Q4 2020 International Money Express Inc Earnings Call
[music].
Greetings and welcome to the International Money Express, Inc, fourth quarter and full year 2020 earnings conference call.
At this time all participants are in a listen only mode.
Question and answer session will follow the formal presentation, if anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.
Please note this conference is being recorded.
And now I'll turn the conference over to your host.
My guarantee and vice President and the rest of the regions you may begin.
Okay.
Good morning, everyone and welcome to our quarterly earnings call. This conference call include forward looking statements, including our 2021 guidance.
Actual results may differ materially from expectations.
For additional information on and International Money Express, Inc, which we refer to it and air Max or the company. Please refer to the company's SEC filings, including the risk factors described therein.
You should not rely on our forward looking statements as predictions of future events. All forward looking statements on this call are based on assumptions and beliefs as of today.
Please refer to slide two of our presentation for a description of certain forward looking statements. We undertake no obligation to update such information, except as required by applicable law.
On this conference call, we discuss certain non-GAAP financial measures and.
Information required by Reg G under the Securities and Exchange Act with respect to such non-GAAP financial measures is included in the presentation slides for this call and our earnings press release, and our annual report on form 10-K, including reconciliation of certain non-GAAP.
And shall measures to the appropriate GAAP measures.
These can be obtained and the investors section on our website at inner Max online Dot com.
On today's call will be our chairman and Chief Executive Officer, and President, Bob, Let's see and Chief Financial Officer, Andrew spending.
Also on the call today is Joseph Aguilar, Chief operating Officer, and Randy Nielsen Chief revenue Officer and.
Now I'll turn the call over and above.
Good morning, and thank you for joining US today, we have a lot of great information to share with you and we look forward to answering your questions. Following our prepared remarks.
The past year has been an unprecedented period of challenge and change and a set of events that none of us ever imagined experiencing while people and organizations are tested through this kind of once in a lifetime experience much can be learned about the quality and stability and resiliency of those people and organizations.
And I'm proud to say that I've never been more appreciative of her grateful for our agents and consumers and employees and during the challenges of the past 12 months.
Large majority of cases, our agents continue to be open for business throughout the pandemic to serve their communities and the needs of our mutual customers.
Our customers many of whom deemed essential workers continue to work every day and many cases risking their health and the process to provide for critical and essential needs of their families and their home countries.
During this time our employees stayed focused on what we could accomplish through innovative and modified work practices, while supporting our retailers and delivering continued excellence in service to our customers.
Simply said when COVID-19 arrived this strong foundation on which our company has been built along with our nimble and us to pivot quickly delivered industry leading growth throughout this extremely challenging and unprecedented time.
We take our responsibility providing a critical service to millions of hardworking individuals sacrifice so much to provide for their families very seriously.
We provide a critical service that and millions of people rely upon to provide for basic needs such as food shelter and medical care for their loved ones back home.
Our agents are carefully screened as we're seeking retailers who share our passion to deliver for our customers.
One stage and becomes part of the Internet's team they are treated with respect and dignity, they're viewed as our partners. We support them in every way possible to provide the best service for our mutual customers and serve their communities with pride.
We do this by providing our agents with solutions for their business through state of the art equipment technology and World Class service.
Our customers are at the center of all we do when we aim to provide industry leading service on every transaction. We achieved this by providing the best customer payer network and service experience and the industry.
Lastly, dinner Max we value our employees and we have created an environment in which they can and will excel.
We ensure that they have the tools and support to continue to perform their jobs at an exceptional level. Even during these trying times and we feel we have created a strong bond with our employees, we're not forced to rely on layoffs or pay cuts during 2020 as some of our competitors did.
We recognize that there likely would be a service shortfall related to our competitors instead of contracting during the pandemic. We quickly adjusted our efforts to enable us to continue to aggregate market share on mobilizing our sales team to.
And to expand their reach with our retail network remotely as a result, we continue to grow revenue and remittances throughout the year.
This business philosophy is the foundation. The company is built upon and I believe it's one enabled inter Max to have such a record year and exceptional fourth quarter, while they are struggling.
Let me highlight on slide three some of the full year 2020 metrics the company achieved.
Net income grew 72% to $34 million.
Since 2018 net income has increased by 350% adjusted.
Adjusted net income grew by 30% to $42 million, we increase adjusted EBITDA by 19% to $68 million and 2020 and over the last three years. It has increased by 105%.
We grew revenues, 12% to $357 million, despite the effects of the pandemic, especially in second quarter. Since 2018, we have increased revenues by 66%.
These results were driven by our hybrid strategy of continuing to grow our targeted high quality high volume agent network, along with making disciplined cost effective investments and new products. These investments include our digital apps card products and expanding our send and receive markets.
And throughout we continue to provide the highest quality of service and the industry.
Our results and fourth quarter, we're even more spectacular on slide four net income was $10 million and 80% increase compared with prior year periods and.
Adjusted net income of $12 million.
And increase of 54% over the prior year period, adjusted EBITDA increased 32% to $19 million and revenues grew 19% to 99 million on these.
And these totals and revenue net income adjusted EBITDA and adjusted net income are all quarterly records for US. This is an amazing performance given today's environment on the next slide you'll see that our peer leading financial performance has been fueled by our strong growth and transactions both on our core markets as well as our emerging markets.
And fourth quarter of 2020, we produced the best quarter ever for remittances, producing 9 million net transactions and increase of 18% over fourth quarter 2019.
<unk> transactions and some of our emerging markets such as the Dominican Republic, Ecuador, Nicaragua, and Brazil, Kenya, and Ghana are growing much faster than our overall business.
Total our less developed markets increased transactions by 33% compared to fourth quarter 2019.
This strong growth and remittances and our emerging markets is also evident as seen on the chart, while our gross slope and second.
Second quarter and the height of the pandemic. These markets are now growing as fast as they were pre pandemic and they are growing at almost twice the rate of the overall company.
On slide six the strong multiyear growth and transactions had led to a significant increase in market share and our core markets of Mexico, Guatemala, Honduras El Salvador.
And they'll Salvador, which are <unk> 75 per cent of the entire Latin American market, we increased our share by 100 basis points from 2019 to 2020, we now have a 19 point for market share and these core markets.
And fourth quarter of 2020, and the same four markets intermix achieved a monumental 20% market share for the first time since.
Since the end of 2018 intermix increased market share by 210 basis points and these core markets.
If we go back a few more years the company has more than doubled its market share and in these key markets validating our differentiated strategy and world class execution. This long track record of transaction and market share increases translates into revenue and EBITDA growth.
So far on 2021, we have continued where we left off last year. We are experiencing continued strength and remittances with January and February running 19% above 2020 levels on the next slide more recently, we have continued to experience strong growth and our mobile app with transactions increasing 125.
Percent versus the prior year. Additionally, the number of overall wires that were deposited directly into bank accounts increased 50% and that now represents 20% of overall wires.
We have increased our focus on our investment and the digital offering and the fourth quarter of 2020 and have continued to build out our digital organization and we expect our new and enhanced App will be completed by the end of second quarter 2021, and Andrew will highlight some of the additional investments they are anticipated making related to the digital opportunity that we see developing and this.
Coming years.
And 2020, the company continued to modify its capital structure on slide eight the company completed a follow on offering and conjunction with certain original shareholders selling $5 7 million shares and 2019. The company completed a secondary offering where certain shareholders sold over 6 million share so their stock.
So on 2019, the company purchase or converted into shares of common stock all of the outstanding warrants, which were part of the original capital structure.
As a result of these transactions no single shareholder owns more than 10% of the company and there is no risk of potential dilution from warrants being executed.
Additionally, on slide nine and 2022 Board members retired and independent lead director was appointed and the company completed a process that started in 2019 to transition to an independent board.
All of these actions diversify the company's ownership structure reduced our perceived stock overhang and improved the average daily trading volume and strengthened our corporate governance.
In closing the underlying appeal of our business model with highly productive localized agent network and superior service quality enables the company to consistently deliver strong financial performance and challenging times and in good economic times. Our model also provides a high degree of predictability and the business and generates mark.
And what share increases and double digit compounded revenue adjusted EBITDA and net income growth and this enables us to reinvest and attractive growth opportunities.
To provide additional future returns and remain confident that our philosophy and dedication to profitability and sustainable growth will continue to drive a significant competitive advantage for interest.
With that let me turn the call over to Andrew spending.
Thanks, Bob and good morning, and all the analysts investors and customers that have joined US My comments will now focus on our fourth quarter results and our full year guidance for 2021, you can find the full year 2000, and 'twenty results and our press release and the attached financial schedules.
Turning now to slide 10, let's walk through our fourth quarter results and a bit more detail as Bob mentioned the company had a record setting fourth quarter across just about every one of our key metrics. It's even more remarkable considering most of the country is still operating at limited capacity. While in 2019 were still on the old normal is a testament to how resilient our customers and <unk>.
Poise are and shows what a solid operating income for the team has built at engine Max.
And the quarter, driven by and 18% increase and remittances, we generated record revenue of 99 million and increase of 19% over the prior quarter. The Companys continued focus on growing a world class high performing agent network, while making measured investments and other products and revenue streams like digital has enabled and interim ex to generate double digit.
As a percentage revenue growth every quarter since entering the public markets, except for the second quarter of 2020, which of course was the height of the shutdowns.
And the fourth quarter, the company and delivered record net income of $9 6 million and increase of 80% versus the prior year and on page 11, you can see that translating to an adjusted net income of $12 million and increase of 54% versus the prior year a.
A strong increase in revenues coupled with a continued focus on efficiency helped generate adjusted EBITDA of 19 million and stout, 32% increase over the prior year quarter. This growth outpaced revenue growth as we generated leverage from the ongoing migration to lower cost deposit services and reductions and cost to our payer network as.
Q4 was still rife with uncertainty. We're also very judicious and expense management and will be held professional fees travel and advertising spend to a minimum which provide an additional tailwind to our financial results as with revenue Intermix has a long and successful track record of generating adjusted EBITDA growth and double digit percentages every quarter.
Since trading and the public markets, even in the second quarter of 2020 during the height of the shutdowns intermix generated double digit adjusted EBITDA growth clearly something on the other <unk> companies just can't say.
Adjusted EBITDA margin for the quarter was 19%, that's and 180 basis point improvement compared with the fourth quarter of 2019. This is very healthy for a public company of our size, however, as well outline a little more on our guidance, we expect adjusted EBITDA margins to come down a little more in line with our historical results as well.
We invest and our digital offering and other growth initiatives increase their advertising expense and employees begin to travel more.
Moving on slide 12, our strong operating results and the fourth quarter and full year 2020 demonstrated the resiliency of the business strategy. This further underscores our confidence and the business model and we will return to providing full year guidance for the current year.
Assuming the worst of the pandemic is behind us and based on recent trends and some historical seasonality, we expect to deliver the following for 2021 rep.
Revenues up between 16, and 18% versus prior year that means $414 million to $421 million.
Adjusted EBITDA up 11% to 14% versus prior which means $76 million to $79 million.
Adjusted net income between 47% and 49 million, that's up 12% to 15% versus 2020 and GAAP net income between 40, and 42 million, that's up 19% to 24% versus 2020.
It's worth noting that our strong EBITDA growth percentage in 'twenty, one will not be quite as dynamic as our revenue growth and.
Of our 2020 cost tailwind dissipate, but will also be making some key investments and the future of our business our investment will be centered in three key areas first and foremost enhancing and upgrading our it systems as we continue to transform our ecosystem to more modern architecture, that's going to mean quicker time to market enhance integration.
<unk> and a better experience for our partners vendors and customers second investment related to our digital business itself as we look to cost effectively grow the user base.
Based on some early initiatives starting in the second half of 2020 one when the new World Class App is available we expect to significantly increase marketing spend to capture a greater share of digital and finally, we will continue and invest and our talent pool as a public company with specific focus on key leadership positions front and growth and technology.
From a quarterly perspective, we expect the second quarter will have the highest growth rate because of the 2020 comparative which were heavily impacted by the shutdowns and the first quarter should also exhibit relatively strong growth due to some 2000 twenty's shutdown impact and and this is even despite the February weather impacts of this year.
And then the third and fourth quarters of 2021 should be better benchmarks for the underlying business growth trends.
And closing our continued focus on high quality high volume agents, along with delivering a differentiated quality of service continues to drive our growth and gains and market share as Bob pilot at the beginning of the call over the past three years and a Max has grown net income 350% adjusted EBITDA 105 per cent.
And revenues and 66% on that backdrop, we're forecasting yet another year of double digit growth on all of those.
With that let me turn the call back to the operator for questions.
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One moment, please while we poll for questions.
Okay.
And our first question is from David Scharf with JMP Securities. Please proceed with your question.
Oh, yes, good morning, everybody. Thanks for thanks for taking my questions and.
Congrats Bob on obviously are navigating a very challenging year.
For all of Us Hum.
First question has to do with.
The geographic reach you know what went on.
When I saw the footnote on the slide.
With emerging markets I guess.
And kind of lost track of just how many.
How many receive geographies you're in now, particularly and in Africa.
Can you just provide an update on.
As we enter 2021, and just what percentage of the business.
On a revenue standpoint, you know it is captured by those emerging markets.
We don't disclose Africa by itself, Mike So David I am sorry, but if we were to and.
We don't normally look at the percentage of the business that is the rest of Latin America by itself, but it's a significant piece today I mean.
You know between Mexico, and Guatemala, El Salvador, and Honduras, although there are a large share of our business.
And there is tens of millions of dollars and revenue to countries like like Dominican Republic, Colombia, Ecuador, Peru, and Nicaragua, and others and as we've talked about many times, we really built the business intentionally to build out Mexico first being the most profitable market in terms of gross margin and the largest market by far and then.
And secondly, secondarily, Guatemala, and then from there obviously, all Salvador and Honduras. We continue now with the next largest received market and Latin America, Dominican Republic, and Thats been growing tremendously for us sometimes more than 40% year over year. So that grouped together is growing very quickly and it's a significant part of the biz.
But there's a huge upside and Africa is still a small piece, we've only been in Africa and little over a year and.
And.
It's there's some complexities there because it's not when we talk about Africa, we talk about it as sort of monolithic, but many different countries, obviously and some different language barriers and things, but the core of that market is really going to Nigeria, Ghana and a couple of other countries and we are beginning to.
And to grow that but we haven't disclosed how many or how big of a business that is for us today as of yet.
No no I understood and I and I guess.
Main reason I'm asking is obviously you know back when your core markets as defined where maybe just.
You you had 10 and 15% share you know not and not the 1920 you have now you know we were inclined to closely track Banco de Mexico data to try to get a sense for how U S and Mexico was that trending but.
You know with with a much broader geographic reach now and mix.
Just trying to get a sense for if there are other leading indicators, but we yeah. There are clearly huge opportunities with about four or five countries in Latin America, and when you get to and you add Dominican Republic, Colombia, a couple of other countries now you start to get to approaching 90% of the market. So we have to.
Talked about it so really concentrated market, 75% and just those four countries, where we've really focused but still tremendous opportunity for instance, Dominican Republic is just as large as the receiving country as El Salvador, Honduras, which means that we could triple our business theyre easily and still have headroom to grow and Columbia as in other markets. So we've got a lot.
Sort of a lot of greenfield and both of those areas, they're heavily concentrated markets Dominican Republic really generally it's the east coast.
Boston, New York, Florida.
Colombia is pretty concentrated in the east coast as well, so they're not and markets that are pervasive as Mexico, and Guatemala and easier for us to really tap into as now we've already built that base.
Understood and just.
Maybe one follow up to a different different topic.
On the digital front I know, it's very nascent at this point.
But I'm curious you had referenced that 20% of overall wires.
From interim ex are deposited directly into bank accounts.
And I would imagine on the receive side and that's kind of one of the big barriers for free for digital adoption.
And that may be the first time I've heard that metric and can you just provide some context as you know over the last like three years does that generally been yes, it's growing I mean, and you know a lot of the payers are either banks or there have subsidiaries that are banks like electric and big payer in Mexico, and as Banco Azteca co.
<unk> has been capella and so all of them have been on a push and.
And I think through trying to create accessibility to financial services in Mexico. The government has been trying to encourage more bank accounts in country and Mexico now the challenge for that is we think that those folks those 20% or with their sender probably less resistant to the online business.
It doesn't mean necessarily that the center on this side of the border is equipped with a bank account and the U S to do a wire, but we do think it's an indicator of moving more digitally and like I say, 20% now of our wires and it's been growing very very quickly some of the banks.
I'm, a very large share as high as 30% or more.
And even and Guatemala Theres couple of other big banks are very high in terms of percentage of deposits into bank accounts. So we see that movement going on but we don't necessarily always correlated to willingness or acceptability to originating side with with digital or online.
Right right got it thank you very much.
Okay.
Our next question is from Mark Palmer with BTG. Please go and see Whats your question.
Yes, good morning and.
And again, congratulations on a really strong quarter and a great.
Great display and resilience during the pandemic as you.
Mentioned, the company really adapted well to the environment, while others have struggled can you talk a little bit about the competitive environment.
We had seen discounting.
And in certain states prior to the pandemic what are you seeing both in terms of competition and pricing at this point.
Yeah, Thanks, Mark I think.
And I'll start up but just.
Talking a bit about what we did very quickly when we saw the beginning of the pandemic I mean, we had a couple of choices to make we knew that our sales force the sales force that interacts and retail with our agent network would be you know not mobilized would be stuck at home for some period of time and we had the choice like many of our.
Competitors to either.
You know kind of pull back and retract a bit maybe lay people off maybe cut some salaries and we kind of doubled down we right away went to our sales team and said you know what we're going to we're going to keep your whole you know for a certain period of time until we sort of figure this out and where COVID-19 is going but here's what we're going to ask from you. So normally they were all calling on ex number of retailers and a day.
So you said youre going to your second home, but the retailers are still open in many cases, and we need you to contact about five times as many retailers a day by telephone and so actually it was interesting for us we actually expanded our reach by five times.
And normally had been now wasn't the in person visits but it was the over the phone and we think and had a lot to do with while everyone else was kind of pulling back we were actually more aggressive at least contacting more agents on a daily basis by the phone versus less agents and person.
After that happened, we think that we not only held service and our retailers, but remember in most cases, we're alongside of other companies and most of those other companies did not execute nearly as well and many cases they became fearful early on and created lay offs or crude and pay cuts and created a bit of day motivated sales force.
All our sales force felt pretty secure and also pretty willing to go on and be assertive and aggressive and retail and that helped us a lot.
I'm Gonna have Randy Nilsen, as you know our chief revenue officer, those obviously a lot much closer to what's going on at the field comment a little bit further on that Randy yes, Thanks, Bob Hi, Mark.
Bob is exactly right I think the point I'd like to stress is our field team was extremely motivated the entire year, Bob and I made the decision to keep their commissions whole. During this challenging time. So we had a very motivated sales team that was working hard the entire year and bringing and grew.
<unk> results of course, I want to address a little year per your question a little about the price compression on what.
And we saw as you real as you know we generate revenue on two streams and fee income and and FX income.
Both were really helped this last year as the average principal the amount people were sending home increased so our fee per transaction actually increased as the principal increased as did our FX revenue. So while there may have been a little bit of price.
Price compression on the amount of ex FX that was being offered on each transaction. It was offset by the amount being sent so our gross margin and our revenues per transaction. We're actually remained very healthy if not a little better than the year before.
Does that answer your question.
It does if I can just ask one quick follow up along those lines.
What what.
Do you believe were the drivers of the larger per.
Principal per transaction.
During the pandemic and do you anticipate that that's going to continue as the pandemic abates and thanks.
Yes.
We think as far as we can can conclude.
Conclude at this time that there are greater needs is greatest and needs. We're here and the U S that people back home, and Mexico, and Guatemala, where hit even harder.
In terms of the pandemic.
And whereas most of our workers for essential workers on paid share there and we're essential workers and others were nimble enough to find movement away from areas, where they couldnt work either verticals that were closed down like restaurants, or even geographic areas that they moved to to stay employed so they were working and the needs.
Back home really increased a lot and so we think that that had a lot to do with it we think in terms of our Mexico market because so many of those folks are in like the food.
Processing more picking of crops and agriculture and things like that that that stayed really really stable and those folks had equal amount of money and the needs were bigger back home as we created our budget for 2021, we haven't really.
<unk> that the principal amounts will stay at that level all year.
So far during 2021, we've seen principal amounts staying relatively high and there are tens of dollars $30 $40 higher than what they traditionally have been so far we've seen them at those levels, but it.
It's not something that we've.
Felt that we could take for granted throughout the year. So much of the stuff you hear US talk about for 2021 is assuming that those principal amounts come back to the normal average amounts throughout 2021, although again through the first couple of months they've remained high and looking more like what they were in 2020.
Okay.
Thank you welcome.
And welcome.
Our next question is from Micron and <unk> with Northern Securities. Please proceed with your question.
Hey, guys, congratulations on the quarter and and the outlook for 2021, maybe Randy just staying with the with the field sales force for a moment did.
Did you hire at all during 2020 did you expand that sales force and then and.
Anything to call out in any U S regions, where things may be came back quicker or more resilient or or even a little slower than what you might have thought.
Yeah, Yeah. Thanks, Doug Good morning, Mike Good to hear from you.
Let's take the geography question first and surprisingly our northeast region, even though it was the hardest hit early on and continued to perform extremely well, we're really proud of that team and the <unk>.
And resilience they've had all year and really for a couple of years now.
We've upgraded the team for sure we took advantage of the opportunity we upgraded our sales teams throughout the year. We hired three tremendous sales leaders that we're really excited about in September and they've made on early contribution we added two more.
Tremendous sales leaders and the beginning of December that have come in and made and early impact. So we like the way our team is structured if youll remember fourth quarter 2019, we had several vacant positions that we think slowed our sales down a little bit and if we compare that to fourth quarter of 2020.
We had many more feet on the street and we were more productive per head count and <unk>.
For 2020 than we were 2019, so all in all yeah, we sweep snapped up and expanded our team and we're more productive.
And that's great to hear and then just maybe as a quick follow up.
The three things you guys called out as kind of key investments.
And <unk>.
Rough dollar range, that's kind of going to those as a bucket.
So we can kind of gauge it in kind of think about 2022 and going forward and if those are continued to be needed.
Yeah. This is address.
Mike I think the best color, we will give you on that because some of it particularly marketing spend and digital is something that is kind of sensitive and we want to keep on our own is the guidance that we set of coming back to more normalized margins.
So I think between our investments and and it investments and digital digital.
And with digital business sales and investments on our talent pool.
I don't think it will be up at the 19% adjusted EBITDA and would expect us to come between 18 and 19.
And.
Got it.
Got it.
And I hear it hey, guys. Thanks, a lot and thank.
Thank you sure.
Yeah.
And as a reminder, if you have any questions you May press star one on your telephone keypad door and so we're ensuring that you have joined the question queue on.
Next question is from Justin <unk> with Credit Suisse. Please proceed with your question.
Hey, Bob Andros, Mike How's it going good to hear from you.
Okay. So.
And so I wanted to follow up a little bit on the prior conversation around some of the more nascent markets that you guys are in.
And.
And Latin America, such as demand and Republic, Colombia, Peru, and Nicaragua et cetera.
Nice announcement earlier around them growing two ex the company average about.
I'm, just trying to dig into that a little more I mean.
You.
Can you unpack the growth algorithm, how you expect that to kind of fuel transaction growth and this mid to high teens and the future, meaning you know.
How do you expect to gain share there and given some of these are.
Kind of less United States space, meaning they're getting sand from perhaps other countries within Latin America, such as call. It you know Costa Rica, sending over to Nicaragua is there an opportunity there to expand your send capabilities into other Latin American countries for kind of and inter Latin America.
Exchange or are you looking perhaps to further gain share elsewhere in the states or maybe just again unpack that growth algorithm, especially and some of these more nascent countries.
Okay, well, there's a lot of questions there and one so let me start off first with that our growth trajectory, although it will be very much fueled by U S. Outbound.
And two or contributed to by U S outbound to countries like Dominican Republic, Ecuador, Peru, Nicaragua, Colombia is not dependent on that there is still a huge amount of growth for us and if you look at our growth trajectory, that's still exists and the way we're gaining share on the four core markets, which are 75% of Latin American business U S. Outbound.
There's still a lot of growth there for us we've continued to gain share not only and the newer ones for us, Honduras, and El Salvador, but and in Guatemala, and even in Mexico. So there is there's a lot of opportunity there as we look at Dominican Republic, whenever we talk about share and where we're talking about opportunities U S. Outbound.
And we don't look at yes, there is some business for Dominican Republic from even from Europe.
And unusual as it might seem even from countries like Switzerland, and the Dominican Republic, but we focus on on the U S market size.
And the U S market size of Dominican Republic for instance, just to pick one is it's about the size of this El Salvador, Honduras and yet we do about a quarter as many wires to Dominican Republic and also remember we have a growth trajectory.
Salvador and Honduras, so theres, a tremendous amount of growth that's available from countries like Dominican Republic from Colombia, Ecuador, Peru, and Nicaragua, and others U S outbound exclusively now.
You bring up a good point and something that we're taking a look at it and we don't want to say too much about because theres not a lot of folks in that arena, but we also do believe there is a lot of intra.
Our Latin American business for instance, Dominican Republic is a big receiver from Puerto Rico and today, we really don't.
And wires from Puerto Rico, Dominican Republic, but Theres also a lot of wires internally within what we would think of as Central America.
And Peter Costa Rica, Guatemala, Guatemala, El Salvador, Mexico, and Guatemala, Guatemala, and Mexico, and we think that with our current payer network and our branding that theres an opportunity. There that we are looking at but again, we don't want to say too much about that and any plans that you see our heroes that we talk about are really talking exclusively about the growth. We believe we have to.
Our core markets, which I think is still significant and then along with those secondary markets to Latin American and of course Africa and other new countries, where we're servicing.
Don't have to have.
Tremendous growth to those secondary countries to have great growth. There's so many opportunities that if every lever was.
Was absolutely played out perfectly any one of those levers can drive the kind of growth that we need and theyre all they all have their different challenges, but as I said, we still have tremendous growth, particularly in the west we've been growing and the west forever. We have some states that we've grown tremendously like Arizona, but were still relatively.
Underrepresented in the Western states versus the eastern States and still a tremendous amount of work to do there and a tremendous opportunity to access just with our core markets. So we think there's opportunity everywhere if it makes sense and.
And but you did hit upon something I think that's really valuable that inter Latin America kind of transaction is something that we are looking at and we think that there is an opportunity there.
But we're not at that at that point, yet and it's certainly not anything we have suggested and any of our planning for 2021.
Got it got it no that's super helpful and I guess, the thought was coming around you have a massive pay out and network already somewhat at scale, there and it would seem Nate perhaps a logical next step to turn those just and descending markets, but one quick follow up if I may regarding digital and thank you for the disclosures around the transaction.
Gross there just wanted to parse through the growth would you say that is more from a tougher comp dynamic or would it be more of a shift like you saw a big shift in Q2 to digital just due to lockdowns and such and given your more though and focused on brick and mortar was that more of a just returned to.
And store or is that a tougher comps issue. Thanks, so much for the time guys.
Yes. Thank you I mean first thing we want to make sure we get kind of out of our language as brick and mortar.
We're no more brick and mortar than Airbnb is I mean, we don't own brick and mortar or the 7500 agents, we have our agent retailers. They on the brick and mortar we provide a service and the service. We provide is digital and the only difference between what the marketplace calls digital and what we do is that that digital is extended to the hand of the consumer versus sitting on the agent.
And retailers desk in terms of their PC. So I want to make sure. We are clear about that we it's one of the great things about our model versus models that might have a lot of brick and mortar and leases of their own I think we have about 7500 agents, who may have about 30, some retailers that we actually own the lease on the building. So most of our business is not really brick and mortar and.
Traditional sense, it's it's and outlet that we or someone else's brick and mortar that were using as a window of commerce to the consumer but <unk>.
And on further with the whole brick and mortar we did see a movement and I'm sorry, the online business, we did see a movement and second quarter.
Net everybody saw Q1 line.
We are seeing people as we look at our research. So we're seeing people that are.
Actually some people who are it's an interesting concept that have come to us first time to us at least and.
Online transaction, and then actually moved to a retail transaction and primarily a retail and now we're seeing people that are going to both and we're seeing people that have migrated to one or the other so now overall, we're not seeing a huge amount of crossover overall, but there is actually and our numbers are not huge numbers, but and our.
Numbers, we've seen more people come to us to start with and digital and then go back to over the counter retail than we've seen people come to us first and retail and go to digital and stay and digital so it's sort of an interesting thing which for us kind of reinforces that we know that digital is going to be a growing part.
The market there may be a very different customer groups right now that's what we're generally seeing and I think other other competitors have said similar things and the other part is is that the there seems to be a great amount of resiliency and determination to stay at retail for those people that are at retail.
And we think though that the retail business and if you talk to any other people, primarily most of them and a pure player and not public company. So they don't necessarily and Theyre not disclosure reports out there, but the biggest cost and the reach and the on the digital business is going to be the customer acquisition cost and and it's how much do you want to spend to build the <unk>.
Customer base, but you know at this time is very very expensive to build and how do you build that we think that the best way for us is to build that through.
We have 4 million distinct customers every year and we want to be very respectful of our retail network and our partnerships and retail, but we also think that we're much better positioned than the pure place to be able to win consumers that are today at retail are interested and moving to an online transaction that we're well positioned because we have.
Our relationship with them and we think that the.
And the companies that find a way to be and both by the way and.
And.
And I can't disclose too, but I've spoken to about three or four online guy. So I'll say, we think the best thing is to be in bulk and on these are people that are pure play.
So I think that the company that finds a way to be able to be offering both alternatives to the consumer and doing that not to necessarily be forceful and moving people from retail and that could actually be detrimental to that very high quality and profitable business are going to be the.
Companies that further ahead and those are the things that we look at is how to best serve the consumer and <unk>.
While staying very focused on both sides of the equation because we think five years from now even 10 years from now youre going to need to be and both sides, particularly in certain markets that may not be the case and India, the Philippines, but it's going to be the case with the markets that we're primarily focused in that both sides of that equation are going to continue to be important.
Got it got it so to summarize it does sound like a decent amount went to digital for one or two transactions and boomerang back to using retail or online and I should say, sorry, but no not really that's not correct.
People more people came to US initially on line just did never saw before and then went to retail after they knew US then people that came from retail and went to online and stage and online most of the people that converted kind of went and both the integrated back and forth.
So we didn't see a lot of people and again, we don't have a huge online business, but we have tens of thousands of transactions per month. So we certainly have a big enough sample size and we're not seeing that a lot of consumers are big share consumers left retail to go to digital and stayed there we're seeing actually.
The opposite that more people actually started and online and went to retail and stayed there the opposite.
Interestingly the interesting thing we've seen.
Thank you so much youre welcome.
Yes.
And our last question is from Josh Beck with Keybanc. Please proceed with your question.
Thanks team for taking the question I have a two parter, maybe if you could just.
Share anything that we should be thinking about on <unk>.
Q1 seasonality versus prior years, you obviously gave some helpful guidepost on.
Q2, being the high watermark for year over year growth, but not sure. If there's anything else you can.
Elaborate there and then.
This might be a bit tricky to do but just as you think about 'twenty, one and could.
Could you help us understand.
What you're expecting in terms of market growth I know, that's a really difficult one and theres, probably a lot of ranges of scenarios, but and.
And any color on those two points would be appreciated. Thank you.
Okay great.
So let me start with the second and first I think thats made up and easier, but it's quicker answer we've seen Mexico remained really strong throughout 2020 surprisingly so I mean, not because we didn't think it was a resilient market, but it was so strong and came back so quickly that even our mixed shift at times of the year.
To shift more back to Mexico versus all other countries not meaning it was bigger than all others, but it was growing faster than all others for a period now we started to see that stabilize again, but the core of the business Mexico. I think we would think will probably be and the at least the middle if not the high single digits it could be as high as <unk>.
1% or 10% year over year.
We have seen it be a little bit choppy month to month, right now and so but I think the average has been and the high single digits to even as high as 11%, 12% on the average so it has performed extremely well and Guatemala and other countries have been a little softer.
Salvador Honduras.
Particularly during the height and I think we're through COVID-19, but during the height of Covid and we saw at times, where those countries really struggled and receiving because banks will be closed on particular weekend days, which caused there to be.
Really and.
Predictable demand and then the <unk>.
Dave's were just off and all of that and the overall numbers were weaker but I think we will.
Look at the market, we're pretty optimistic about 2021, Mexico remains strong and we think some of the other countries will be lapping relatively weak numbers. So we expect them to to stay pretty strong.
As far as the first quarter year over year 'twenty, one versus 'twenty, we're really dealing in a world and.
On January and February of 'twenty, one versus 'twenty are a very normalized world I mean, most of us didn't hear much other than a blurb here or there about COVID-19 and until we got into March and March the business became really volatile and it's the first time in history that I've been around this and we've got folks on the room between Joseph Randy and me that had been around <unk>.
Industry, a long time, where we saw the peso actually trade and move in terms of pesos overnight and not centavos, where a couple of times you know we saw during March where the peso went from 21 to 23 or 23% to 21 overnight, which was completely different and new and nothing we've ever experienced.
And before.
And that led to.
March being really crazy last year, and so we think we've got a good comp because there were times in March where everybody was rushing and sending and you had really crazy comp days, but overall as a month. We think we've got a good comp to March of last year, the first quarter having.
Started off really strong for us it would have been a lot stronger there are two things that happened in February one is we knew about which is we're going 28 days to 29. So right away you have a 2% to 3% decline and growth because of that and second the snow storms that hit really hard and the south and the southeast and even in Texas really there were days, where those markets were virtually shut down.
So, but even coming through that we still were around 19%, 80%, 90% transaction growth year over year March is a good comp, which should come in really strong and march or too early to predict but the business and that month last year was really choppy and then of course, you remember for US we didn't really have a horrible second quarter last year, we had on.
Horrible April, but we popped up pretty quickly so we versus a lot of our competitors don't have the easy comp that they have because we didnt go fall through the floor, we actually grew EBITDA and second quarter last year 'twenty versus <unk> 19, So we have a good comp, but we don't have a comp that's like some of our compare.
<unk>, where they might have contracted by 20% and EBITDA or our net income and second quarter of 'twenty versus <unk> 19, so it'll be a good comp force, but it's not it's not nearly as good as some of the others because we have such a strong second quarter relatively speaking compared to the market and 2020.
Yeah.
I think I'll just echo upset I think the fact that we're two months through 2021.
With those snow storms still running 19% above 2020 levels and headed into a good March comp I think Q1 is going to look pretty good and Q2 is obviously going to be our biggest quarter, but bench.
Benchmark Q2 versus some of our competition as Bob said, we might not stand out as much but it is going to be a good comfort zone.
Really helpful. Thanks, guys.
Thank you.
And we have reached the end of the question and answer session and I'll now turn the call over to chairman and CEO, Bob Lissy for closing remarks.
Well. Thank you all for joining us on this first quarter call.
Happy to have 'twenty 'twenty behind us it was a year of a great deal of challenge and.
And we're really proud as a company that we're able to grow the way we did keep our employees.
<unk> employed and kept the company strong and I think it's been a testimony to.
The real sustainable growth and and profitable growth that we built into our business, it's a bit of and old fashion business and some ways right, but that old fashion business held up like the house of bricks that we've described it many times. So we're really proud of the results and the results that this team and the rest of the team has developed and created in 2020 and we're looked.
Forward to a great 2021, so we thank you all for joining us and look forward to talking to you all soon.
This concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.
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