs incurred during Q4 2021, but the primary factors included: number one, our hiring activities; number two, incremental costs associated with operating as a public company, which consisted primarily of professional fees and insurance costs; and number three, stock-based compensation charges. Adjusted EBITDA for Q4 2021 was a negative $1.9 million, compared to a positive $1.8 million during Q4 2020. This was driven by hiring in 2021, as well as increased costs from operating as a public company.

Adjusted EBITDA was within our implied guidance range for Q4 2021, but we did hire faster than expected during the second half of 2021 across all departments of the company. For context, we generated $22.7 million of adjusted EBITDA and reported a 58% revenue less ancillary services growth rate with a strong adjusted gross margin of 69.1% during the year ended December 31, 2021. Moving to the balance sheet. With respect to capitalization as of December 31, 2021, we had $389.4 million in cash and cash equivalents and $25.9 million in long-term debt.

As of December 31, 2021, we had 106.7 million shares of common stock outstanding, which is different than the weighted average shares outstanding used to calculate net loss per share due to the timing of our IPO. Moving on to guidance for 2022. As we are an increasingly international company, we continually monitor risk factors both domestically and globally but are optimistic that 2022 will see improved conditions for our clients and the industries they serve relative to recent years. We currently have minimal exposure to the impacts from the difficult circumstances in Ukraine, but our thoughts are with those in that country.

We will continue to monitor these events and the potential impact on our business as they unfold. That said, we expect revenue less ancillary services to be in the range of $244 million to $252 million, resulting in an annual revenue growth rate of 37% at the midpoint for the year ended December 31, 2022. Our 2022 expected annual organic revenue growth rate, excluding the impact of our recent WPM acquisition, approximates 33% at the midpoint. Our full year 2022 expectations for revenue less ancillary services reflect our confidence in the growth of our existing clients across all of our verticals and the ramp-up of the clients we added during 2021.

Our guidance also assumes a revenue benefit in the second half of 2022 due to our planned investments in additional go-to-market resources to attract and sign new clients and sell new products to existing clients. We remain confident in our original expectation of a rolling recovery from COVID through midyear 2022 and remain excited about the strength across the verticals we serve as this proves out. We expect adjusted EBITDA to be in the range of $9 million to $13 million for the year ended December 31, 2022. Our full year 2022 expectations for adjusted EBITDA reflects strong revenue less ancillary services, as just discussed, offset by meaningful investments across the organization to continue to drive revenue growth in 2022 and beyond.

Although we generated $22.7 million in adjusted EBITDA during 2021, we communicated during our previous earnings calls that we intended to continue to invest in the development of our capabilities across the business. As a result, our full year 2022 adjusted EBITDA expectations are moderated by the investments we plan to make in our technology, payment network, go-to-market resources and people, as detailed by Mike earlier. We are bullish on the strategic and economic returns on these planned investments. That said, we would like to provide some detail on the scale of these planned investments as a onetime disclosure.

There are three primary areas that we expect to be the drivers of incremental spend in 2022 over 2021. First, the annualization of compensation for employees we hired during 2021 and compensation increases for our existing employees in order to retain them in a very competitive labor market will amount to approximately $20 million in incremental spend during 2022. A second driver of the incremental spend during 2022 is general and administrative costs primarily associated with becoming a public company that amounts to approximately $10 million. Finally, we expect to invest approximately $20 million in 2022 in new personnel that will be predominantly directed toward growth in our go-to-market roles and innovation within our product and technology teams.

We look forward to detailing out more of our product strategy in other forums. As you have heard us say before, we see opportunity everywhere, and we are excited about the innovation and the go-to-market investments we plan to make to enhance our market position and deliver long-term revenue growth in 2023 and beyond. Finally, we are providing revenue less ancillary services guidance for Q1 2022 as a onetime disclosure to address the seasonality of our business. Revenue less ancillary services for Q1 2022 is expected to be in the range of $55 million to $57 million, representing a 39% revenue less ancillary fees growth rate based on $56 million of revenue at the midpoint.

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

Questions & Answers:

Operator

Thank you. [Operator instructions] Our first question is from Dan Perlin with RBC Capital Markets. Please proceed with your question.

Dan Perlin -- RBC Capital Markets -- Analyst

Thanks. Good evening. And great results here, as has been the case since going public. So we appreciate that.

The question I have is around kind of the domestic education opportunity. I know you mentioned Stanford, which is clearly a marquee client. But I'm just wondering if you could kind of outline maybe in a broader context what you're seeing from the institutions that you currently have in order to kind of flip over to this domestic side. What kind of cadence do you think maybe you could see in terms of gaining some of that market share as we think about this year? And then, again, maybe understanding the implications to the P&L as that becomes more prominent again.

Thank you.

Mike Massaro -- Chief Executive Officer

Hey, Dan, thanks for the question. I'm going to hand that one over to Rob. He's close to that, and we'll jump in.

Rob Orgel -- President and Chief Operating Officer

So first of all, thanks, Dan, for the question. One of the core elements of the strategy for the company has been the expansion in domestic education, and we've continued to win great accounts. Obviously, we shared the name of Stanford today. We talked about Texas A&M.

Last call, we talked about MMU as a domestic win in the U.K., meaning we are taking the opportunity to take on domestic business not just in the U.S. but internationally. And it's a great business for the company. As we said in the past, it's a revenue multiplier for us every time we take on one of these accounts.

Obviously, these are the accounts that they're -- on the sales cycle side, they are more involved, but we view ourselves as being very successful and effective in the opportunities that we tackle in all of this. And we continue to expect to have a great 2022, winning more accounts. We've got a nice pipeline. We have a nice set of sort of secured opportunities that we are moving forward and executing on and look forward to being able to share with you in upcoming calls.

Sorry, the second part of your question was just around sort of the financial implications of all of this. The revenue piece I just referred to in terms of being a very good revenue multiplier for us in terms of the EBITDA contribution, obviously, these are good accounts that flow through nicely. The only place where we would call out something that many of you look at, some of you, despite our requests that you not focus on the monetization rate, the one thing about these domestic accounts is there is often a lot of volume there, and it monetizes overall at a lower rate. And so, you would see that trend in the overall.

But again, these are great deals with great economics and benefit for the company at healthy margins. And the only place where the trend might be notable and catch your eye is in that monetization rate. But again, we're very focused on the revenue margin and gross profit.

Dan Perlin -- RBC Capital Markets -- Analyst

Yeah. Understood. That's great. And then, just a quick follow-up on one of the areas of investment.

And I appreciate all the detail around those buckets. But on the go-to-market strategy and leaning in, I think, incrementally on these relationship management opportunities, was that driven by looking at the cohorts in the portfolio that you have and just realizing that there's a lot more to extract from those existing clients? Or did you feel like as you were moving to certain types of new clients, whether that be more complex ones in healthcare or otherwise, you needed to have not just kind of a well-informed sales force but true relationship managers? Thank you.

Mike Massaro -- Chief Executive Officer

Yeah, I'll take that one. This is Mike. I would say it's a combination of more things to bring to our customers and our customers wanting to do more with us. We've got this great set of relationship managers across industry and also geographically distributed, right, of course, where the clients are.

And so, we saw is a direct correlation with that team growing, our ability to get more business and to build more senior relationships in these clients and ultimately grow. So think of it as our teams going deeper, meaning fewer accounts, more focused by region, by subregion, by category, even in some sectors and some industries. And again, it's a clear correlation to that and growth, right, because the closer we are to these clients, the more we understand the problems. Those problems turn into new products, new capabilities, new features.

And then, we're also, obviously, right there when they're thinking about a new product -- a new solution change or maybe a new domestic provider, and that's exactly the strategy.

Dan Perlin -- RBC Capital Markets -- Analyst

Excellent. Thanks, Mike. Appreciate it. Great quarter.

Operator

Thank you. Our next question is from Jason Kupferberg with Bank of America. Please proceed with your question.

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

Thanks, guys. Appreciate it. I just wanted to start with a question on the EBITDA side of things. So the guidance calls for around 3% to 5% margins this year.

You did a great job of laying out a lot of the opex initiatives for the year. I know in the past, you've talked about a multiyear or medium-term target of 25% or so. So just any way to think about potential timing there? Does it really just kind of depend when the top-line growth normalizes down into the medium-term target range, which I think is around 25% to 30%? Just trying to get a sense of how we should think about trajectory. It does sound like 2022 is just going to be a bit of an outsized investment year.

But obviously, there's a lot of opportunity to capitalize on. So would just love your thoughts there. Thanks.

Mike Ellis -- Chief Financial Officer

Thanks for the question. This is Mike Ellis. So the way we're thinking about it is that the sizes of the TAMs that we get to go after are very significant. So you can kind of see that investment thesis really come through in 2022.

And we do have long-term aspirations to drive better adjusted EBITDA margins, but that's not the short-term outlook. We view ourselves as a long-term revenue grower. And we'll continue to invest appropriately to ensure that we're driving long-term revenue growth, first and foremost, with a sight toward appropriate profitability levels based on the long-term position of the business.

Mike Massaro -- Chief Executive Officer

And Jason, hopefully -- this is Mike. Hopefully, people got from the additional detail we shared in the investment areas. These are investments that we think is the time is now to make. The opportunity in front of us is strong.

And at the same time, a pretty clear indication that we want to show the strength financially of our business, and I think that came through pretty clearly in the flow through last year. And so, we are taking that opportunity to make sure we invest properly.

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

Right. Right. OK. So it sounds like there's no change in that longer-term objective, but you're trying to strike while the iron is hot now, which is, obviously, understandable.

On the WPM side of things, just wanted to get your view on how long it potentially takes to kind of drive some of what seems to be some pretty significant synergy opportunities there.

Mike Massaro -- Chief Executive Officer

I'll take that one. This is Mike again. Obviously, it's a deal we're quite excited about. We've known that team for a while, and I couldn't be more excited having -- I mentioned in my earlier comments that made two trips in the U.K., two international trips already in the last four or five months and seeing how clients have received the combination, as well as how the teams are working.

We expect results, again, really monetization of payment volume within that region, which is, obviously, what we were working to do. And that deal provides us a great opportunity. So I expect us to see some benefits in '22. I expect us to see benefits for years and years to come.

It's a great opportunity for us. We are super excited we got the deal done.

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

Excellent. OK. Well, thank you.

Operator

Thank you. Our next question is from Darrin Peller with Wolfe Research. Please proceed with your question.

Darrin Peller -- Wolfe Research -- Analyst

Hey, thanks, guys. When we look at the forecast and we try to back out the inorganic contribution, it looks like you're in the low to mid-30% range in terms of targets, which, obviously, is extremely strong off a year that we just had. Maybe you could just give us a little bit of an understanding as to the same-store sales thoughts embedded in that. I know the revenue retention looks like it's continuing to improve.

But just thoughts on same-store given the land and expand strategy you guys keep doing well with across multiple verticals versus the new customers coming in because to us, it just seems like there may, believe it or not, be some conservatism in that. But I'd love to hear your thoughts. Thanks.

Rob Orgel -- President and Chief Operating Officer

So our belief is that we're going to continue to work on the playbook that we've always worked on, right? So if you look at our NRR, you can see that it's back to sort of prepandemic levels. It's certainly a core element of our growth strategy to drive that NRR. You heard Mike just a moment ago talk about the addition of the relationship managers. At our core, we believe we're going to keep doing it, right? We've got the sort of the product suite, the offering and the strategy that lets us sort of continue to execute on existing client land and expand.

And so, that's what we plan to do. That's been the larger portion of driving growth in prior years, and it'll be complemented this year by new client growth and new client revenue as well. But that's the -- those are the elements that drive the overall growth rate that we've shown you in the guidance. And we have every reason to be confident that we're going to continue with that land and expand successfully. 

Darrin Peller -- Wolfe Research -- Analyst

OK. Guys, I mean, there seems to be a broad-based expansion of your opportunities across verticals beyond even education. And so, maybe you could just give us one sense of like if you were to highlight where you're most excited about, some of the transformation occurring into much bigger opportunities than even you expected when you started in, for example, healthcare, B2B travel, perhaps not -- moving away from your biggest vertical for a moment, can you just touch on that in terms of what's seeing the most momentum? It just seems like it's pretty broad-based, but maybe a little bit more fine-tuning. Thanks, guys.

Mike Massaro -- Chief Executive Officer

Yeah. I'll jump in. This is Mike. I get four kids.

I always say that's the question of which kid do I like the most, which I always struggle to answer. But I'll go first and toss it to Rob. For me, it's travel. The travel team has done an amazing job over the last two years navigating a pandemic, right? We grew that business even in '20.

Actually, we grew all verticals in '20 even in the face of the first wave of the pandemic. And then, to see what they've been able to do in 2021, significantly growing that business and positioning us really well for '22 and beyond, for me, that's just massively exciting. We haven't even seen the world come back, and the strength of that pipeline and the new client size is really great. So that's mine.

I don't know, Rob, if you have a different one.

Rob Orgel -- President and Chief Operating Officer

Travel is very exciting. Each of the verticals is very exciting. If you look at B2B, this is sort of the first call that we've made much commentary around the B2B side of things. You'll see us this year continue to expand that team.

We are feeling really good about the kinds of clients that we are adding and the value proposition that we have for them. And in terms of growing that team, adding more leadership into that team, adding more product capability in terms of integrations in the things like NetSuite and Salesforce, like we are moving on multiple fronts in the B2B space. And so, very excited about that one as well. 

Darrin Peller -- Wolfe Research -- Analyst

Got it. Cool. All right. Thanks, guys.

Nice job. Thanks, sir.

Operator

Thank you. Our next question is from Ashwin Shirvaikar with Citi. Please proceed with your question.

Ashwin Shirvaikar -- Citi -- Analyst

Thanks. Hey, Mike, Mike, good quarter. I guess, let me start with the sales headcount. Good to see the investment in growth.

Could you remind how you typically think of sales productivity and sort of the lag, I guess, between adding sales and getting results? Is that the six months or the back-half orientation that you talked about? Or is that just to get the salespeople?

Rob Orgel -- President and Chief Operating Officer

So we'll start adding people sooner than the back half of the year. There's sort of the timing of bringing people on, the timing of them getting productive and the timing of clients actually producing revenue and all of this. So we're pretty good at all three of those steps. But the reason you will see the effect mostly in the back half, as we've talked about often, there is some lag time between when the clients are -- the sales cycle start, they sign, and then they're implemented even when that implementation cycle is quite quick.

And so, that's why you see sort of the effect, driven primarily in the latter half of the year. Of course, we did do hiring in 2021, and lots of those people are starting to come online and become effective now. So really, it's sort of a steady effect that you should expect to see as we make these people productive and they contribute to the client count.

Ashwin Shirvaikar -- Citi -- Analyst

OK. Understood. And if I think beyond 1Q, if you could maybe provide some incremental color with regard to just cadence of how you see the revenues coming through. Because last year was kind of a little bit wonky with Delta and Omicron and various other effects, so both from a revenue growth perspective and you're making investments this year, so from a margin perspective, how are you thinking of cadence through the year? 

Mike Ellis -- Chief Financial Officer

Yeah, I'll take that. This is Mike Ellis. So both at the revenue less ancillary services and the adjusted EBITDA basis, you should be thinking about the seasonality of the business in 2022 very similar to what we reported in 2021. It's really a function of the vertical makeup of our business.

And if you think about it, Q3 will be a very important quarter for the business in 2022. It will be our biggest quarter. It always is our biggest quarter both in revenue and adjusted EBITDA generation. And then, after that, it comes down to Q1 and then Q4 and then Q2.

So I would expect that -- you should expect that revenue and adjusted EBITDA for 2022 on a quarterly basis should follow the relatively consistent pattern in previous years reported. 

Ashwin Shirvaikar -- Citi -- Analyst

Thank you, guys.

Operator

Thank you. Our next question is from John Davis with Raymond James. Please proceed with your question.

John Davis -- Raymond James -- Analyst

Hey, good afternoon, guys. I want to spend a minute on WPM. Mike, maybe just talk a little bit about the revenue model today, kind of what you have embedded in the '22 guide and then how you think about the $30 billion addressable payments. Are they monetizing payments today? Is that the opportunity? Just trying to think about how we could see this business grow over the next several years. 

Mike Massaro -- Chief Executive Officer

Sure. JD, thanks for the question. So WPM, again, think of it as a software play. Again, non-venture-backed business, has had two founders who have bootstrapped it since the beginning and have built a great business.

And so, again, it's a company we've known for a while, have had great respect for them, and to be able to get a deal done was really exciting. So they have not monetized payments directly. It is really the crux of the opportunity that we see. So think of it as software revenue, as Mike articulated, small, single-digit, inorganic part of our 2022.

And then, when you think of the opportunity, it is exactly that, where can the combination of teams and technology help drive payment monetization inside the U.K. And that combination is quite exciting. Last month, I was with -- at a conference with a huge amount of clients, many of them shared clients, as well as net new clients. And I think, the opportunity is really there for us to deliver value.

So already excited. The team -- integrated offerings already underway. The response has been super strong. And again, I think, it's just going to help us accelerate, as we said earlier in the comments.

John Davis -- Raymond James -- Analyst

OK. Great. And then, maybe I just wanted to touch on NRR for a second. Obviously, 140% in '21 is pretty remarkable, definitely benefited from kind of schools seeing more full enrollment.

How should we think about the normalized NRR? Should we think about kind of 2018, 2019 levels of the, call it, 125% to 130% level? Clearly, you're growing a little bit above your kind of medium- to long-term 30% range in the near term, but just maybe spend a minute talking about the kind of NRR piece, plus the new wins and how should we think about that over the next year or two.

Mike Massaro -- Chief Executive Officer

Yeah, sure thing. So that's one of the exciting things. We've always talked about multiple growth levers, right? So when people think about us, we encourage them to look at that NRR, but really think of it as the three-year average. Obviously, with the COVID impacted years throughout that average gives you a more consistent baseline to use.

And so, for us, that's at 123%. That includes that COVID impacted year we've talked about prior and, obviously, the record year last year in NRR. So I think, that helps blend out that turn, but it's right in the range that you shared. And then, I would just say, obviously, we look to add new clients and add new logos to the tape every year, and I think we've got a consistent track record of doing that.

But that isn't -- we don't need -- it's not just that lever we have for growth, right? So it's that combination of NRR growth, plus net new adds that really, I think, is one of the exciting things about Flywire and why we're so confident in that kind of compounding growth story over the long term.

John Davis -- Raymond James -- Analyst

OK. Appreciate the color. Thank you.

Operator

Thank you. Our next question is from Tien-Tsin Huang with JPMorgan. Please proceed with your question.

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

Hey, thanks so much. Great results here. I guess, on bookings and NRR -- I know you got a question about NRR, but thinking about AR in your pipeline and how the year closed, how are you thinking about bookings in 2022? How might it be different in terms of composition or quality versus what you saw in 2021? Any color there? 

Rob Orgel -- President and Chief Operating Officer

Tien-Tsin, Rob here. Good to hear your voice. I think, in terms of sort of composition and quality, we expect it to be consistent with what we've shown in the past, I think, the big difference being that the pipeline continues to grow and the expectations for signing ARR continue to grow as we look into the year ahead, right? So very healthy dynamics in the pipeline, very healthy dynamics in adding new clients. As we mentioned, we're going to be growing the go-to-market team by what amounts to about another 50% growth in sort of go-to-market capabilities across the teams.

And so, with that, we expect to show that kind of ARR build that supports the future growth.

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

Great. I appreciate that, Rob. And just my quick follow-up is on pricing. And I know, Mike, you don't want to us talking about take rate.

So it's more about just the pricing environment given inflation and really volatile FX right now. Any thoughts on what might be different here, again, same thing '22 versus '21 with respect to pricing?

Rob Orgel -- President and Chief Operating Officer

So again, we're fortunate not to be one of those companies that has sort of a cost of goods subject to inflationary pressures, right? And so, overall, our business model is such that as the pricing changes for the underlying service, we'll do the transactional work on top of it, but sort of don't feel that we see sort of a difference in inflation in that regard. In terms of FX, we've always been good at the hedging of risk in that regard. And so, we don't really see anything different or plan for anything different in terms of '22 versus '21. 

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

Excellent. Thank you so much.

Operator

Thank you. Our final question comes from Bob Napoli with William Blair. Please proceed with your question.

Bob Napoli -- William Blair -- Analyst

Thank you. Good afternoon. Nice job in the quarter. Good outlook.

So I guess, you did your first acquisition as a public company. I know, Mike, you guys have done a couple previously. But what are -- I would imagine you're engaged. Are you looking for new verticals, add-ons? What metrics or criteria are you using? And should we expect you to be active in 2022?

Mike Massaro -- Chief Executive Officer

Yeah, hey, Bob, good to hear your voice. So for us, it's -- WPM is a great example of the type of deal that fit the three pillars we've talked about before, some way to go ahead and accelerate an existing industry or a region that we are already in. The opportunity to layer in additional product or capability is the second pillar we've talked about before. And then, the third, and I've said it less likely than the first two, is the ability to enter a new region or a new industry through an acquisition.

And so, those three pillars are still the core strategy. We have a corp dev and M&A team that is -- continues to be quite active, and we're also very picky. As I've shared before, the WPM deal is a great deal for us. It was the right team and culture fit, as well as the right thing for clients.

And that was really a cornerstone. We are going to keep looking for that. We don't feel like there's pressure to do something. But at the same time, I wouldn't be surprised if you saw us active, but we're going to find the right thing first. 

Bob Napoli -- William Blair -- Analyst

Thank you. And then, education, obviously, the third quarter is a big quarter. But the first quarter, I mean, as we sit here today, you know who's enrolled in what university for this semester. Is that -- is your visibility for the year on -- and for third quarter on the education business, how would you look at the visibility today for your business, not only for education, but obviously, that's the biggest sector, but for the other parts of your business?

Mike Massaro -- Chief Executive Officer

Sure. Well, one thing that many folks know about Flywire is we see visibility into all types of payments, including admissions and deposits and things throughout the year. So that speaks a bit to your visibility question. The one thing I would tell you, it's still pretty early in the year, right? We are just two months in.

And the last two years has taught us anything that it's quite a dynamic world. And so, I would say we sit here feeling quite good in the first two months of the year. At the same time, we've just come through two years of global pandemic, and things have changed very quickly on all of us around the world. So we're cautiously optimistic but feeling really good about the first two months of the year.

Bob Napoli -- William Blair -- Analyst

Thank you. And if I could just sneak in. You haven't had any issue with cross-border payments and with SWIFT and with the -- obviously, the sad occurrences in Europe, has that had any effect on your business?

Rob Orgel -- President and Chief Operating Officer

Yeah. Rob speaking here, Bob. First, just quickly to acknowledge the difficult circumstances for Ukraine and that we're all thinking about those difficult circumstances. In terms of our business and in terms of SWIFT, our -- all of our work has been done to ensure that we are sort of appropriately compliant with sanctions and regulatory requirements that have sort of risen just in the last little bit here around those events.

So we're sort of done that work and overall, at this time, don't see it disrupting other aspects of the business.

Bob Napoli -- William Blair -- Analyst

OK. Thank you. Appreciate it. Nice job.

Operator

We have reached the end of the question-and-answer session. And I'll now turn the call over to Mr. Mike Massaro for closing remarks. 

Mike Massaro -- Chief Executive Officer

Thank you, operator, and thank you all for joining us today. We appreciate everybody's time and thoughtful questions. Look forward to speaking to many of you and even maybe seeing some of you over the next few weeks. Have a great night.

Operator

[Operator signoff]

Duration: 77 minutes

Call participants:

Akil Hollis -- Vice President of Financial Planning and Analysis

Mike Massaro -- Chief Executive Officer

Rob Orgel -- President and Chief Operating Officer

Mike Ellis -- Chief Financial Officer

Dan Perlin -- RBC Capital Markets -- Analyst

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

Darrin Peller -- Wolfe Research -- Analyst

Ashwin Shirvaikar -- Citi -- Analyst

John Davis -- Raymond James -- Analyst

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

Bob Napoli -- William Blair -- Analyst

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