Q2 2021 International Money Express Inc Earnings Call
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Thank you for standing by this is the conference operator welcome to the International Money Express Inc. Second quarter 2021earnings conference call. As a reminder, all participants are in listen only mode on the conference is being recorded.
After the presentation, there will be an opportunity to ask questions to join the question queue. You May Press Star then 1 on your telephone keypad should you need assistance during the conference call you may signal, an operator by pressing star and zero.
I would now like to turn the conference over to Mike gallon time, Vice President of Investor Relations. Please go ahead.
Good morning, everyone and welcome to our quarterly earnings call. This conference call includes forward looking statements, including our updated 2021 guidance.
Actual results may differ materially from expectations.
For additional information on International Money Express, Inc, which we refer to as <unk> 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 2 of our presentation for a description of certain forward looking statements and 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 information required by regulation G of 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, our quarterly form 10.
In Q and our annual report on form 10-K, including reconciliation of certain non-GAAP financial measures to the appropriate GAAP measures.
These can be obtained in the investors section on our website at <unk> online Dot com.
Presenting on today's call will be our chairman and Chief Executive Officer, and President, Bob Lessee, and Chief Financial Officer Andre spending also on the call today is Joseph Aguilar, Chief operating Officer, and Randy Nelson Chief Revenue Officer, Let me now turn the call over to Bob.
Good morning, and thank you for joining US today. This morning, we have some exceptional quarterly results to share with you later, we look forward to answering your questions. Following our prepared remarks.
As you saw detailed in our press release that was issued this morning Intermix recorded another remarkable quarter of record setting operating and financial results. Let me highlight some of these accomplishments on slide 3 net.
Net income was $13 million or 47% increase compared with the prior year period, adjusted net income of $15 million or 41% increase over the prior year period, adjusted EBITDA increased 33% to $23 million compared with the prior year period and revenues grew.
37% to $117 million compared with the prior year period.
Additionally, we generated a record number of remittances with over $10 million, while transferring 4.4 billion for our customers. This represents a remarkable 53% increase in dollars transferred over the second quarter of 2020 Lastly, we achieved a record high market share of 21% in our core markets of Mexico quarter.
Mala El Salvador and under US as we continue to grow faster than the overall very robust market.
These results underscore the success of the company's omni channel strategy.
We are focused on partnering with the best retail agents that are strategically picked to meet the consumer needs and offer the very best service quality in the industry. We do this while continuing to expand our online digital business for those consumers, who prefer that option, we carefully and aggressively expand our payout network to deliver wires more efficiently and effectively.
<unk> than ever before whether those remittances are paid digitally to bank accounts loaded on a mobile wallet available through an ATM for paid out over the counter on cash we are proud to say that more than 20% of our remittances are settled digitally in the receiving country.
1 of our biggest growth opportunities continues to be to maximize our retail digital business by improving our presence in ZIP codes that are currently unserved or underserved. Although these opportunities are primarily in the western states many growth opportunities remain throughout the U S. Even in our most established states.
This opportunity fully once accessed and maximize could more than double the size of our retail remittance business over the next several years pursuant to that opportunity. We've added more new retail agent locations than anytime over the last several quarters in Q2.2021.
Our omni channel strategy focuses on meeting consumer needs with the best retail and online product and service in the marketplace. It is fueled by our exceptional growth in transactions across our core markets of Mexico, Guatemala, Honduras, and El Salvador as well as our emerging markets you can see this illustrated on the next slide.
And second quarter of 2021, we're proud to have generated 10 million remittance transactions. This represents an increase of 33% over second quarter of 2020 and was the largest total number remittances ever sold by the company on 1 quarter. Please keep in mind as illustrated on the chart. Unlike many of our competitors we continue to grow both.
Total transactions in emerging market transactions throughout the height of the pandemic last year and second quarter 2020 transactions in many of our emerging markets, such as Dominican Republic, Ecuador, and Nicaragua, among others continue to grow at an even faster rate than the overall business.
In total our emerging markets grew transactions by 41% compared to second quarter of 2020.
This total growth and total remittances and emerging markets is also very evident as seen on the chart. It is important to note that the 2 year growth is 37% and total transactions and 69% in emerging market transactions from Q2, demonstrating our ability to grow our business in both good and also.
On more challenging times.
On slide 5 the strong multiyear growth in transactions has led to a significant increase in market share we continue to grow at a rate well above the market growth.
<unk> overall and gained share.
We believe our consumer orientation is driving this outsized growth.
We offer the consumer all possible options to send a wire our consumers can send a wire at retail by using cash or debit card on line by using a debit card credit card or a C. H. Additionally, on the receiving side consumers can receive money digitally into their bank accounts loaded on a mobile wallet paid out on an ATM.
Pick up cash in a convenient location importantly, all of these funds are available in minutes.
Our omni channel strategy is focused on providing our customer choices not forcing the consumer to options that are very expensive from a consumer acquisition cost perspective, historically, we empowered our consumers to choose the best option for them. This consumer focused approach has led to a total increase in dollar sense.
Of 88% over the last 3 years.
Same time intermix as efficiently investing in growing our consumer based digital app offering on the next slide we have continued to experience strong growth with our mobile app with transactions, increasing 66% compared with the prior period.
Based on the definition of some of our competitors, who define a digital transaction is a transaction where either side of the remittances cashless.
Intermix processes more than 22% of its transactions digitally. These remittances were initiated as digital transactions on the send side or were settled digitally to the receive side.
During the second quarter transactions that were deposited directly into a bank accounts increased 50% compared to the prior year period track.
Transactions processed through the use of debit or credit card and retail are small percentage of their overall wires, but are growing 117% year over year.
These transactions will continue to grow as we expand the number of retailers who accept debit cards.
In closing we are confident that the underlying appeal of our omni channel model driven by our best in class retail network combined with our digital online strategy. The acceptance of debited retail along with the ability to settle transactions, both digitally and the bank accounts as well as over the counter and cash placed <unk>.
<unk> in a unique position to continue to outpace the market growth and gain share our best in class customer care unique agent selection process and technological advantage at retail will continue to drive the company to deliver strong financial performance over the years. Our model has proven itself to provide a high degree of predictability.
By delivering double digit revenue as well as EBITDA and net income growth.
This enables us to reinvest in attractive growth opportunities to provide additional future returns, we remain confident that our philosophy and dedication to profitable and sustainable growth will continue to drive a significant competitive advantage for intermix with that let me turn the call over to our CFO Andrew spending.
Thanks, Bob and good morning to all the analysts investors and customers that have joined us today.
Turning now to slide 7 let's walk through the second quarter results in more detail as Bob mentioned, we broke records across all of our key measures and did it against the <unk> 'twenty comparative that was positive for our company, which is a very different baseline comp versus most of the industry, which was negative in <unk> 'twenty.
In the quarter revenues were up over 37% versus the prior year quarter to $116.7 million or first time, breaking $100 million on the quarter and beating consensus by over $10 million. A combination of factors contributed here of the company was up 23% on customers' remittance transactions were up 33%.
And the average remittance amount continued to climb in our favor 15% higher than a year ago.
Net income for the quarter was $13.2 million up over 47% versus the prior year period, which translates to an adjusted net income of $15.3 million, which you can see on page 8 an increase of over 41% versus the prior year period, not just a record growth rate, but another milestone for the business to break $15 million on a singer.
Good quarter.
Pretty dynamic revenue growth was the key driver, however, lower depreciation amortization and interest expense all contributed to a great bottom line result.
Service charges from agents and banks were up but again, that's a function of our success at the front end these costs move in line with transactions.
Salaries and SG&A expenses were up as in past quarters and these are in line with our plans, we're confident that our thoughtful investment in key leadership positions crown on growth, but especially technology and digital are positioning us well for the second half for 2022 and beyond.
All of what we've been speaking about drove adjusted EBITDA up over 33% to $23.2 million again. This was against the <unk> 'twenty comp, where we were growing as a company.
Adjusted EBITDA margin for the quarter was 19, 9% and aside from the ultra low spend during the height of the pandemic. It's really 1 of the strongest margin quarters. The company has seen for years.
We expect our investments, especially in digital to normalized margin some in the coming quarter, but I'd just a hair under 20% Q2 was a really really healthy margin quarter for us.
It's worth to mention that we successfully refinanced our $87.5 million loan facility at significantly lower rates at LIBOR, plus $2.50 to 300, depending on our company leverage down from LIBOR plus 450 in the old facility.
In addition to better rates, we significantly expanded our revolving credit facility from 35 million to $150 million. It was the right time for us to capitalize on the sustained performance of the business and the strength of the balance sheet, the new facility and our expanded banking relationships put us in an excellent position to grow.
Okay.
On slide 9 we had a great first half and we're going to confidently raise our full year 2021 guidance. We now expect revenue to be between $4.41, and 450 million GAAP net income between 43 and $45 million adjusted net income between 51 and $53 million and adjusted EBITDA.
<unk> of $80 million to $83 million, we're going to keep executing on the company isn't a great position to grow earnings in the second half of 2021. The only reason our earnings wont be even more dynamic than the guidance I just gave will be our investment plans, where efforts, especially around digital and technology are going to accelerate even more with that let.
I'll turn the call back to the operator for questions.
Thank you we will now begin the question and answer session to join the question queue. You May Press Star then 1 on your telephone keypad, you will hear a tone acknowledging your request if youre using a speakerphone. Please pick up your handset before Christine any keys to withdraw your question. Please press Star then channel.
We will pause for a moment as callers join the queue.
Okay.
The first question is from David Scharf from JMP Securities. Please go ahead.
Thank you good morning, everyone and thanks for taking my questions.
Hum.
Bob.
2 things I wanted to inquire about the first.
It's something that sort of ripples throughout the income statement and.
It relates to the steep rise in principal per transaction.
I think started to see this phenomenon emerge.
Probably late last year I know.
Until recently, you've been hesitant to kind of classify it as a new normal but it obviously has a lot of positive implications on.
FX volume and margin.
With it up 15% I mean do you have any more insights into what may be still driving that and whether you believe.
Yeah.
As a new normal and therefore impacts the margin outlook going forward.
Well, it's clearly been the new normal for more than a quarter or 2 now we've seen this happening later in 2020 and it's once we built the plan for 2021, we wanted to be really conservative than we were and kind of went back to closer to normal principal amounts, particularly with Mexico.
Because that's really where it makes the biggest difference so biggest market is the 1 where we gained the biggest FX gain so.
So we were really conservative we're seeing it.
Yes.
Excuse me.
Sustain itself and.
We think the factors that are contributing to it is that we've had a very strong economy in the U S. But relatively speaking we have also seen a relatively weaker economy related to COVID-19 and its effects south of the border.
Know that from our own call centers, we know that from talking to people in this.
That are there we have a lot of employees in Mexico, and Guatemala, and we know that those those countries continued to be hit harder by Covid than we are north of the border. So I think it's a combination of both stronger economy here more troubled economy in the south and people are sending more money to be able to help their families. I think in addition to that that certainly the.
The amount of money Thats put being put into an economy. That's bolstered every economic factors also helping our consumers and our centers some of which benefit directly.
Relative to actually getting checks from the government because they are documented and they've been on the books and they are getting these these stimulus checks others because there are benefiting from it in a secondary manner. They may work for someone who is getting a stimulus check people better getting stimulus checks may decide it's the right time to landscape the yard or put a deck on the back porch or whatever it might be.
That creates a greater stimulus so I think the strong economy and it is theyre. All of this housing starts remain relatively strong I mean, we've seen as we've talked about are our consumers work and construction.
<unk> culture and service and 2 of those 3 have been really really strong even through the biggest and hardest days of the pandemic. So.
We're not ready today, yet to say this is the new normal, but when you look at our guidance and it's up and guidance on the second half. We're certainly assuming a stronger number now part of what you also have to understand is that extra profitability. If you will that we're getting from that has been very very efficiently investing in the business.
A lot of it related to our digital and creating a better technology, particularly for our app for the for the mobile devices as well as investing into our digital related to promoting that business as well as promoting other businesses like our card business. So this this this increase the principal amount that ultimately triples to the <unk>.
Bottom line is is being invested very efficiently and new divisions, new verticals for us to help make a stronger and more vibrant in the coming years.
Got it.
Helpful and maybe just 1 follow up.
In terms of the footprint.
On the send side I mean in the past you've always strongly.
<unk> emphasized agent productivity and quality over quantity that agent count alone.
Isn't the key metric, but you did call out specifically in your prepared remarks.
This quarter you added more than any other prior 3 month period can you talk more about where they were added and what the outlook is for the balance of the year on that front well there. They were added throughout the country and some of it is a little bit of pent up to right, where we had some slower quarters last year as we were forced by many to pull.
Our sales force back and have them work from more from home and working over the phone with their agent retailers, which slows down the ability to us to add new retailers, but we've been adding them.
Throughout the country and as you heard from my remarks, whereas we think the west still remains the place where we have the greatest opportunity and interest.
Factual based on our market share in the west versus our market share on the east and the number of agents. We have performed born in the west versus number of agents. We have performed born in the east, but we still think there's a lot of opportunity. So we're adding agents throughout the country and new agents have always been a big part of our growth. It's just.
Reductive new agents right. So we want to continue to make the agents we have grow on a same store basis, which is continuing wed like to see that would be a double digit same store growth at least but lately that's been much higher than that and then the new agent retailers are also adding to that so theyre always been on an important component, but we kind of slumped a little.
Through the through Covid, because we had people out of the not in the market every day, adding agents and now they are back in full speed and Theres, a little bit of a back in backlog of agents to be added, but we think now we can sustain that because 1 of the things we're doing with some of the.
Extra revenue that could be even above that increased guidance. We gave is investing even in more folks in the field, particularly in the west to be able to drive even more agent acquisition to be able to drive more volume and have us roll into 2022 with even more momentum than we otherwise would.
Got it great. Thank you and congrats on.
Thank you I appreciate it.
The next question is from Timothy Chiodo from Credit Suisse. Please go ahead.
Thanks, a lot good morning, and thanks for taking my question I wanted to talk about what visa has been discussing publicly on some of their earnings calls and conferences in terms of their partnership with many other of your competitors in terms of remittance providers, maybe you could just talk a little bit about in terms of the payout method you mentioned money that you already or that you're on.
Already offer to your customers, maybe you could talk about the potential to work with visa direct Mastercard sand et cetera, and where you think that sits in really to the overall broader industry.
Yes, I mean.
Today, we have we've talked a little bit about I mean, and I think sometimes it gets lost in the shuffle in terms of what our business looks like on the on the payout side today.
Some of our payouts on cash some of them go directly to bank accounts, which is now a significant number about 20% of our of our remittances go directly into bank accounts, there's a share that could paid into mobile wallets and theres a share that can be accessed at Atms. So we continue to look at every option that the consumer might want.
To be able to access money in funds both on the receiving side of the border in the sensor.
Relative to the retail side, we've been ahead of the curve. We were the first guys I believed in the marketplace that took debit cards at retail and we have a number of agents to do that and as you heard us talk about in our in our prepared remarks are our credit card debit card at retail has grown 717% year over year.
And we plan on extending that card reader to more of a retail agents because we think that many of our consumers still prefer retail, but they prefer a cashless kind of ascent now cashless on that sense side May also end up still being cash on the payout side. There is a sort of a mismatch of how people sense.
Sometimes it's it can be by card here in cash on that side cash on this side to a car. There. So what's important is to really offer the consumer every possible option.
And we think we're doing that we'll certainly look and explore visa and Mastercard options.
That makes sense for our consumer we've been less likely and less involved in trying to grab headlines with fortune 100 companies and signing you saw how well 1 of our competitors work with working with 1 of the.
<unk>.
Cyber currencies, and how well that worked and how well when that rug got pulled out and how it affected their financials. So we're not really really big into into things that are form where things over substance and thats why our market share continues to grow that's why we have a 21% market share now to the 4 core countries in Latin America that represent 75.
Percentage of the money go into Latin America, No..1 else has that kind of share is growing that way because day in and day out we're looking at the very best options for our consumers on both sides of the border, but you won't find us just trying to steal headlines because what we're trying to do is do what's best for our consumers and best for our retailers and that we continue to do on offer many many options that are paying.
Very big dividends as you can see from our numbers.
Excellent. Thank you so much for taking the question.
You're welcome.
As a reminder, if you have a question. Please press Star then 1.
The last question is from Mike Grondahl of Northland Securities. Please go ahead.
Hey, guys congratulations on the quarter.
Yes.
Bob You mentioned, new agent growth that that was stronger than it had been it sounds like several years.
<unk> mentioned, a little bit about the backlog and the pipeline could you kind of speak a little bit more to the backlog on the pipeline how robust that looks.
And is the is.
Is the larger sales force, obviously, helping to contribute to this a little bit too.
Yes, I mean I think it's.
I don't know that we have a huge backlog today, but what we do have is a larger sales force we've been closer to full <unk>.
As you've heard us talk over the years, sometimes we've had some open positions as we try to expand the sales force we were growing faster than the need for our salespeople was growing faster than our ability to fill those jobs, we've been much closer to full a full employment in the jobs that we have but we recently have made a decision to add we don't want to talk too much about it.
Relative to making it open to our competitors, but we are investing in more people at retail that will be focused exclusively on adding new retail locations, particularly in areas and you know those areas are mostly the west where we're under agent represented related to the population. So when we look at it.
On share those numbers, but I'll give you sort of the general Directionally when we look at the states in the east we have far more retailers per foreign born population. So we're much more printouts from penetrated with quality retailers in the right geographies to support our business in the west we have much more opportunities to fill in.
Sort of the bald spots and that is where we're going to be continuing to engage more people at retail to sign more retail locations.
And we think that.
That's going to be if you will a backlog it doesn't mean necessarily we have a list of people that are saying I want to be a retailer, but the backlog of places where we need to go and then we'll be able to fill much quicker because it's always been a factor of how many people do you have how many people months do you have right. If you got 50 people.
Or if you have 70 people, particularly if you have 70 that extra 20 may be exclusively focused on adding retail locations and we think theres a huge opportunity for us still in the west and the thing about our financial performance, which has been obviously very strong with the growth we've.
EBITDA growth in the thirties.
Have some resources right to continue to up that guidance and actually beat our original plan, but also invest more in the field that will get us rolling into 2022 with a lot of with a lot of momentum because really when we had when we add retailers. It takes a little while to ramp up but more importantly, when we add sales.
Reps it takes a while until they are able to add those retailers that need time to ramp up. So these investments we're now making in the second half of 2021, we feel theyre going to pay really big dividends in 2022.
Additionally, any retailers that we've already added in 2021 remember we've talked about that are typical retailer we add in a given year usually doubles their transactions for next year. So we've got that kind of momentum that started swinging our way in terms of adding new retail locations and more emphasis on it even in the second half of the year.
Got it that's great.
Have you quantified roughly.
The dollar amount of growth investments.
In 2021.
Yes, we have and when we don't we're not going to share that but we have done it and thats why we have the guidance that we have I mean, if we were out to deliver the highest EBITDA and net income we could we would be higher but what we're doing is building the business in several ways and the first way is that we.
Is that our business at retail is going to be a cash cow for a long time for this business. We also recognize the importance of building our digital option for our consumers and when we say digital additional includes a lot of things that can be digital on 1 side of the border or the other and Thats why you hear us talking about paying to mobile wallets or people getting the money directly out of an ATM.
That don't necessarily have a bank account or is taking a card at retail so and the conventional traditional online transactions, we're going to invest a lot of money on that and the investments that we put in the field and retail continue to extend that really high growth rate that is continued and actually.
<unk> keep in mind, we're the only public company that grew in second quarter of 2020. So we lapped a strong 2020 number with a growth number in 2021 that was well into the <unk> for both transaction for both I'm, sorry, EBITDA and for revenue growth. So.
We're investing in the core business that we feel is important because it drives the bottom line, but also that core business then enables us to invest in the online all of these other digital options as well as our own card business, which you know we're building and growing and is growing for us. So that's kind of how we're doing it we're not talking.
About the dimensional size of that but we will continue to try to make good decisions that we think most benefit our shareholders and balancing the need to drive profitability and cash flow today with the with the need to be able to make sure that we have a vibrant business in a year 2 years 5 years 10 years down the road as we stay ahead of the.
The curve of the consumers and the options they want to send and receive money in.
Got it.
Then just lastly, Bob.
The 33% transaction growth and 23% customer growth.
Was there any geography that really stood out net maybe surprised you 1 or 2 regions or geographies that yes.
We don't we don't share that because it's just a signal to the marketplace where to attack us. So.
But generally I will say that our growth has been very very promising throughout the country and we continue to grow and take share and really just about every state.
So.
We don't have a lot of problem areas and the growth is both in the west and in the east they're very close in terms of their total growth and year over year, we still have a lot of opportunities to target in the east so.
None of it's very surprising we feel that a lot of people have vacated retail right and we think theres still we not only think we I think we're proving there is still a lot of business. There that we don't do that by turning our backs on all these new things all these new options for consumers and Thats, why we talk about mobile wallets and depositing into.
Accounts and taking your car to retail on our online business and our own card products, because we will continue to invest in those but we've then you do as a leader to Mexico, and Guatemala, we have grown much faster than the market in both of those countries Bill because we continued to take share and.
That's just the fact of it and we're taking share from a lot of different folks and it's throughout the country.
Great sounds like broad based I appreciate it guys. Thank you.
Youre welcome.
This concludes the question and answer session I would like to turn the conference back over to Bob <unk> for any closing remarks.
Thank you all for joining us.
We're happy to have had you on the call and we're looking forward to a strong second half of the year, we'll talk to you soon thank you.
This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.
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