Q1 2020 Earnings Call
Without generalized.
It's a core.
The opportunities that are available when certain options are limited oftentimes. They go through great hardships to come to the us the whole purpose for being here is to make money and take care of critical needs backhaul. Additionally, many of our customers working essential businesses, such as agriculture food processing in construction and as a result, they continue to work internally.
This is also build a strong franchise by means of our core strategy to be located oftentimes in more rural areas as opposed to being heavily concentrated in large metro centers.
There has been less disruption of business as usual in those geographies.
Before speaking to the quarter results, let's first ground you all and why we believe intermix is well positioned from a competitive and business model.
Many of you have heard me described dinner mix as a house bill to brick during our fireside chat. We conducted a few weeks ago I'd like to spend a minute or two on what that means first and most importantly, intermix has always taking that approach to drive profitable sustainable growth both in our legacy and new markets.
Profitability and sustainability sound like an obvious and of strategy, but I can tell you that many competitors in our industry and companies in general do not Paul that approach.
We have never focused on growth on the topline that is not ultimately profitable and sustainable we believe many competitors and the remittance industry. Some at retail and many on mine providers focused on volume growth with little consideration for profitability in sustainability. This has created two issues for those companies.
They have often have to compromise service quality because of the options for the long term viable model and more importantly today. These companies have little to no margin of error as the volume of Remits drop off before they become profitable.
Intermix is well positioned because our model provides us with the leverage to withstand challenging conditions such as the one we are experiencing and the resources to become more aggressive during these times to maximize growth opportunities. This is the main reason we tend to gain share in weak markets, just as we do and stronger ones.
The other important and related components, a house made a brick is that our model creates exceptional liquidity and superior free cash flow. This is a powerful capitalization model, which is critically important in times of uncertainty.
Tony will detail our liquidity later in the call, but I will simply state upfront intermix has more than ample capital to fund our business in a wide range of scenarios over the coming orders.
I would also like to highlight that intermix is run by a very talented and capable team that has operated remittance businesses. The recessions in volatility previously theres a lot that goes on behind the scenes. It in this business and in our view. It is critical to have an organization as proactive rather than reacted with that.
Month intermixed as again proven its operational superiority in this regard.
Lastly, we believe our reputation for customer reliability is a significant differentiator times, the stress and volatility.
In recent weeks, we've heard from some of our payers that a number of smaller competitors have had liquidity shortfalls.
There were the result of these issues is that receivers are not receiving their funds in a timely fashion. These issues do not occurred intermix and we expect our reputation as a highly reliable provider will only grow in the coming months.
If we turn to slide five let's review our first quarter results across key performance indicators first for revenue, we exhibited solid 13% year over year growth as I began the call. We highlighted increase in year over year volume growth compared with last quarter. We believe the coldest did increase the average principal amount.
Of the transactions for several days in March, but Conversely, as the month further unfolded the transaction growth year over year began to slow.
As I just spoke to we are proud of how the company has handled our customer needs without any disruption and believe our service quality reliability will continue to win new customers from our competitors.
Turning to profitability Intermix continued to drive operating efficiencies in Q1, our adjusted EBITDA grew at 23%, which again is unmatched across our industry singles for EBITDA margin, which ended up the quarter at 17.1% or nearly 140 basis points higher than a year ago.
Finally, we grew our adjusted net income by over 30% compared to last year and drove free cash flow $7.3 million in the quarter.
Tony will walk you through our liquidity.
And the broader results in a second but I'd like to reemphasize that our EBITDA growth and free cash flow generation is a significant outlier in our industry.
Clearly markets are influx, so I won't speak to valuation or how we believe our model is under appreciated.
I will say that our philosophy and dedication to profitability and sustainable growth will drive significant competitive advantage for intermix. However, the coming months in quarters play out with that ill turn the call over to Tony.
Thanks, Bob and good evening to our analysts and investors on todays call.
Continue Bobs point about the house of Rick I would like to provide a little more detail on our liquidity and cash generation than we have in the month.
On slide six well see that we added $7.3 million a free cash generated in the quarter up 2.5 million or 52% from the first quarter a year ago.
These figures reflect the conversion of adjusted EBITDA free cash of 55% after taxes investments and debt servicing.
Our business model, which combine strong margins and variable cost structure were 80% of our costs vary with transaction volume has positioned us well to whether this crisis.
Turning to slide seven.
Let's look at the efficiency of our adjusted EBITDA conversion to free cash in Q1 of this year, we converted 55% of our adjusted if that a free cash of which we're extremely proud. This represents growth of over 10 percentage points to the conversion rate from the same period last year.
We feel that our profitability and free cash generation or Differentiators that will service well in the quarters in years ahead.
Turning now to slide eight I'll quickly walk through our first quarter results as Bob touched on a number of these metrics already.
First on the top of the page we grew transactions by nearly 14% over last year on volume growth over 17%.
Again, an uptick in year over year growth compared with what we saw last quarter.
Turning to the bottom half of the page you can see that our revenue growth year over year was 13%.
Despite a favorable mix shift towards Mexico transactions revenue grew slightly more slowly than transactions. This was driven in large part because of the extreme volatility in the Usdten Mexican peso exchange rate, which led to an abnormally high volume of cancellations in March.
Last on the bottom right, our adjusted EBITDA growth of nearly 23% was impressive again, especially given the FX backdrop I just spoke to the key drivers here were one our mix, which shifted back in favour to Mexico compared to less profitable markets and to operating leverage gain through slower growth of our fixed costs.
Now if we turn to slide nine we continue to see our strategy and execution payoff in the form of market share gains as you can see in the increased share Guatemala, and the lower middle lower middle portion of the page.
Unfortunately, since we are reporting earnings in late April the first quarter market share data are not yet finalized from the bank of Mexico and typically become available in May we will update RP investor presentation on the data become available.
I will close my remarks on page 10, let me start with a comment that should be expected given the current state of our global economic uncertainty attributable to the pandemic, where suspending our full year 2020 outlook for revenue and adjusted EBITDA.
Bob mentioned, what we've seen so far in April is about a 10% decline in volume year over year at this level, we remain very comfortably profitable and can continue to generate free cash.
While this is not a projection of future performance, we wanted to at least provide transparency on the current months performance so far.
In closing I'd like to note once more and exceptionally strong quarter with nearly 23% adjusted EBITDA growth remarkable in light of this crisis.
While we don't know what will happen in the quarters Com, we're very confident in our ability to continue to provide our central service to the communities. We serve we're equally grateful for the resilience as seen in our agents and our customers.
I wish the entire intermix community, our employees agent customers analysts and investors good health and safety passage through these trying times with that let me turn the call back to the operator for questions.
We will now begin the question and answer session.
To ask a question you May press Star then one on your telephone keypad.
If you were using a speakerphone please pick up your handset before pressing the keys to withdraw your question. Please press Star then to at this time, we will pause momentarily to assemble our roster.
Our first question comes from Mark Palmer with BTI Ji. Please go ahead.
Yes. Thank you thanks very much gentlemen.
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You touched during your remarks on the fact that some payers had said.
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Smaller competitors had been facing liquidity shortfalls.
Could you speak a little bit more broadly on what you are seeing in the competitive environment, particularly among those smaller independent players who make up a lot of the market and whether you're seeing.
Other signs of weakness that could potentially translate into share gains.
Yes, Mark Hi, This is Bob I'll I'll begin to answer that and give you sort of the topline and then maybe turn over to Randy for some additional color any Nelson our chief revenue officer. So.
We've seen a quite a bit I mean, we.
There's been one competitor that actually shut down over entire weekend Easter weekend I won't name their name at this time, but it's relatively middle sized competitor.
We've seen other people shutdown parts of the country what happens in those cases is that.
It's a good sign of liquidity problem, even ones other than the ones. We hear from the payers. Its they are really not having in a pesos that they were able to fund in time at the time that they were buying the pesos for that day and not willing to take the risk with the volatility that's going on so we've seen that on a on a sort of intermittent basis with at least three different competitors.
We also heard from as I said, a number of to have them providers payers in Mexico, any guatemala with certain providers certain money transfer companies not being able to pay their wires and then having to hold off on paying wires until they were able to fund. It philosophy that are on sort of maybe not as aware of how the market works on a Friday.
Okay.
Any company is really going to have to by the number of pesos that they're going to need for Friday, Saturday Sunday, and they're going to combat in advance and for us its knowing tens of millions of dollars for the small guys, even it could be $10 million and oral or more and as these days get where margins get dinner or away.
There are some agents made shut down temporarily and because of quarantine issues and they can't collect funds all those kinds of erratic sort of behaviors lead to guys that are right on the brain failing and not being able to have the funding available to pay the wires out at the other end on the timely basis. So what happens in the end of the days with the customer through.
Ceding customer is turned away at the electro are turned away have been calmer or wherever they go to pick up the money down in Mexico calls back to the center. The sender goes back today turn retailer into retailer has to call the provider and providers on the phone and may not even how that we will answer the wire ultimately has to be refunded, but they don't.
I have the money to refund the wire either at that time, and so really ties up the consumers money the consumer doesn't want to use that provider again, and ultimately retailer who ended up spending maybe an hour solve their time. Some tracking this down does want to have the consumer send through that provider again, so it starts to move wires to the more reliable companies and promote.
And the recording but the feel is is that we're grabbing share from the small competitors and actually some of the larger competitors as this crisis as unfolded Randy I don't know, if there's anything you'd add to that.
Yeah, <unk>, Thank Bob Hi, Mark.
Boston are really nice job explaining how the.
How the market works on the weekends and we in the sales team we hear from time to time.
Even more so during March.
Yeah.
Companies have slowed down or that their services unavailable it but it's all but may basically rumors.
I was just thinking is Bob was talking five or six.
Companies, we've had sales people from five or six companies contact in the past couple of weeks looking for employment that had been confirming that their companies have had downsizing events.
Confirms the rumors we've heard in the marketplace with respect to some of what bothers, just illustrated and what that does for us on the sales team Mark to kind of answer. Your question does it open up opportunities for every time, we hear the events like the one Bob reference where a competitor was down for about two and a half days over Easter week.
<unk>.
That's the opportunity to go to all of the retailers that share our service with that company.
And.
Send a strong reminder, that they want to be offering a service that they can have confidence on the leader that gives us another opportunity to go to retailers, where we may not have our service today, but a competitor may and talk to them about the same message and so our sales team has been very very active over the past.
Several weeks on a competitive from contacting retailers that we don't do business with as well as our own retailers over the phone stressing all good solutions that we bring them and reinforcing doing business with the leader that they can have confidence and so we do think it's going to open up some great opportunity for us.
Moving forward.
Thank you.
Thank you and just one quick housekeeping question for Tony is what was the the company's cash balance and revolver availability as of the quarter end.
Yeah, So I'm Mark when you say cash balance I assume you mean, our free you know free cash that's available outside of working capital.
That's correct, yeah in which case yeah, yeah, yeah. So we had about 36 million available and you know based on the day that we close the <unk> are 35 million revolver was was all available as well.
But we feel like you know even towards you know peak needs of working capital, we're still sitting at about 35 36 million of free cash.
Very good thanks very much.
Mhm.
The next question is from David Scharff with J.M.P. Securities. Please go ahead.
Oh, yeah. Good afternoon in it thanks for taking my questions.
I know, Florida has been in the news quite a bit lately. So hopefully everybody is staying safe down there.
A couple of things pop <unk>, one I I just wanted to.
<unk> touch base on on the agents.
It looks like.
The 95% figure you cited I mean that that's.
Tremendously positive I I think when we think about a lot of these small businesses, even if it who'd services and essential that they would be more struggling it sounds like you have a high degree of comfort level with the kind of relative held for the agent base or are you aware of what it whether or not any of them or.
Applying for P.P.P. loans or have you had any other of your sales people in the regular coercive just contact with him.
You know have any sense at any are sort of you know more struggling or on the brink or do you feel like that 90 to 95 per cent figures going to hold up over the next couple of corridors.
Oh, you ask do you lost a lot of questions here I think during any downturn.
Always the possibility that you know the age of network, which are mostly small businesses has a chance score some of those businesses not to make it that it brings in a whole nother piece relates to do you know agent defaults and all that and we think we've got a green handle on that we don't seem to this point see a lot of agents that look like they're struggling to that degree I mean.
Relative to the money transfer business sense. We said you know and we'd disclosed are are are are equal numbers are better than 90%. So I mean, you know and when you look at most parts of the country. It's just proportion and as you can imagine in a place like New York on the North North northeast, where it's been decimated by the by.
It's much much deeper cut into our transaction volume. So many years the country operating you know pretty close to 100% if not at 100%. So those agents or I don't want to stay on affected but in many cases, there aren't affected I mean, there's no not on affected in terms of you know the the the impact of covert being out in and and and being.
Pandemic, but from the standpoint, if their business been somewhat on affected we have heard and Randy might comment on that we heard of agents that even asked our advice or can we help them out in applying for small business loan and we've done what we could help with that I think there will be agents that will apply and many of them that we'll get it but I think again.
I think we feel like it's pretty solid base, we've been really surprised and delighted in and you know.
Really the level of agents that are still up an active.
For one I think there's a few things said, it's really proving and if I'm really the industry to start with number one is that you know this is a really essential service right. I mean, when you start thinking about you know well what services are essential well you know for us, it's drugstores and food stores and all this but this is the money that's going back to people in Mexico, Guatemala, El Salvador under some others to paper.
To pay per medicine to pay for shelter. So it has been deemed essential service. There's been a few places regents or you know I think there was no San Francisco Seven County area. There were a couple little pockets of more upscale neighborhoods, where they were forced to shut down and if they weren't food source, but generally speaking they've not been forced to shut down some have self quarantine because it.
It's been really rampant in their area, but we really it I think it says something about the how resilient the businesses in itself how resilient our workers because you think about it I mean, you know our our Mexican volumes have been staying pretty close to 100% I mean, we're finding that you know other then again and if you pockets to northeastern has been hit <unk>.
Much harder, but they're states that are are really you know the middle of the country for US has remained quite strong. So at this point you know again, Tony said it well in the end, we don't you can't really predict what's going to happen in the next month or two I mean as state start to go back into business a bit Georgia, leading the way, Florida is removed other than our area here down.
South Florida restrictions for starting Monday aren't started to <unk>, we expect the business to begin to pick back up again, you know it does is there a second run of the virus and things that we can't look into that but the way we see it right now today, we feel like our businesses really really solid we feel like where you know things continue at the level that they are right.
Now, we're going to remain very cash flow positive very profitable and with a lot of extra cash in the bank and free cash that we're never going to have to really even begin to think about using for this purpose still available force from any other purposes matter, whether it be acquisitions or whatever so we'd be is it's much you can feel good about such a terrible pandemic, we feel really good about Howard position right now.
And how our interaction with the agents is working in the collection those funds and all the rest of it.
God I got no no I mean, it's.
I think Brazilian is.
Inappropriate word I'm wondering is a fellow but you know when Randy shared the anecdote about.
Five or six sales people from.
Competitors, reaching out to you guys.
You know he got got me thinking as you think about the sales strategy with.
With all of the uncertainty that the pandemic is introduced in all of the operational considerations Gotta forces you to.
Focus on has it all third how you're viewing sort of the 2020 sales plan in terms of trying to open up new agents in new States are you putting your foot on the break a little bit or.
Still <unk>, let me let me let me.
Let me begin with an answer and then again I'll, let Randy you know more detail first it's not just a small guys remember money Gram early on.
Early early on before I think any of us knew the impact put a 20% pay cut across their whole organization and when you start talking about sales people I mean, if we cut our sales people pay by set 20 per cent, we'd have half of them out on the street repeatedly because they're very price sensitive about sales people. So I mean, it's not just in small guys. It's been it's been.
You know money Gram as well.
The the second piece of that is is Randy we'll talk to it but we're still putting up agents and we think that whereas and we're doing it remotely we're shipping it out we have a company it shifts the P.C.'s out we can do the the training an activation all of that remotely without going out. We also know that there's going to be some states that we're probably within the next week or two going to be able to.
Start putting our sales people back on the street because those states restrictions are appealing back and we're going to equip them, but weren't safely with all the P.P.E. that they need to be able to do that in with certain protocols and we'll be back out in the field in those areas, but last me. The thing I think that's most important is that there's going to this is a great opportunity for strong companies. This is a great opportunity for a company.
These that have built these houses of bricks like we have built which is a company that has the kind of margins built in that have not been built on.
Fluffy sales, if you well right they've been built unsustainable profitable business and they did built in a way that it's put money in the bank and submitted a solid company and we're so well positioned to go in and after these small guys now that I'm disappointed retailers and disappointed consumers and so once we hit the ground running I think we're you know certainly where you know we.
It's a month or so here, where we're not activating agents at the same level, we would've been if we're in the field, but I think we're going to have a pen up opportunity go after agents because there's going to be a lot more opportunity that's frictional because of the shortfalls of the companies that have failed their retailers. During this period of time. So I think you know if if if things start to Wade back in.
As we're seeing in stages, and we start to get back to normal here in the summer I think we're going to have an incredible second half of adding age and retailers because there's going to be a great level of dissatisfaction between consumers retailers and actually sales reps in companies, who are you. There have been lay off didn't get paid or have their pay cut during this time. Unfortunately, we've been able to mobilize.
People to continue to be selling it continued to driving transactions that in some days or 100% year over year in April. So we're really pleased about that we we really can't wait to be able to get back out there, even though we've been really productive while we're not out there because we think there's more business for us to gather up than we can imagine because the shortfalls with the companies are competing with.
Yeah, Randy sending things like that to that yeah, yeah, too quick comment Thank Bob Hi, David.
I do want to say that the number we told you the 95% in fairness, that's a little bit fluid right. Even in your neck of the word in the Bay area. We had some agents that went down initially maybe for a week or two and then they called and said we're missing out on business, we need to get reactivated we need to get back in the game and.
They've been up now for a couple of weeks. So and then maybe in another part of the country, we see someone else for a few days or a couple of weeks.
Temporarily suspend themselves so it hasn't been like a big group of agents just have been shut down during the entire time period.
The other thing I do want to stress Bob's right on we have really taken advantage of this opportunity to try to fine tune, our selling skills and every day.
Sales team or calling their agents over the phone and their prospecting over the phone and they're they're taking every advantage like I mentioned, a few minutes ago to call. These retailers, who are offering an inferior service to our and to make them aware of everything we can bring to them. So Bob's right. We've got.
Regions of the country that will hit their Activations go in April in spite of doing it 100% virtually and we've got a lot of pent up prospects that we can't wait to get out too as soon as we hit the streets again so.
I you know again, if if it's only a few weeks that have impacted us we feel really good about coming out and hitting full stride here. It here.
Right Thanks for anything.
Sure.
The next question is from might Grondahl with North Securities. Please go ahead.
Yeah. Thanks, guys congratulations on the court or.
Update and I think it was 10 to 12 sales people you're hired last fall how is how are they progressing.
I'm sure Randy why don't you just go ahead, and and and talk about that directly thing sure sure. So.
Hey, Mike how are you.
Good rainy things we.
We.
We did make gosh, I think you're right I think but eight or 10 people at the end of the year beginning that you have to wear sale leader that are doing a really nice job for us we we really like the way they <unk>.
We do a very good job I think as we've shared with you before we we literally track here's the business that he sales representative inherited and here's what they've done with it week one week two month, one long too when really tracked that from the very beginning with our sales managers earlier this week reviewing that.
New higher performance plan.
Yeah.
Again, some of the new folks have been a little bit impacted because they started in January they went through some orientation in February and then they didn't get a full month in in March on the Street building up their product that bank and they of course has to be doing it virtually in April but we'd like to town we've brought in.
We've seen in the media turnaround in some markets, but we like what we see and really every market right now and we have a couple of vacant positions right now.
For them, we have every intention to fill those once we find the right candidate.
And continue to add where we need to add.
Got it and then.
One more quick.
There was a mention about some volatility F.X. volatility in March.
Mexico in some cancellations <unk>.
<unk> did that I could tell us that would industry.
Smaller players or if you guys, even had a little bit of that activity.
Yeah, Mike what would have this is Bob what what happens is that it's a simple thing, let's say that.
The sender on a Sunday decides to send money any sends it in it that days quoted in pace or rate of 24 pesos per dollar.
And on Monday, there's bad news in in the pay supplements and it goes to 26 pesos a dollar and at that point is beneficiary. The receiver on the other end hasn't picked up the money yet he goes and then he decides he's gonna <unk>, he's going to cancel the wire and replace it so those kinds of cancellations will cause there to be some losses.
Well when people trade in and Retrade a wire it happens in these cases volatility and it's kinda baked into the number but it will be part of the ways that you know you might see a fax not be quite as big gains as you normally would see I think the other thing that happens that's not really cancellation oriented is that when the pacers continually try.
Leading down it does allow people that are short of funds, a little bit better opportunity to lean into it because they might be able to buy those pesos tomorrow at just as good or a better rate than they did the day before so that that we talked before about the fact that are declining peso over time can sometimes favorite people that are shorter of funds.
But in this case the volatility kind of kind of cost is some of that out because it's hard to predict we had days in March where the peso went up went from 24 26 and other days when I went back from 26 to 23, and a day or something like that and maybe not specifically so.
Can't really take a bad on either side of that you know in believe that either way is going to you know if there was just very hard to pick which direction to pay some was going so I think some of that was just beginning in some cases you know we had the end up cancelling wires and then re issuing them at a better F.X. ray which in in the end can end.
You know costing us money to do that and that's baked into that ethnics game.
Got it Okay, Hey, thank you guys.
The next question is from Georgia Halos with Cohen. Please go ahead.
Hi, guys. This and so on for George Thanks for taking my question I wanted to know if you could discuss a little bit about a year customer servants, specifically ones that are focusing the restaurant hospitality and what kind of stress you're seeing in those customer areas.
Oh, we're really not seeing a great stress in those areas in in the sense that let let's let's first talk about the Mexican component of our business, which is the largest is probably mostly focused in areas of agriculture.
And in construction and in some time screwed processing and those areas the ball been very much deemed essential businesses and that's why the Mexican component, which as you well knows big share of our business has been really strong Guatemala would be similar to that I think there's other groups and you know some some mexicans and others, but.
Particularly more other countries that might be more involved in the restaurant business, but in those cases and a lot of cases, even in that these are delivery people, they're not typically shops were not typically talking about bartenders, we might be talking about busboys in that case that there's since sensitivity bike the thing about our consumer is is that but.
<unk> right, let's just talk about the numbers I mean, you know we continue to hold a strong growth number we continue to holding strong growth number through April and our customers are resilient. There are people that will move quickly from one job to another if they were working in a restaurant they'll go off and start delivering food or they'll go to a car wash or whatever happens to be open to find work as.
We sat in the in the the earnings release in the in the earlier part that you know our customers are are well move from one one project to another because we've gone through such hardships to get here in their work really is essential work for everyone back in their family. The other thing I think that's really important for us is that.
We've always been a business that's been more focused in agriculture in the rural areas than we've been at city based business, we do a lot of business and more business and agricultural areas than we do in metro areas like New York or in L.A.. So because of the results of that where the virus has not been is rampant our businesses.
Held up really really well, so we feel pretty strongly about it and and it continues to hold up as we said quite well through April.
[noise] great appreciate that color and then for follow up buttons is talking about what kind of flexibility you have in the non service or expend foreign looks like a trendy down a little bit you every year, even with strong revenue growth. So if you could just help contextualized stuff for us that'd be great.
Yeah sure.
Yeah sure so.
First you just need to think about in our entire cost structure.
About 80% of our costs are variable with with transactions. So that remaining that remaining 20% is kind of split between salaries and and other S.G. and they're they're operating expenses if you will.
The the flexibility we have in some of it is you know the flexibility we have in in the situation. There's some costs are just naturally you're going to come down like like T. any for example.
Obviously, you're going to take a little bit of a hit to your hiring plans. During a time like that's right you can't get people in the interview and and those sorts of things and and some of that is just timing and and and we'll come back we have flexibility and other things like advertising, which is in there.
But by and large you know it's going to be in your in your hiring and it's going to be and things like like travelling expense, but more importantly, I think the big take away here is going to be that you know we get we get we're getting great leverage out of the fact that you know 80% of our costs are variables.
When we get a volume declined we don't we don't see a big impact to our unit profitability on a fully loaded basis.
Yeah, I think I think one of the things you have to remember is that.
Versus maybe one or the other public companies that recorded recently I mean, I had 1% revenue growth in 20 per cent yeah. The D.A. decline, we've proven ourselves to be great operators, because we had a 13% revenue growth in a 20 per cent revenue it'd be a grow so no I I mean still the positive revenue growth some others have already struggled.
We've already proven that we've typically leveraging our revenue growth too much credit <unk>. So we're very very good at that did good at that over time in right now we don't see a necessity to do a lot of that because we're still holding quite strong in the disruption with our team to be able to start to think about the things that something like my grandmother.
Which is called salaries 20 per cent across we think that that would be more destructive to our business than it would be productive because then and you know it's sorta feeds on itself I mean, that's part of the reason that businesses holding up well into the nineties in terms of year over year, even through this pandemic terms of April.
Great really appreciate all that.
<unk>.
The next question is from Tennessee, Ciota with Credit Suisse. Please go ahead.
[laughter] yeah. Thanks, like Peskin afternoon, I wanted to dig into the on line. The the strength there that you call that in terms of at the volume search I want to talk about the extent to which you think there could be some lasting behavioral change there maybe a little bit about the types of customers that are using the.
Nine platform is it an existing customers switching over is the the new incremental customer is it a bank or an unbanked customer.
They sending to someone in Mexico that is banked or unbanked, just need to break down a little bit. So we can get a better sensor. Okay. How this might well last you sure yeah.
Yeah, let let's let's talk about a few that things and I'll start maybe with the back part of it. The first thing is that most people in Mexico. The studies that are out there and say that the the majority of people to mix score on bank somewhere between anywhere between 65, 75% of people in mix for on things. So in most cases, they're going to be sending to an an bank.
<unk> statistically and given in most cases that people that are more likely to be bank in Mexico, or probably not the ones that across the border to wash. Our cars are picker oranges that that probably they're sending more likely to on bank customers. We have percentages are bank transactions, even in our in our brick and mortar business and we don't disclose.
Those verses are over the counter and some of them do go into bank accounts. The percentage of people that would be banned that would be online sending the wire would be 100%. I mean, you need to have a debit card a credit card or a checking account to be able to send money. There's no other way to do it and that's been the obstacle for the online business for the most part for every.
<unk> the technology has never been an obstacle or at least hasn't been for years and years, mostly everybody. If you went out into the the fields in central California, and all the guys picking vegetables and fruits you look every one of them on their hip who's got a smart phone either and an Android or an iPhone. The issue has been a bank account and it's been a lot of issues that we.
Going through and I can go through and detailing my bore people again to do that but you know the proximity the banks. The fact that they don't want bank accounts back in even in in in Mexico. The fact that banks aren't really looking for their business banks are now looking for people that deposit $600 on Friday and brought down to zero on Thursday, they're not looking for a lobby pull the people that might be coming in with cash or checks.
They want direct deposit so all of those factors.
What we're seeing in terms of the business that is growing in terms of online we're seeing bold new customers and we think those customers could be coming from the fact that we believe a lot of the online providers to Mexico, or Guatemala, El Salvador, Honduras simply do not know how to cater to those businesses. They don't have call centres in those markets. They don't.
They don't speak the language they don't know the geography, they certainly don't know the culture and as a result to that we're gonna see people not that online will become a threat to ospel, we will become more of a lot a threat to the online typical online provider overtime as we built our on line business because they'll find a home.
Are we actually specialize in Latin American business right. I mean, you can check with a call centres are most of the online providers, but you're going to find it very few of them or they're going to be in Mexico, or Guatemala like we are so [noise].
We think there could be some people that I've tried online that had been at retail before we know we also take by the way retail we do a thing called Carterets. So we take a debit card and retail per transaction for instance, so some of those people could have decided to go online, but I think in more cases. These are you could be new customers that were really getting better.
On the on line circuit, if you will and they're moving over from other providers, because we're becoming more aggressive in the online service and I know Joseph there's anything Joseph Aguilar Who's our Chief operating officer managers are online directly I don't know if there's anything you would add to that Joseph.
I think you've covered most of that bond, but but I think we do city opportunity here continuing to to in fact, this and and also we we see you know customers, who haven't tried that now or taking the opportunity. During this process or during this event to try <unk> service and are likely to service. So we're we're pleased about down and we're pleased the customers aren't aren't reaching out.
The internet access and attempting to use our service and using the service. So that that reflects I think that you're over your grocery proceed in this product.
[noise] and we think that like I believe I think.
Yeah, Yeah, we think that adding to that we think bias we'd get later in the year that this will become a more material part of our business and will disclose probably a little bit more information as we go on the on mine today. It's it's you know it it's growing very quickly and it's quickly becoming a material piece, but I wouldn't get called the material piece, but were quite excited by this gross and.
Think that there's you know the pandemic has given us an opportunity to kind of <unk>, you know to focus on a little bit more and see if we can can can can move that needle along a little better a little faster.
Okay. That's great. Thanks, Yeah fully fall you on the Unbanked next they started off with that same page and then when I was really getting atlas or the mix of new customers versus existing and I think he covered that quite well. Thanks a lot.
Okay. Thank you.
The next question is from Josh Beckwith Keybank. Please go ahead.
[noise] things, particularly question Bloody here, everyone is doing well yeah I'm just wondering macro wise, obviously, there's been a lot of.
Traditional linkages that have been you know completely flipped upside down just you know as we go into.
Middle the or the back half the year you know are there any one you know or maybe set of.
Macro indicators, whether it's on employment or.
Immigration flows that you'll be tracking closely to kind of gauge what could happen to the remittance market.
I think it's really I mean, I think no one can gauge anything about the second half of the year I mean, it's very difficult to gauge I think what we've seen is is that we're going to operate assumption a lot better than the market doesn't the market's held up quite well, but I don't think anyone can predict the greater marketplace. You know at this point I think it's it's we'd be we'd be stretch.
Watching and and you know, making something up to tell you that we could in the face a pandemic that we haven't even started to restart the economy that we could tell you what the second half a year is going to look like in terms of overall money transfer business remittances to Latin America, what we can say, it's we think we're going to continue to be at the very top about and outperformed the marketplace as we've continued.
To do since we didn't have a company.
Okay <unk> that's helpful. And then you know obviously there was some nice strength within Q1, certainly yeah sounds like to the Middle Marjorie was there anything I guess brochure internal plan that that stood out in terms of just how how things materialized.
Well I think that you know Q1, we we began to get back to some of our fundamentals and we had talked about that that you know we had seen some deep discounting from small providers and whereas the marketplace. In some cases was anxious for us to respond in ways that would've made us maybe <unk>.
A little bit quicker that'd be less profitable, we decided not to take that Pal and as a result, we saw first quarter volumes, you know growth coming in at 13% because we put in place plans to be able to go in and attack against those small providers that had come after us and I think it was taking old as a matter of fact, we think that.
That had the virus you know non heads in the pandemic not hit when it did we think that are 13% would've been slightly stronger I'm not going to say was allowed strongest there's only two or three weeks, but we think we probably to come in and maybe 14.5% growth or whatever for the corridor doesn't matter that didn't happen now, but it really is the execution against those plans that you know against those.
Small providers that were really coming in and undercutting with price and we have some things that we've been doing and you know, we're we're not going to talk about them in detail, but has been winning us business, while sustaining or margins and it's been working quite well and we think it will continue to work quite well you know what we don't want to do is is get into a situation where we.
We become part of the sort of the the you know circling the drain if you will where you know the small guy gets a deep discount and we discount to that level or a little bit more and he's a little bit more pretty soon we tried margins down to where nobody is able to really deliver a quality product and deliver profitability overtime. So we took our time to do that and I think it was working.
And quite well I think it's it's also testimony in terms of how well our business is working in in April So far you know and and you know we not so far but run the 30th day and more business is holding up quite well a lot better than I would've thought I mean, it's it's it's I've said, we've had some challenges in the northeast where the pandemic was obviously.
Much more strongly and put a lot more businesses I think either shut down completely or you know more likely to be shut down to limited hours or whatever but and then cassette in the middle part of the country. Our businesses me quite strong approaching close to 100 per cent year over year down a little bit from where it was obviously not at 13, 14% growth, but seemed pretty strong so.
Pretty good about where we are you know we felt like we were really on the rebound included in back to you know high double digit you know 15 16, good pushing your 20 per cent growth is year on hold it wants to restart that now, but we do you think that we're going to be a big outlier versus b. industry over the next several months, even through the pandemic and as we restart the.
Enemy I might even a positive way by the way.
[noise], great Thanks really color.
The next question is from drew Koopman with Cantor Fitzgerald. Please go ahead.
Hi, good afternoon. Thanks for taking my question. So I just wanted to touch on the negative 10% for transactions in April that you mentioned have you seen accelerating per month or is starting to stabilize just any color that you've seen over the last 30 days.
Yeah, I mean actually it's probably getting stronger as the month is going on but you know it could be a ways. You know there are ups and downs, but I think we saw earlier in the month. Some more softness then we're seeing now I mean lately, we've been approaching many days 100 per cent year over year. So we're pretty happy with what things are going and we think as some of these states you know again, it's not a prediction.
And it's kinda, it's not a guidance, but we think it's some of these states really start to restart up that had been shut down either partially or completely I think we're going to start to see there aren't transaction <unk> pick up again, the little bit more than where they are.
Right and then just given how strong margins, where this quarter or just if you can touch on what you expect moving forward you know throughout this year and then even longer term.
Margins in terms of in terms of our.
<unk> I'm sorry.
Okay. Yeah, I mean, we've always talked about and I like Tony you know get more into D., telling us we've always talked about that you know, we don't see our either D.A. margins getting a lot stronger we got them. We've done it and then stronger from time to time is necessity has presented itself, meaning in these times, where you know the pandemic.
Or whatever and we're able to eat quite early on in understanding what's going on and and manage our our fixed costs really well, but over time, we really need to be able to continue to invest in the tremendous opportunities that we have out west.
I'm in and and we know that as we invest out west at the margins typically there are lower than they are in the east we still have a huge upside in California, Texas and the entire western part of the United States different parts of the Midwest in the northeast and we have great opportunity still in terms of our card product and in terms of our on line. So as we invest in the.
Since we don't expect everybody margins to get a lot bigger we expect to be able to invest in those to perpetuate margins similar to that or in that area for a long period of time overtime by investing into building you know new product lines and and also building do I think.
New profit centers that will originate those brick and mortar wires you know California's still remains a huge opportunity course, Texas still remains each opportunity and there's those things happen, we're not necessarily going to increase our into d. margins, whereas we're going to increase the top line increase the absolute top number of of a dollar a P.D.A., but the margins may not go up a.
Lot with tone up that Tony kind of comment maybe in more detail on that [noise].
Yeah. The the only thing I think Bob said, it pretty comprehensively the only thing or that for you. There is you know some of this depends on are volume mix to Mexico in Guatemala versus countries that don't have a foreign exchange game.
Component and you know as you know through the fourth quarter.
Bizarre mix moving away from Mexico, and now here in the first quarter, we've seen it moving back toward so we we can't say you know today, how that's going to play out for the rest of the year, but you know that that dynamic as an important part of what's going on but I still think you know you know it's exactly right what Bob.
But as far as we don't you know any excess adjusted March and we would expect to invest back into our future growth.
Thank you.
This concludes our question and answer session I would like to turn the conference back over to Robert Lissy for any closing remarks.
Yes. So thank you all for your time today on the call and thank you for your questions look forward to talking to you all soon and hope y'all stay well and best wishes from all of us to hopefully won't be through these difficult time soon and back to normal days, where you know we'll look towards even rose your days in terms of business world. Thank you.
Your time, we'll talk to take care.
The conference. This now concluded. Thank you for attending today's presentation you may now disconnect.
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