Q2 2023 International Money Express Inc Earnings Call
Good day and welcome to the International Money Express Inc. Second quarter 2023 conference call. All participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing the Starkey followed by zero.
After todays presentation, there will be an opportunity to ask questions to ask a question you May Press Star then one on a touchtone telephone.
To withdraw your question. Please press Star then two.
Please note. This event is being recorded I would now like to turn the conference over to Mr. Mike Callen Todd. Please go ahead.
Good morning, and welcome to our quarterly earnings call.
I would like to remind everyone that today's call includes forward looking statements, including our third quarter and full year 2023 guidance.
Actual results may differ materially from expectations.
For additional information on international money Express, which we refer to as the Intermec story of the company.
Please see our SEC filings, including the risk factors described therein.
All forward looking statements on this call are based on assumptions and beliefs as of today.
You should not rely on our forward looking statements as predictions of future events.
Please refer to slide two of our presentation for a brief description of certain forward looking statements.
The company undertakes 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. Under the Securities and Exchange Act for such non-GAAP financial measures is included in the presentation slides our earnings press release, and our annual report on Form 10-K.
Excluding reconciliation of certain non-GAAP financial measures to the appropriate GAAP measures.
These can be obtained in the investors section of our website at intermix online Dot com.
Presenting on.
On today's call is our chairman and Chief Executive Officer, and President, Bob Lissie, and Chief Financial Officer Andreas Venditti.
Also on the call today are Chris Ryan Chief Operating Officer, Joseph Aguilar, President Latin America, Randy Nelson, Chief revenue Officer, and Marcelo Sia Doro, Chief Digital Officer, Let me now turn the call Bob.
Good morning, and thank you for joining we appreciate your interest in <unk>.
We had a solid quarter of growth as we continue to build upon the company's sustained track record multiyear expansion and we continue the profitable integration of both the national and I transfer acquisitions on slide three revenue increased 23, 5% to 169.2.
$2 million net income was $15 4 million a decrease of three 5%, while EPS increased two 4% to 42 cents a share adjust.
Adjusted net income was $18 $4 million up 6% and adjusted EPS increased six 4% to <unk> 50 per share.
EBITDA increased 11, 7% to $39 million, our CFO Anders spending will provide a more detailed analysis of these metrics. During his his prepared remarks, while we continue to achieve our aspirations of double digit EBITDA growth our results reflect the challenges of traversing some top line headwinds.
We have seen a slowdown in year over year growth to Latin America, and the Caribbean markets and this has stimulated increased price discounting in the marketplace.
These challenges have emerged as we focus on the integration of a valuable acquisition that has made us a stronger company to Latin America and expanded our footprint into dozens of additional profitable corridors in Europe and Asia.
After several years of overall market growing in the middle teens and above the year over year growth. Although still positive has slowed during the second quarter of 2023 through may based on the latest available data the top five countries in lacquer, Mexico, Guatemala, El Salvador, Honduras, and the Dominican Republic.
We're at a much lower rate than they did a year ago.
As a result of this market slowdown numerous competitors have resorted to more aggressive discounting primarily in the form of reducing FX gains to attempt to sustain their growth rates.
We have experienced this phenomenon in the past this round has been a bit deeper and longer sustained than previously experienced.
It's a high quality service provider in the industry, we're evaluating and modifying our pricing position to find the optimal price points to maximize profitability.
It is not our intent or strategy to align our price with the discounters, but we'll be more aggressive in an efficient and strategic way that maximizes growth.
Similarly, we believe the pricing pressures will subside in the meantime, we will execute a modified plan that enables us to capture share in the current environment.
We have created a strong business that has generated double digit revenues earnings and cash growth to deliver long term shareholder value for years in the prior three years that ended 2022, the business generated $150 million and net free cash. This strong free cash performance continues in 2023.
We expect to produce more than $70 million in free cash today intermix is nearly $100 million of available cash, which enables us to invest in future growth by expanding our business in multiple areas like our presence in Europe , the acceleration of our digital business, our card products and potential acquisitions are unique.
Value added model has attracted an increasing number of consumers from the Latin American community, who rely on <unk> for their money transfer needs because of the quality of the experience and the trust we have gained.
Our customer focused Omnichannel business model utilizes superior technology and operating infrastructure that is difficult to replicate.
Powered by our steady our proprietary technology will deliver value added services to our customers through our extensive network of highly productive retail agents. We're confident that the differentiated business model. We have built will prevail and sustained itself through any short term disruptions and intermix will emerge as an even stronger more successful company.
As we have done throughout our history.
On slide four as we noted in our first quarter earnings call. The low National acquisition has resulted in US reassessing, how we discuss market share from the U S to Latin America.
And our market share analysis. We now include the top five countries in Latin America, and the Caribbean are which the Dominican Republic as apart.
These countries collectively account for 82% of the money sent from the U S to that region with the inclusion of our national our estimated market share and second quarter of 2023, and these key receiving countries is 21, 7% an increase from 24% in the second quarter of 2022.
Further solidifying our position as one of the leading remittance providers in that market.
A significant opportunity exists in the U S markets to drive continued growth and market share our priority is to expand our footprint in the most populated foreign born Hispanic ZIP codes, both with <unk> as well as our international brand.
Based on the foreign born population from the National footprint, we see a tremendous opportunity for expansion across the east coast.
Additionally, a total over 2000 ZIP codes, representing an opportunity of $1 5 million wires per month exist in the <unk> business in an effort to more aggressively target. This market. We have restructured our <unk> sales force, we have added a sixth region and a new regional sales director. Additionally, we have created.
10, new sales districts to address the Unserved opportunity. We also restructured the land from a national sales team to better capture these opportunities.
Historically most of our transaction growth is produced by the same store locations with the balance coming from new agents as important as same store performance is to growth the recruitment of new stores may be even more impactful.
New agent retailer creates incremental transactions in year, one Additionally that retailer will grow by even larger percentages in year, two and three.
Continued pipeline of quality, new agents is critical to new store performance, but even more important the same store growth over time, we're confident that based on intermix is superior service our share of remittances within the store will grow as we become the preferred provider over time.
To ensure the company maintains the pipeline of new agents to drive future growth. We continue to review and analyze our field productivity metrics to ensure we allocate resources, most effectively and cost efficiently.
Additionally, we said agent recruitment targets down to the ZIP code level, but this is only the start within each of those ZIP codes agents will be carefully screened to make sure they possess the necessary attributes and the commitment to delivering the highest quality of customer service.
Our recent realignment complete with an increase in regions and sales district will position the company to better access these market opportunities.
Turning to our nationality with the completion of the acquisition, we're actively integrating land U S business. According to our plans.
We're also starting to capitalize on the significant opportunities that lie ahead in Europe with I transfer.
We're investing significant time evaluating the opportunity in Europe , and we believe the business unit has significant opportunity for outsized growth over the next several years this opportunity exists both at retail and on the online digital Si further accentuating our omnichannel approach.
In the second quarter I transfer business grew approximately 14% of revenue and grew approximately 70% in EBITDA. This business unit has an excellent foundation and we feel it has excellent growth potential our business has only scratched the surface of the full opportunity in Europe , we operate.
Primarily in Spain, and Italy, with one company store in Germany, and the Middle run we will look to grow these countries out and expand to France, the UK and other opportunities as we mentioned previously we believe that the Europe market will present, a big opportunity grow digital online wireless as well there'll be more to come relative to <unk>.
Europe , but we see a tremendous future here.
Simultaneously as we seize the opportunity in Europe , we have made significant progress integrating and right sizing the nationality U S based business the upside potential for the national in the U S slides and right sizing the retail network and maximizing efficiencies, while expanding our presence in ZIP codes, along the east coast that are currently unserved.
On Monday, we announced the restructuring of the U S business, which will result in approximately $1 $5 million in annual savings starting in third quarter Andrew.
Andrew will provide more insight into third quarter restructuring charges incurred that would trigger the $1 $5 million in annual savings.
The growth ahead of us will be driven by careful disciplined operating rigor and bringing intermix agent recruitment agent performance model to this business unit. There are many opportunities to expand our national footprint into new Zip codes.
With our formalized restructuring plan, we are confident that we will achieve a 9% to 11% EBITDA margin run rate by late 2023 are early 2024.
National has proven to be a valuable asset for intermix and we're just beginning to unlock its full potential we believe the combination.
Of increased profitability of one national in the U S. Coupled with the significant growth opportunities of <unk> transfer in Europe will translate into hundreds of millions of dollars of revenue and tens of millions of dollars of EBITDA and free cash from these properties over the coming years. Among other areas. We are optimistic about our our payroll and GTR.
Cards. These will both compete in large attractive markets. The payroll card is a part of our $100 billion plus market and the GTR market is approximately double that size intermix is a significant distribution advantage due to our existing network of high traffic retailers and our check direct service that we provide to many.
Of our agent partners, we have a great line of sight to the employers of our customer base.
We can then target those companies to demonstrate the benefits of our payroll card product <unk> not yet a large revenue contributor for <unk>, we have sized the market and feel we are well positioned to launch our upgraded payroll cards to the market later this year.
We can also leverage a similar distribution advantage with our GTR cart a retail sales can leverage the relationships that exist with independent retailers and effectively demonstrate the benefits of adding our GP our card at their retail locations.
We are adding a new program manager for the card product this year to assist in expanding and managing these products. The crowd products will not significantly contribute to revenues or profitability in 2023, but we are well positioned for meaningful growth in 2024 and beyond.
Lastly, our digital business continues to grow at a high rate, we grow at a rate of 63% in second quarter.
We're also delighted that our updated application have been receiving high marks from our users.
Great opportunity for growth exists with intermix digital business as well as our wires as a service product.
And which we co brand our co host with a partner.
In summary, it has been another great quarter of double digit EBITDA growth. There is much to be optimistic about our business. We continued to deliver strong EBITDA numbers with a high conversion to free cash.
It adds to our already strong balance sheet, where we have a base of $100 million of available cash to invest in our business growth opportunities abound, whether it is through our modified approach to retail with our intermix business reorganizing of our national business unit or the tremendous opportunity for growth that are EU license provides for.
US with E transfer.
Additionally, we are excited about our continued sales growth in our digital online business and the prospects for our wireless as a service offering along with the opportunity to launch our online offering in Europe . Lastly, we believe we have made significant progress with our two card products and look for each of them to be meaningful revenue.
And profit streams in the future.
With that I'll turn the call over to Andrew who will drill down to the numbers and offer his perspective on second quarter operating performance Andrew Thank.
As Bob mentioned, we had another quarter of double digit EBITDA growth still our overall results were a little short of our expectations driven by a slowdown in market growth that pricing dynamic in the market as I've mentioned earlier and several unhelpful items that converged during Q2 to make a quarterly objectives, just that much more difficult to achieve a large.
Still in safe and agent that Levered up for mother's day in <unk> and a settlement of a longstanding HR litigation in California, just a few that worked against us in Q2.
On slide five the number of unique active customers increased by 41, 1% during the second quarter to $4 2 million. These customers generated a record $15 1 million remittance transactions 26, 7% more than a year ago.
This represents about six 3% growth in transactions in our core business plus the contribution of <unk> U S and international businesses.
On slide six we achieved a 63% increase in digitally originated transactions as strong customer acceptance of our mobile App continues. Moreover, we achieved this growth while being good stewards of the company's capital not chasing customers with significant marketing spend that has an unproven payback.
From a send and receive standpoint, 31% of our transactions are either sent or received digitally up 480 basis points from a year ago.
On slide seven the total principal transferred grew 19, 5% to $6 4 billion driven by our core business and the addition of <unk> U S and international businesses the.
The average remittance within our U S core intermix business was consistent with the prior year. It was $447 precisely the same send amount. It was in Q2 2022 in the consolidated business. The average send amount was down five 6% for the quarter year over year at $422 per transaction.
This is influenced by the average transaction amounts and our Lynestrenol U S and Europe businesses, which are structurally lower by National U. S is currently at $297 in Europe at $270, bringing the business average to $4 22 for the quarter.
On slide eight total revenues companywide increased 23, 5% year over year, reaching $169 2 million during the first three months.
Excluding acquisitions revenue growth in our core business was six 7% fueled by organic customer additions through new and existing H.
Our core revenue growth dipped below the double digit level this quarter impacted by the market slowdown and the current pricing environment.
Our digital business is contributing an ever increasing share of revenue while still in the single digits. We continue to thoughtfully paced spending around our app and online offerings to match, where stay ahead of consumer acceptance, we're successfully growing the digital business efficiently and profitably with the revenue contribution from digitally originated.
<unk> transactions up just under 58% year on year in the second quarter.
We keep it tight pulse on consumer behavior, which positions us to invest in digital intelligently, ensuring the unique economics supported.
Net income was impacted by a few key areas topline growth slowing.
When our credit facility and depreciation and intangibles amortization. The latter is driven for M&A activity, but also from hardware upgrades and some accelerated depreciation as we transition to a new headquarters building at year end.
The higher effective tax rate, mostly acquisition related also kept growth in check when it comes to net income net income was down three 5% and at $15 4 million GAAP EPS was better up two 4% to <unk> 42, a share aided by our share buybacks. We'll see these same factors both during the second half.
As reflected in our guidance.
Looking at slide nine adjusted EBITDA increased 11, 7% to $30 9 million also impacted by the slow revenue growth and the inclusion of our national business, where margins are structurally lower.
Note that as the top line in the core business slowed we have and will continue to aggressively control costs, which is what allowed us to again achieve another double digit EBITDA quarter.
Adjusted net income was up <unk>, 6% during the second quarter to $18 4 million impacted by the same underlying drivers as GAAP net income, but excluding items like share based compensation transaction related expenses and amortization of certain intangibles and the tax impact related to those items from an <unk>.
<unk> EPS perspective, we were up six 4% to <unk> 50, a share.
Turning to the balance sheet on slide 10, Intermix continues to be an efficient operator and cash generated the company ended the quarter on a Friday peak activity for our business, where you would have seen the revolver drawn on the balance sheet to the tune of $116 million from our credit line.
Net free cash generated our internal measure, which excludes working capital cyclicality dipped a bit to $13 million in Q2. However, if you exclude the $5 5 million net cash attributable to the closing of <unk> transfer in the second quarter net free cash generated is closer to $18 5 million or <unk>.
7% increase from Q2 2022.
During the quarter, we continue to be active in the market purchasing 416000 shares for $10 million at an average price of $24 per share. The board authorized repurchase program. Additionally, we repurchased 500000 shares from one of our beneficial stockholders for $25 28 per share.
<unk>, a 4% discount to the market price on the day of the transaction the negotiated transaction totaled $12 6 million paid with cash on hand.
We continue to see our buyback program is an excellent use of capital and anticipate remaining active.
On slide 11, as a result of the slower market growth, we are seeing coupled with the price discounting in the market. We are adjusting our guidance for the full year as mentioned in the first quarter earnings call. We're transitioning from net income to EPS guidance for the remainder of the year. Additionally, as Bob mentioned, we will record a restructuring charge in the third quarter.
<unk> for that asset now we expect this will be approximately $600000, which is captured within this guidance as discuss this restructure will generate over $1 5 million in annualized savings to beginning in September our.
Our new guidance is as follows for the full year revenue of $644 9 million to 673 million.
Diluted GAAP EPS of $1 56 to $1 63 per share adjusted diluted EPS of $1 87 to $1 94 per share and adjusted EBITDA of $114 8 million to $119 8 million.
For the third quarter, we expect the following revenue of $165 7 million to $176 8 million.
GAAP diluted EPS of 40 to 43 cents a share adjusted diluted EPS of <unk> 49 to 52, a share and adjusted EBITDA of 30 million to $32 million.
In summary, we continue to execute in a retooling to grow the <unk> core through the current market dynamics at the same time, we're defining the path to 10 X for Europe positioning us size up part in digital and driving efficiency to perpetuate a strong EBITDA growth trajectory for letting us know us with that.
I'll turn it over to the operator for questions.
Yes.
We will now begin the question and answer session.
To ask a question you May Press Star then one on your Touchtone telephone.
If youre using a speakerphone please pick up your handset before pressing the keys.
If at any time. Your question has been answered and you would like to withdraw your question. Please press Star then two.
Tom I will pause momentarily to assemble our roaster.
The first question comes from the line of Mike.
With Northland.
<unk> Securities. Please go ahead.
Hey, guys. Thank you.
Could you talk a little bit more about the U S sales force.
It sounded like you restructured it.
Created a sixth region.
And I think you said added 10 districts.
What about just the number of sales people kind of how has that trended. How do you think that sort of feeding the agent pipeline that you mentioned.
Yes. Thank you Mike for that question. So we're doing a lot of things related to the sales force I think.
As we've talked about many times, we have seen over the years.
Challenges arise.
Relative to the market pricing that typically happens as the market slows down a bit as we've seen.
The growth in the market has gone from last year and second quarter at about 15% to Mexico to eight so when that happens we see a greater push from particularly people that are discounters in the marketplace with lower prices that caused a little bit more friction for our business.
In response to that we decided to add a sixth region that region has added in in.
Sort of the southwest so that we have more emphasis now in terms of folks focusing on the business in the Western States and then created those additional districts in the past we've had.
At times more what we called regional sales executives, which were people that were roving.
It had bigger geographies in which they could sell in we didn't feel we got the return on investment for those we feel like its best when someone has a distinct geography and that's why we created the additional sales districts. Now in addition to that we're spending a lot of time looking at the markets, where we have a lower market share in a huge.
<unk> opportunity on the upside and looking at our pricing related to those and as I said in the opening remarks.
Not joining the forces of being a discounter by any stretch of imagination at the same time.
We will be more aggressive at retail in opportunities, where we're not necessarily acts selling because theres not a lot for us to lose their meaning there is not a big base of business, we'd be discounting there'd be a bigger base of business to acquire so all of those things together with more salespeople more people dedicated.
Two specific geographies much more strategically placed with a different approach to the marketplace, particularly related to those areas, where our market share would be let's say less than 10% and even there are some pockets where it might be less than 5%. So a lot of places where we have a market share of 30 or 40%. So we'll focus a little different kind of energy in pricing in those areas.
Have great opportunity for the upside.
Got it and then maybe just secondly.
How would you describe the pricing challenges or pricing pressure is daddy.
Couple percentage points of overall growth.
Is there any way you can frame that a little bit.
Yes, I mean, I think if anything I would be guessing at Reg to say well. It's this percentage of growth or whatever I think what happens is when people.
Particularly the smaller providers that general ammo to start is to discount when they see a marketplace slowed down their immediate reaction is to more exaggerated approach to what they normally do which is to discount and so we're seeing that in a number of areas, but in some other areas. We also see opportunities because.
Even though it's discounters have markets, where they need to be able to make money and we need to attack. Those so it's hard to put a number on it.
We think that clearly, though when I talked about rather than we've always made our success by focusing on what we do best rather than just worrying about what the marketplace is doing and from our perspective, we still have all of those ZIP codes. We talked about 2000 that are under under served are unserved.
That we could gain about 1 million and a half wires and thats only by getting about a 15% to 20% share in those in those ZIP codes, which is very much below where our best <unk> performed and so really that's the area that we need to focus on now what will be different because we've talked about that in the past one thing it would be different and will have more dedicated people to those geographies and <unk>.
Who are our sort of approach to the market is going to be different where our gross margin, meaning what we get after we gain the fee and the FX minus what we pay the agent and the payer we're willing to take a lower lower ultimate gross margin to gain wires in this more competitive time, we're not going to wait it out.
As I don't want to see is passively, but as confidently as we have in the past will be a little bit more proactive quite a bit more proactive we still think it won't sustain itself. We know that one of the big discounters will be on the market for sale next year. One of them is on step out of the market for sale now two private companies and so they're very aggressive in a down market.
And thats affecting the overall and then what do you see as even some of the public companies start to join in that discounting because they joined the fray. So we need to be able to address that as we are doing but we also believe that there'll be some relief in that over time, because whoever whenever these these these sales happen that usually what happens is there becomes a <unk>.
Change in the approach to the market.
Hey, thanks for that color Bob.
Welcome.
Sure.
The next question comes from the line of my neck.
Please go ahead.
Thank you good morning, Bob and Andrew I, just wanted to get a better sense.
The market began to slow down incrementally from the time you gave guidance back in May like what really changed is it more just pure macro or is there something else going on in the market beyond just the macro pressures.
While the amount of the market.
Grew in last quarter at 12% and it grew at eight to Mexico, which is our core business. So that is something that happened at a greater level in the second quarter versus the first quarter, we've seen some slowing but it's been a bit sporadic.
You can if you look at the numbers for Mexico, Youll see that sometimes you'll have a.
8% growth month, and then sometimes you'll have a 13% growth month than it's been spit sporadic, but the quarter as a whole in second quarter dropped about.
A third from 12% growth to 8% growth and that was not fully anticipated.
We thought that probably <unk> was about where it's going to land. So I think that impact was was what was not necessarily predicted.
Understood and then I just wanted to go back to the model. So as we look at the rest of the year just sort of the building blocks in terms of the numbers.
What are the expectations for transaction growth.
Principal growth and remittance site, if you could just give us some sense of like what you have embedded in your guidance. Thank you.
Yes, I would just speak from a trends. This is anders from a transaction growth standpoint in the core wherein conservatively around 5% growth in the core business and what are the other factors that I could dimensionalize three principal principal amount I think principal amount we upheld in the core.
<unk> is well steady year over year, we haven't modeled in any growth or haven't modeled in any.
Any attrition in that amount.
Thanks, Jason.
And the remittance side would also be just given some of the headwinds you guys talked about should we expect the remittance sites to also come down just over the back half of the year to reflect the updated guidance.
Yes, I think not much I mean, maybe a little less than a percent in terms of overall size of the part thats not impacted by.
The acquisition principal sizes.
Okay.
That's helpful. Thank you so much.
And remember the peso is trading at its strongest point, which we haven't really talked about that many times has an effect on the principal amount you would think when you get less pesos on the other side of the border people would tend to spend more because they have.
Stable amount they need but what happens is when the peso is usually weaker if it's in the twenties people send larger principal amounts because they feel like the peso's on sale and they send bigger bigger average transaction. So we're kind of the whole industry is kind of.
Those headwinds where the peso has been stronger than it's been in a number of years now.
That's great color. Thank you so much.
Okay.
Again, if you have a question. Please press star and then one.
The next question comes from the line of David Scharf with JMP.
Please go ahead good morning.
Good morning.
Hi, good morning, Thanks for taking my questions maybe.
Maybe just to follow up a little more on the <unk>.
Competitive.
Dynamic right now Bob.
You called out a couple private discounters.
But taking a step back.
And maybe compare to prior cycles like you say this ebbs and flows in terms of price competition or.
Or the pricing.
Moves by competitors.
You described them as fairly broad based among most of the remittance providers you encounter in your stores or.
Is it concentrated within a couple of discounters.
So the question is not broad based geographically, but is it broad based within the within the competitors.
Exactly is this.
Yes, I would say that it had it in.
I would say that it is in one of the large publics with their second or flanker brand. However, you want to describe it that's a deep discounter as well.
And one of the other public companies is pretty aggressive as well. So I think it's we're probably.
By ourselves as the guys holding the line more our margins have been relatively stable, which is really good news because it gives us a lot of headroom.
To sustain the margins, where we're strong enough to sustain them, but two if you have an average margin to Mexico are $5 for over $5 and I'm just using that as an example, I'm not quoting that number and you go out and aggressively go after business. That's at a much lower rate. Your blended gross margin is still quite attractive. So we've got a lot of headroom.
And I think it's really other than us relatively pervasive.
Lot of markets, where we have such a strong position.
Position.
The Eastern States for instance, and I won't name the states specifically.
For strategic reasons, but.
But.
So it's harder for the competition to come in because we're so well entrenched, but where we're going and acquiring new business and Thats, where I think our approach will change more because there's so much of an upside opportunity you might look at a state in the west Colorado. It has more foreign born spin a state like Georgia.
We have a fraction of the business there so our opportunity there where we have really strong margins is to be much more aggressive because the upside is really big for us and thats really the way that we need to be able to compete.
In some of those areas and you'll see us we'll be we're not going to be necessarily again riding with the discounters in some cases, we won't be at all some cases are offering won't change at all because we don't really have an issue but in other cases, we'll be much more aggressive.
We will still going to ride on our value added service. The fact that we pick up our customer service line and four seconds that our technology works, better and faster and more reliably than anyone else in the face to face transactions the banking relationships, our check direct product the quality of our customer service all of those things were still going to sell on that value add.
But we recognize that we might need to be a little closer to the discounters prices in certain areas of the market for us to compete and grow again at rates that are in the teens.
Got it.
Understood and.
Hey.
Couple of just follow ups on one more on the operational side.
First the sales additions can you provide some context in terms of.
Yes.
The addition of a new sales director New region new districts.
Was this in the cards since the beginning of the year or have you accelerated any expansion plans on the kind of agent acquisition front in <unk>.
Sponsor to what might be a persistent.
Yeah.
Right yes.
We're constantly evolving but the actual decision to add another.
Regional director, a new new region happened probably in late late sort of first quarter early second.
<unk> added the person in late second quarter as far as the sales districts, which are folks that are on the ground. The closest to our retailers. We just recognize the increased productivity of having folks having assigned geography, rather than selling in a floater basis.
I'd say a floater.
All over the country. It just means that those those will be called <unk>.
Regional sales executives they could sell maybe all over southern California, but they didn't have accountability for geography. So we recognize that that was not working and we would rather create more.
Districts, which we think puts us in much better position to attack the marketplace with that geographical assignment. So thats really the move there and it's I think it's.
It's been evolving but I think it's mostly in response to the fact that we're seeing the market slow we're seeing all the things we talked about the discounters become more aggressive in discounting and our response to that in an effort to really drill down better into the market.
And grow our business and some of those areas, where we have a really big upside and not really a big base of business and our willingness to do that in a way that that.
Well, except gross margins that probably were less than we accepted in the past still very profitable, but less than they've been in the past.
Got it got it hey, just just to close out.
I'm assuming based on.
Excuse me, just just 5% kind of organic transaction growth in the second half.
Yet the guidance reduction was.
Pretty much organic related.
Any.
Downward revision to the Ellen <unk> forecast as well embedded in the second half.
Guidance for Doug there was pretty much all of the core business.
It was pretty much driven by the core business I think international and I transfer are doing what we expected them to do and I think that restructuring activity that we talked about is going to flow through nicely in the fourth quarter for <unk>. So it's really driven by the court.
Okay got it thanks, so much.
Thank you.
The final question comes from the line of Chris <unk> with Credit Suisse. Please go ahead.
Hi, Good morning, Thank you for taking my question.
I have a question on the new Florida immigration law, So specifically the Senate Bill 718, which passed.
Passed in May and came into effect on July 1st.
Seeing any impact so far in the first multi beam implementation.
What are your expectations for any potential impact or any potential offset to that thank you.
Yes.
What we saw initially was a response that was relative to protest.
Whether there'll be a long term effect or not.
We see usually when these things kind of happen is it sort of wanes over time and Theres really not a big effect. We also will see I think in some of these cases.
Where theres been difficulty in the past of state, making it more difficult for immigration.
As for farmers or those that need the labor to begin to work directly with.
With work visa folks to be able to bring people in on a more or less.
Les undocumented basis and more documented basis. So there are lots of crops to pick in Florida, and we don't anticipate that in the long run that it's going to have a big impact we've seen municipalities not typically states, but municipalities do different things over time, we've even seen states put a tax on unremitted says on every remains.
And it has not had an impact over time because of the need for labor and the willingness of folks to provide it.
So I think some short term kind of days of protest and stuff occurred.
But I think it's too early to tell what's going on is we have a market that's slowing a bit anyway. So it's difficult to see and we're not seeing Florida grow or slow at a rate that would be greater than the greater market and we wouldn't expect that it would be something that would hamper the ability of people who require labor to Hyatt.
And Labour who wants to provide labor to provided.
Alright very helpful very comprehensive thank you so much.
Youre welcome.
Yes.
This concludes our question and answer session I would like to turn the conference back over to Bob Lee for any closing remarks.
Okay.
Yes. Thank you all for joining US we look forward to talking to you all soon thanks again.
Sure.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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