Q1 2025 International Money Express Inc Earnings Call
Good day, and thank you for standing by! Bye!
Speaker Change: Welcome to the International Money Express Inc. 1st quarter 2025 earnings conference call. At this time, all participants are in a listen-only mode.
Speaker Change: After the speaker's presentation, there will be a question and answer session to ask a question during the session You will need to press star one on on your telephone You will then hear an automated message advising your hand is raised You will need to press star one on on your telephone
Speaker Change: To withdraw your question, please press star one one again. Please be advised that today's conference has been recorded. I would now like to hand the conference over to your speaker today. Alex Sadowski, investor relations coordinator, please go ahead. Thank you very much.
David Scharf, David Scharf,
Alex Sadowski: Good morning, and welcome to the internment's first quarter, 2025 earnings call.
Speaker Change: I would like to remind everyone that today's call includes forward-looking statements.
Speaker Change: For additional information on International Money Express, which we refer to as Intermex for the company, please see our SEC filings, including the risk factors described therein. All floor-looking statements on this call are based on assumptions and beliefs as of today. You should not rely on our floor-looking statements as predictions of future events.
Speaker Change: Please refer to site two of our presentation for a description of certain forward-looking statements.
Speaker Change: The company undertakes no obligation to update such information, except as required by applicable law. On this conference call, we will discuss certain non-GAAP financial measures.
Speaker Change: Information required by Regulation G under the Securities and Exchange Act for such non-GAAP financial measures is included in our presentation slides, earnings press release.
Speaker Change: and our quarterly report on Form 10Q, including reconciliation of certain non-GAF financial measures to the appropriate GAF measures.
Speaker Change: These can be obtained in the Investor section of our website at intermexonline.com. Presenting on today's call is our Chairman, Chief Executive Officer, and President, Bob Lisy, and Chief Financial Officer, Andras Bende. Let me now turn the call over to Bob.
Speaker Change: The past quarter brought many changes to the market that were difficult to anticipate.
Speaker Change: The economic, political, and immigration backdrop presented many challenges to our business model into the U.S. to Latin America corridor in general.
Speaker Change: Regardless of this challenging environment, our results reflect the strength of our brand, the excellence of our execution, and our corporate discipline that we continue to bring to our strong and healthy underlying business.
Speaker Change: The good news is, the overall market for reminiscence to Latin America remains resilient.
Speaker Change: The downside is that for the first time in our public history, we have delivered a year-over-year volume growth while experiencing a decline in the number of transactions versus the same period this last year.
Speaker Change: The principal amount per transaction increased, but money transfer fees were lower due to larger send amounts and fewer transactions.
Speaker Change: This dynamic also had an impact on our foreign exchange profit.
Speaker Change: It appears consumers are sending larger principal amounts less often to discern factors about which we can only speculate at this time.
Speaker Change: Total revenue came in at $144.3 million. That income at $7.8 million. Adjusted if a DA at $21.6 million.
Speaker Change: We believe this is a strong indicator of the underlying strength of our overall business and resilience of the retail market.
Speaker Change: Transactions originating at retail, remaining the foundation of our business, and our highly profitable and cash-generating engine.
Speaker Change: Total volumes sent in four out of our five top markets increased significantly, whether in our brand. Less positive was the fact that four of the five of top markets saw a decrease in transaction
Speaker Change: Despite that softness, we protected our margins and continued to make smart, targeted investments in our retail business.
Speaker Change: We reduced time from 20 seconds to 9 seconds on a typical transaction.
Speaker Change: We continue to build on the best in class system reliability as well, resulting in a total uptime of 99.995%. For this supporting our position as the premium retail partner for our highly efficient agent base.
Speaker Change: Now, turning to digital, or our retail platform is the cash engine of our business today, our digital business is the glory of our homie channel strategy, and the most important part of our growth
Speaker Change: We're aggrowing that business most successfully. In Q1, our digital transactions grew just under 70% year-over-year.
Speaker Change: Aligned with the Digital Business Strategy, invested more in the digital marketing ever before in Q1, we will continue to do so intelligently through daily optimization and ensuring that every dollar is spent with maximum efficiency.
Speaker Change: Our customer acquisition costs and LTV projections remain intact as customer acquisition costs are better than projected and our customer retention remains strong. We plan to ramp up our total spend more in the coming quarters as we discussed at our recent investor day event. At the same time, engagement across our app, which we believe is the best in class continues to improve.
Speaker Change: The salaries and benefits of only 1%, our GNA is up, over the biggest single driver relative to increasing GNA, was our planned digital marking spend.
Speaker Change: In February , we completed the shutdown of one of our off-shore operation centers supporting
Speaker Change: We have begun to realize those efficiencies and we are on track to achieve the approximate $2 million in annual savings we anticipate from those moves.
Integration of the National Agents onto the Internments.
Speaker Change: Tech Platform will continue in the second half of 2025. This places in a position to further streamline our back office into ultimately surrendering the national state licenses for the reducing costs while maintaining the look, feel, and integrity of the LaNational brand.
Speaker Change: On the balance sheet, side, we remain very strong. We ended the quarter with $151.8 million in cash and generated over $10 million in free cash during the quarter.
Speaker Change: A net leverage remains low, giving a significant flexibility to invest in growth, continuing to pursue opportunistic share repurchases, and maintain our strong financial foundation.
Speaker Change: As mentioned, cash generation continues to be the hallmark of this business, and that again remains strong, even with the increased investments in digital, retail sales infrastructure and a challenging macro backdrop.
Speaker Change: At InterMex, we are focused on what matters most, delivering the best possible service for our customers, and doing it with operational excellence.
Speaker Change: We are a trusted brand for over six million customers every year. Whether it through our retail locations or by way of our growing digital channels, our customers know that they can rely on us to move their harder and money quickly, securely and reliably.
Speaker Change: We have the right foundation in place, including a profitable retail engine, a fast growing digital platform, and hands by our unique omnichannel strategy.
Speaker Change: And what we believe the strongest, most well-respected brand in Latin American quarter.
Speaker Change: We are confident our ability to continue to deliver value for our shareholders. With that, let me turn the call over to Andras to walk you through the financials in more detail.
Andras Bende: Thanks Bob, good morning everyone. As Bob mentioned, we delivered a discipline and focus quarter navigating a unique retail environment of greater send volume, but negative transaction growth while maintaining profitability and strong cash flow.
Andras Bende: Total revenue for the quarter was $144.3 million compared to $150.4 million in the same period last year.
Andras Bende: Total volume cent was up 3.7% versus 1Q last year, while total transaction cent were down just over 5% a unique and unprecedented market.
Andras Bende: For us, we believe this indicates the underlying market remains healthy and resilient. However, at least for a period of time, we will likely continue to observe some shift in send behavior that puts pressure on transaction growth.
Andras Bende: Fewer transactions result in less fee income, however the cost of fund and cost of bank consumer transactions go up when volume grows, and that is what transpired this core.
Andras Bende: While the company remains strong, profitable, and ready to navigate this dynamic, the impacts on the P&L for the moment are notable.
Andras Bende: In the other part of our book, growth in digital health offset, part of the pressure on transactions and retail, with digital transactions up just under 70% this quarter, we invested more in digital marketing this quarter than any past quarter for intermox. We'll continue to scale this investment in the quarters ahead.
Andras Bende: Foreign exchange income contributed 20.2 million and was down slightly year over year. However, in percentage terms, less so than fees.
Andras Bende: Larger individual send amounts help drive FX income for the company. It's worth noting, however, that we observe sharpest increase in average send amounts in countries other than Mexico, where FX is a much heavier component to transaction unity economics.
Andras Bende: Service charges from ages and banks were 93.8 million, down from 97.9 million last year. While agency and payer commissions were down in modern transactions, bank fees were up driven by higher volumes sent versus one Q last year.
Andras Bende: Salaries and benefits were up only 1% from a year ago, as our cost and efficiency disciplines continue to serve us well. That ends, we also incurred 0.3 million restructuring charges in Q1, in line with our previously announced restructuring of foreign operations.
Andras Bende: Provision for credit losses was 2.1 million and depreciation amortization came in at 3.6 million. We also recorded 1.2 million in transaction-related expenses associated with a previously announced strategic alternate review.
Andras Bende: Operating income for the corner was 14.1 million, down from 19.6 million last year.
Andras Bende: For Q1 volumes sent via more normalized send amounts, we estimate revenue would have been stronger by 7 to 10 million, and operating comes stronger by 2 to 3 billion.
Andras Bende: They didn't come with $7.8 million in diluted earnings per share, was $0.25, adjusted diluted EPS, was $0.35.
Andras Bende: We enter the quota with 151.8 million in cash and cash equivalence, up for 130.5 million at year end. Total debt was from 47.4 million, down from 156.6 million at year end.
Andras Bende: We repurchase the approximately 3658,000 shares during the quarter for $5 million.
Andras Bende: A balance sheet remains strong and our liquidity position gives us continued flexibility to support our strategic growth initiatives. We remain focused on managing costs, protecting margins, and executing with discipline across both retail and digital.
Andras Bende: They've spent our first quarter of 2025 financial results and the underlying market dynamic we have observed to date, the company is revising its previously issued for your guidance.
Andras Bende: Current levels of uncertainty and volatility affecting market conditions and consumer behavior have increased the difficulty of reliably forecasting short-term results.
Andras Bende: For over as previously announced, the company is in the process of executing on a long-term strategy of investing in its digital business offerings to increase their contribution to the company's revenue and to increase its profitability. Accordingly, the company is discontinuing for the moment issuing quarterly guidance.
Andras Bende: Full year 2025 guidance is as follows. Revenue of $634.9 to $654.2 million. Diluted EPS of $1.53 to $1.65.
Adjust the diluted EPS of $1.86 to $2.02.
Andras Bende: and Adjusted EBITDA, 103.6 million to 106.8 million. So with that, I'll turn it back to Bob for closing remarks. Thanks,
Bob Lisy: Thrap it up, we delivered another quarter of a discipline execution, we protected profitability, we invested it strategically and grow, and we continue to generate strong cash wealth.
Bob Lisy: Retail remains a critical and profitable part of our business. Digital is scaling with strong economics, and we're confident in the foundation we have built.
Bob Lisy: We will stay focused, stay disciplined, and keep delivering for our customers and our shareholders.
Bob Lisy: Thanks again for joining us. We're now ready to take your questions.
Bob Lisy: Thank you. As a reminder to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please send by while we compile the Q&A roster.
Unidentified Operator: And our first question comes from Chris Zhang of UBS. Your line is open.
David Scharf, David Scharf,
Chris Zhang: Thank you, Morning. Thanks for taking our questions. So, the first question is about, I guess, some of the more New York terms are just giving the first quarter williness and also the unique U.S. to Latin America market that we're seeing.
Chris Zhang: In the more recent months of March and April , and I want to thank to date, that be helpful. Thank you.
Chris Zhang: Okay, great. Thank you for the question. So the behavior...
proportionally, is not changing much, right? That's a big thing.
Chris Zhang: The digital side of the house for the industry and us as a company has been growing much faster than retail, so digital this quarter grew at 70% year over year.
Chris Zhang: And it's actually so far in April , through April , is increased to about 80% growth. So we're growing the digital very quickly.
Chris Zhang: The retail continues to be more of a struggle. We think the retail market is still really strong, and you may have heard from our remarks, the total amount of principle amount that we sent.
Chris Zhang: To Latin America, to our overall business was up 4% year over year, and our business is dominated still by the retail side. The challenge we have today and in the short run,
Chris Zhang: First of all, I'm completely excited about what's going on with our business. I think to grow the digital business at 70% in a difficult market where the current administration talks about zero crossings in the border is a very great achievement for us, and we think we've only just begun there. [inaudible]
Chris Zhang: We think that we're just starting to click in with our advertising. We think that our wires as a service is going to get bigger and better.
Chris Zhang: So we have a lot of strategic partnership there that we think will build it. The difference between us and some others and maybe sometimes where we separate with some of the marketplace analysts and others is we think that retail.
Chris Zhang: Based on the fact that it grew at 4%, or the overall market for us, grew at 4% dominated by retail, is still a very healthy business with very large profitability, great margins on a unit economics perspective, and very low entry point to acquire customers.
Chris Zhang: And so we'll continue to drive that business and we would expect in difficult times where the overall market is flat as it is today.
Chris Zhang: And we're dominated by Mexico 65% of our gross margin thereabouts comes from Mexico 80% comes from Mexico Guatemala So when the borders tight it's not like we have a lot of folks that are sending in a big part of our business
Chris Zhang: that are South America and other places where may not be border crossing, right? Okay.
Chris Zhang: It tells you that the retail market is probably growing at n minus 8, a minus 10, so we're beating that and we're beating the digital side, and we've talked about this many times, we're just heavily...
Chris Zhang: Weighted on retail, which is not performing well as an industry and underweight on the digital side, but we're doing a lot to change that as you can see with 70% growth in digital and that going to 80% growth in second quarter and we really have just begun to
Advertise and drive customers to our digital site. So...
Chris Zhang: That's how I would delineate the two today. We expect retail to be softer over time. We think that we will get it back into positive year-over-year growth numbers, and we expect digital to continue to grow at high levels.
Chris Zhang: 60, 70, 80% year-over-year and continue to grow that. And once the balance starts to get better and the market gets better, you'll see us driving much more positive numbers between the two together.
Speaker Change: Thank you so much for the color. Just have a follow-up on the…
Speaker Change: Revised Full-Year Guidance this year. I understand we're no longer providing the quantity guide, but for the revenue, for the full-Year revenue and...
Speaker Change: Also, the EBITDA margin, you're both seeing some improvement from the Q1 level. I think it was the revenue growth and EBITDA margin. And can you maybe give us just the rational sense of the trajectory of the revenue growth and also the margin improvement?
Robert Yer, Joseph. There's two things.
Speaker Change: Maybe the two lead things I would talk about is, we're still ramping up from a revenue perspective.
All the work we do on our digital business.
Speaker Change: So, whereas, it won't necessarily improve the margins a lot because we'll be investing in marketing to do that, it's going to drive revenue.
Speaker Change: We also think that we're going to be able to add a lot of our pipeline for wires as a service is very very large right now and we believe that we're going to be adding lots of those folks which really don't do much to
Speaker Change: Degrader cost us money to promote. We're basically providing the technology and the licensing and various different ways with different companies we're providing for. And so I think those are going to drive that revenue from a digital side.
Speaker Change: More people at the retail level that will be driving more agent retailers in specific areas.
Speaker Change: Not in any way a happy hazard just throwing retailers out there, but very targeted in the right zip codes in the right places where we know there's wires.
Speaker Change: And that's going to have the impact on that second half as they'll start to accumulate in the waterfall from that happens.
Speaker Change: The last piece is that we're laughing easier numbers in the second half of the year because the downfall in the Mexico business particularly started to happen for us in the second half of last year in a more...
Speaker Change: You know, in a stronger way than it was in the first half. And so we're lapping a little bit easier numbers while have better plans for retail and the digital business will be catching on and getting more traction as the investment we put in it and some of the folks in the wires as the service starts to come through.
Unidentified Operator: And we could also come in on margin and be awesome. Thank you.
Speaker Change: Yeah, and Chris, the only thing I would add to Bob Thomas, is I think you know, you follow us for a while, but we do have some seasonality of the business with one cube, just being a softer quarter overall.
Thank you for watching!
Speaker Change: Right, I'll proceed to color in and just get back in with you. Thank you.
Good. Thank you.
Unidentified Operator: And our next question comes from Gus Gala of Monès Cresby Heart and Company, your line is open.
Gascayla: Good morning, guys. Thank you for taking our questions. Start off, I want to focus on retention.
Unidentified Operator: I was hoping these would kind of walk us through the volume, maybe it's on a volume basis, maybe it's on that.
or GP basis.
Unidentified Operator: What you've seen in retention versus what came on with, let me go by sound on and just tell us think of the levers that you're pushing on to help with the drive for the retention, individual particular and I'll have a follow up.
David Scharf, David Scharf,
Speaker Change: Okay, so let me I'll address the retail event and then I'll ask Marcelo Theodoro, who's our chief visual officer to talk a little bit about the digital side and retention.
So, let me just take it through first...
CapEx and OpEx.
Speaker Change: are about $2,500 to start up a retailer. And that retailer on the average at the end of year one on the average will do about 200 wires, which means that we get a payback at retail from a new retailer in about seven months or so.
Speaker Change: Those retailers will be today, we look at three components in retail, we look at same store, we look at new store, and we look at Schurnt.
Speaker Change: Today the retail churn is, I'm sorry, the retail same store performance is operating about the same as the retail market.
Speaker Change: So we think the retail market is about a minus 8 to a minus 10, and our retail existing agents we define them as an agent that's here at 366 days or more.
Speaker Change: They have a year-over-year number. They're behaving at about a minus 9, minus 10, minus 8, depending minus 7, somewhere in those high single digits.
Speaker Change: Shorten that churn rate, those are agents that did wires in last year and do none, and then grow our new agent base. And that's why, as we talk about,
Speaker Change: In specific markets like California, Texas, Illinois, where we have a lower market penetration rate, where we know that we have zip codes.
Speaker Change: Mark said we do really well, the metric that we would use is...
Speaker Change: We have about 1,000 or 1,200 foreign-borns of a targeted market per agent. In markets in the southeast where we're very dominant, sometimes a 40% market share in the market.
In California and Texas, we might have 5 or 6.
Speaker Change: You know, foreign-borns on the average in big pieces of geography per each agent retailer.
Speaker Change: So it tells us in some of those areas we need three or four times more retailers and that will be a big part of growing the overall retail business.
Speaker Change: We would expect that the average retailer will perform like the average market any year over year. We'll be able to do a little better in some with targeting sort of finding out what the issues are, if there's some shrinkage there related to competitive incursion, but on the average, they're probably going to perform. The issue will be acquiring new real estate in places where we are where we're underdeveloped and that's really the initiative and retail today.
Speaker Change: Through the connectivity of the retail. Marcel, you want to talk a little bit about digital? On the digital side, the rotation is slightly better than prior quarter, despite the fact that we invested much more in marketing. So that's exploring our growth as stated by Bob Indonesia remarks.
Thank you for watching!
Thank you.
David Scharf, David Scharf,
Speaker Change: You said you had a follow-up? I'm sorry. Yes, I do. Sorry. I got myself stuck on mute. The other one I want to ask.
Speaker Change: Is there any sense of, have we maybe hit a drop in the retail foot traffic?
Speaker Change: Yeah, I think that it's a little bit of a funny quarter in the sense that
Speaker Change: February , you know, was a 28-day versus 29. So, you know, there is a little bit of a downturn if you will. It's it's
Speaker Change: You know, it's 1% naturally baked into this quarter, right? And then February was a bit of a downturn from January by which you might expect. The reason we don't usually talk about month to month [inaudible]
Speaker Change: It's because they're not perfect comparisons. We look in four week segments because what happens is in January you have three what we call some days, the 29th, the 30th, and the 31st.
If last year those days were Friday, Saturday and Sunday, [inaudible]
and this year those days are Saturday Sunday Monday. Okay.
Speaker Change: It's going to be a different number. And even worse, if last year they were ended on Monday and this year it ends on Tuesday, which Monday still is a strong day and Tuesday is one of the weakest days of the year of the week. So we really don't...
Speaker Change: We look at the business on a monthly basis. We look at it when we look at how we grow transactions and the principle. We look at it in four week segments because that's a perfect comparison. And, you know, if we look at it by the
Speaker Change: Month, it kind of, you know, February is the perfect example, last year it's 28, 29 versus 28. But even in January , the stump days would be different, which will throw that number out. So you can get a sense about, oh, we did better, we did worse. But really, when you look at the four weeks,
It's relatively stable. We think that...
Speaker Change: You know, a lot of weather the trough is there are not. You know, it's a lot.
Speaker Change: I think there's two things that will react to how we perform at retail going forward, first is the macro environment, and I think once that settles into a new normal I don't even think there has to be an easing of the current administrations [inaudible]
Speaker Change: Approach to immigration. I mean if you look, there's been prior administrations, if you play their speeches.
Speaker Change: President Obama said similar things to Trump. President Trump said, you know, if you're here illegally, you know, you will be deported.
So it's those things... [inaudible]
It's an easy way to deport them all north. They're a way to replace the work they do, particularly in agriculture. So I think that...
Speaker Change: There probably will be some easing over time, but if there isn't a new normal, we'll kind of set in. I think we have consumers today in talking to our retailers that don't necessarily want to go to retail.
Speaker Change: But they have to because many, many consumers either don't trust or are not equipped to do digital. It's not because of the technology, it's because of the banking. If you're undocumented, you may not have the banking relationship to be able to do a digital transaction. And we think that group could be 60, 70% of the, you know, we hear the numbers, but administration makes sense, could be 60, 70% of the folks that are here. I think that's the first piece of it. I think that's the first piece of it.
The second piece is, is we're shifting our approach a bit? [inaudible]
And retail. And whereas we are a value added, high. Bye.
Quality Provider
We also recognize that at the increment, we will be...
Gifford and more aggressive for incremental wires.
So we'd much rather do...
Speaker Change: actually brought down our average margin. We're not going to touch the 5 million that we have in the basket, but we can be aggressive in states like California and Texas.
Speaker Change: And make a lot more money, deliver a lot more of the DA and create even better of the DA margins we have.
Speaker Change: by being aggressive in a wafeless shot approach. And that's the kind of stuff that I'm talking about that underway.
Speaker Change: As we speak that the waterfall has not yet been created, that will impact that second half.
Speaker Change: And it will be, I don't want you to think that...
Speaker Change: These high margins we have in places like Tennessee, or other parts of the east, I just dig signals to all the little crap guys out there, but to go after our states. But in the southeast, those margins aren't going to be touched because we don't need to because we're doing great. Well, we need to do is on the margin where we have opportunities, and we're going to be much more nimble at that.
Speaker Change: Great, I appreciate all the great color. I'll jump them back into the tube.
David Scharf. David Scharf, David Scharf,
Thank you.
Unidentified Operator: Then our next question comes from Mike Grondahl of Northland. Your line is open.
Mike Grondahl: Hey, Bob and Andrew, say, hey, first question, have you thought at all about pulling back on your incremental investment in digital, or I don't know, pushing it out a quarter or two, or is it kind of full systems go there?
It's full systems go.
It's
in terms of proportionality. [inaudible]
Mike Grondahl: It's a moving target, so you know, when we get there, if we get there, but we're going to continue to move that digital business and we think we're moving it and we'll move it very properly with the current customer acquisition and the lifetime value of the customer that it will be a profitable business.
Mike Grondahl: and I think this is the time to do that. I think it's the right time and it's the right time for that investment for us. And again, you know, we're not...
Speaker Change: We're not in a position nor is it the style of our company.
Speaker Change: to go, you know, and, and, and, and over invest and not manage that. We've been very good operator, very, very custodians of every nickel in the company, and we'll continue to do that and monitor the response of that, but it is the right time. And I think our wires invest in the service.
Speaker Change: for us is a positive sleeping giant, right? I think that there's just a lot of business out there that we can get with people that we can process for that may not be millions of wires per but could be 10,000 here and 20,000 there. These things add up.
Speaker Change: The margins on them are not quite as good as their own business, but what's really great about them is there's the investment. It's just simply things we've already done or technology or licenses or banking relationships, not all needed in every case.
into R.
Speaker Change: He's growing our own brand, Intermex, and our other brand now, Amigo Pizano. The thing that I think that we've never yet encountered, and it's because of the strength of retail.
when we see that...
Sadowski, Andras Bende, Robert Lisy
Speaker Change: But if we started to see a sharper drop there, we can be much more aggressive.
Speaker Change: and providing the digital opportunity for consumers that are leaving retail. And we do some of that today, but we don't believe we're in a catastrophic or anywhere near that situation where we want to risk the very high profitability retail.
Speaker Change: and the reagent relationships we have to be able to aggressively convert those customers. So we feel we've got a ton of options that are disposal. We're still one of the largest, we are the largest provider in the world to Guatemala.
Speaker Change: And we are still amongst those two Mexico, the two most profitable, largest markets to Latin America, and we will continue to do that but continue to do it very carefully.
Speaker Change: So that we're growing that digital side without, you know, degrading our overall profitability and value of earnings per share for our shareholder.
Speaker Change: Got it. Bob, you've mentioned kind of a strong pipeline for wires as a service.
Speaker Change: Is much of that embedded in kind of baseline 2025 guidance, does that represent upside or how should we think about that as it comes online?
Speaker Change: Yeah, I think we've been really conservative about how we've looked at that because...
Speaker Change: We, you know, wanted to make sure that we had an engine related to, you know, there's a lot of things with wires as a service that have to be at that front end.
Speaker Change: But are also siloed with Marcelo that are making sure that we're able to push these things through more quickly and get the all of the necessary components of the words of the service done faster. And so all of that
It's an upside because we're... [inaudible]
Speaker Change: Continuing to evolve it and so we want to make sure that you know these things are all different the contractual piece can be put through really quickly and the accounting piece because sometimes we're going to have the revenue by regulation sometimes they're going to have the revenue we have to decide on all of those different factors.
Speaker Change: But and then ultimately the technology once we have a basic
Speaker Change: A couple of components that you can pick as awareness is a service, and we're getting to that now, the technology piece will be really easy, it's kind of a plug-and-play .
Speaker Change: And we think that there will be soon in a place where we'll put more people on the street to actually be selling our wires to the service. And we think there's a lot of, you know,
Speaker Change: Right in the marketplace, and also adjacent customers for that. And we haven't counted that upside in our numbers today.
Unidentified Operator: Got it, and it's one last one, the larger principal amounts.
It's happening a little bit less often. [inaudible]
Unidentified Operator: I'm assuming that was the primary reason for the slightly softer quarter and revised guidance is
Speaker Change: Is it, are you able to quantify that in one queue, like that was pay a couple million for five million, is that thinking generally correct?
Speaker Change: Yeah, but Mike, we commented on it in the script, but I dig the answer is yes.
I think if the same amount of principle.
was sent in more normalized amounts. [inaudible]
You would have seen two to three million more.
and Nick Scott.
Speaker Change: Exactly. Okay. Yeah, I mean, just do you get an economics for everyone on the phone that when someone sends up $1,800.
Speaker Change: We still get a $10 fee, we make a lot more FX because we make the FX on the $800.
Speaker Change: But if they send two four hundred, we get two ten dollar fees plus the same effects. So the effects in the margin that we're getting per wire kind of looks good because the principal amounts up and there's more effects but it reduced. [inaudible]
Speaker Change: You know, not necessarily, you know, two to one, but maybe five to four, maybe six to five or whatever. And we're not sure, as we said, script. We don't know what exactly caused this.
Sadowski, Andras Bende, Robert Lisy Sadowski, Andras Bende, Robert Lisy
Speaker Change: You know crashing, it's just not especially a market that where the border is sealed right that still shows the strength of the overall retail market and particularly our retail business.
Speaker Change: And again, I want to be careful. I know you didn't ask this Mike for those other listening out there. This does not mean that we're, you know, I know people have a real problem with understanding how we can do two profitable things.
Speaker Change: They think you've got to lose a shitload of money like some people to just be all digital. We just happen to think it'd be really great to return a lot of money to our shareholders on a quarterly basis, while we build a great digital business.
and not going hawk on our shareholders' backs. [inaudible]
Speaker Change: to do that. And I know there's a lot of analysts out there that think the retail business is dead, well they're wrong. It's not. That's why we're in it. I've been at this a long time and we'll continue to build digital, but we'll build it from these proceeds and profits that we have from the strong retail market, which we excel at.
David Scharf, David Scharf,
Sounds good. Hey, good luck this summer, guys. Thank you.
Thank you.
Andres Bende, Robert Lisy
Speaker Change: And our next question comes from Alex Markgraff of KBCM, where line is open.
Alex Markgraf: Hey everyone, thanks for taking my question. Sort of along the lines of the principle amount and transaction dynamic. Andras, and then you mentioned an expectation that continues into the near future. I guess just maybe level set for us within the guide what's assumed there. Any sort of worsening assumed in that guide around that dynamic.
Yeah, I think we expect a different...
Continuing in Q3 and Q4 work.
Alex Markgraf: I think we've modeled in that getting a bit better towards Iran, because we do believe in time is going to be a...
Alex Markgraf: Or Resets of the New Normal, but I think if you look here every year in the guide, we still do have that dynamic of transactions down and volume up here. So that's weren't the same.
Speaker Change: Okay, and then if I could just ask one on op-x and appreciate any comments, just on the agility and the organization.
Speaker Change: Just from your current position obviously have exhibited quite a bit so far just sort of curious what sort of agility is left on the table as you think about the op-ex base and some investment priorities.
David Scharf, David Scharf,
Speaker Change: Fat that sits to cut, we zero base everything every year, so it's not like we have a big slate of...
Speaker Change: You know, 200 folks worth of costs we can take out. We're continuing leveling up and leveling down the costs as needed. That's why, from a salary perspective, you're talking, you know, maybe 1%.
Unidentified Operator: Okay, that's super helpful. If I could just squeeze in one more on the digital revenue number for this quarter, I think the quenchedly was a little bit lower than the fourth quarter. Is that just seasonality or is there anything else to understand about that?
Speaker Change: No, it's mostly related to the volume. The first quarter tends to be a little bit lower than the fourth quarter. But when we look at Q2, we see the trend growing again more than we did in Q1.
Speaker Change: in the industry. October and December are amongst the biggest months of the year and fourth quarter obviously.
Speaker Change: And in first quarter, the weakest month of the year is January , and tied for the second with November is February . So you're sequencing one of the strongest quarters, if not the strongest quarter of the year, with the weakest quarter of the year.
Speaker Change: So that's why we kind of always in our industry look at a year-over-year number and the year-over-year growth and so, you know, that's why we focus on the 70% year-over-year growth, not this quantity.
Okay, I appreciate all the answers. Thanks, guys.
Thank you.
David Scharf, David Scharf,
Unidentified Operator: And our next question comes from Andrew Harte of BTIG. Your line is open.
Andrew Hart: Hi, team. Thanks. Appreciate the question. I appreciate the commentary, right? I think you said you can't speculate right now why there's...
Fewer Transactions and Higher Principle for Transaction Going On, but I think something you did say is longer term, you do not think that it's a long term.
Speaker Change: Schiff in the consumer behavior. So I guess can you just kind of share a little bit of why you have confidence that it will shift back to what it's historically been like and have you seen any of that shift so far here in the second quarter? [inaudible]
Speaker Change: Yeah, I think first I want to be clear there's a lot of land between think and confidence, right? So we said we think it will go back. We're not confident and we'll go back. We've never suggested that.
Speaker Change: Like this, unless there is an FX reason for it. Like you might have an election in Mexico in the peso weekends to 24, and you'll see huge, principal amounts go up, because in people's minds the pesos on sale, and the money's worth more money on the other side of the border at 24 pesos per dollar than it is on the northern side of the border.
Speaker Change: But we haven't seen these kinds of phenomena. It is a little bit different times either from a perception perspective or a reality perspective with the border. And I think, you know, however, we don't know we suspect they're talking to our retails.
Speaker Change: It's not an exact science, or retailers are small business people.
But they believe this foot traffic.
Speaker Change: Ars Down, there's less wires and they feel like the reason is...
Speaker Change: Many of them might be and having a visit from ICE, right? Immigration that might come there and check IDs and deport people, right? So whether that's, we don't know, it's unscientific [inaudible]
Speaker Change: That's the best data we have right now. We're not seeing any shift yet in that, but you know, again, it's sort of a perspective that we have in trying to identify what's happening.
David Scharf, David Scharf,
That's really helpful color. Thank you. And then…
Speaker Change: I'm the digital side of the business, I guess two questions here. The first part with the 70% growth, I think obviously that was...
Speaker Change: Aided a bit by Amigo Pesano. So can you just share kind of what? No, let me be really clear for everybody listening. It was not aided in any way. Amigo Pesano was in our number before and it's in our number now.
Speaker Change: So it was not, there's nothing in here that's non-organic. This is organic growth between our wires of the service, a meagopisano and our own business. And it is a year over year growth, a real growth is 70% in first quarter. And that is increased to 80% in April .
Okay, that's great clarification. The second part is...
Speaker Change: The commentary on customer acquisition in digital is better than expected. So, you know, I guess...
Speaker Change: Is that giving you confidence or want to actually lean into it even more as opposed to pull back on the other side of the point? You should follow our plan, right, just what we're trying to do. So I'll let Marcelo comment more on that, but we're certainly not planning on pulling back. But you know, we can't evaluate.
Speaker Change: You know, if we're getting a really great return, then you know, that's certainly something we can take a look at, whether we would invest more, but Marcel, do you want to? No, perfect, Bob. We are very confident with the results that are achieving Q1. We keep investing very meaningfully, but topfully about...
Speaker Change: Exactly what was in the plan. We also are seeing growth in value-added services that we are offering to our distal solutions. So now we are offering top up, we are offering due payment.
Speaker Change: So, while we are still reporting the gross margin per transaction related to remittance, there is additional company that is more revenue coming from the same consumer with other products.
Speaker Change: Our vision for the industry that we did not mention yet clearly during the school.
He's to be a financial service provider, so...
Speaker Change: Every dollar that we invest in customer acquisition has the potential to become a higher return per consumer than we had in the past. So to confirm your question, yes, we are confident of what we did and we are going to keep investing as planning.
Thank you. I appreciate the questions.
Thank you.
David Scharf, David Scharf,
Unidentified Operator: We have a follow-up from Gustavo Gala of Monès Cresby Heart and Company. Your line is open.
Gaskela: Hey, Bob, just wanted to see like get you to riff a little bit on what you're seeing in terms of pricing rationality across retail and digital in the industry.
Speaker Change: Observations, Dower People Behaving, I think I'm going to finally see people try to take down price when they're struggling. Just talk about rationality in the industry. That'll be helpful. Thanks.
Speaker Change: Yeah, if I think that there's, I won't mention names, but there's a...
Speaker Change: You know, just wanting to make money, hopefully. You know, the private equity from sponsoring them. We see that in more cases, where we think that pricing, we've taken, you know, again, I've talked about that reporting to Andrew, we have a data scientist and when we're looking at it,
Today, we're very competitive price wise at retail. [inaudible]
Speaker Change: You know, there's places where better than the competition places where we're worse.
Speaker Change: But we do believe we have a superior product and we think pricing we're in a really good spot.
for us to be more aggressive in price.
Speaker Change: But from our perspective, if we picked up the million incremental liars in our average margins today are, you know,
Speaker Change: Between $4.5 and would be any more specific than that.
And then Million Wires came in at 375. Bye.
Speaker Change: We're delighted at that. That's going to drive their bottom line dramatically. Definitely.
Speaker Change: It's about, you know, that's almost, it's more than $40 million in gross margin annually, which we'd probably bring down 15 to 20 million of that to the very bottom line. So we will use from our perspective
Speaker Change: Price is an attacking mechanism where we don't have wires we're getting a margin of 375 on a thousand wires is a wonderful thing because we have zero wires.
Speaker Change: But what we don't see is the need for us to degrade. [inaudible]
Speaker Change: The Core Pricing that we have, which you know, in March from our all-in business was 4.7 million wires. And again, that's a mixture of LaNationale and a transfer of all everything together, but we don't see a need to be aggressive in price in that area because we think if anything...
Speaker Change: Tracing has probably been a slight bit of a pullback. There's still a couple of guys out there that are really aggressive in price.
Speaker Change: But you have to be really careful because what you hear, not that you hear it, but what we might hear from our, because the salespeople are always going to tell you the other guys much better FX.
Speaker Change: But when we have really do the survey, and we have independent people even in our company do that with the data scientists, we find that pricing is not nearly the issue that we might hear if we're dealing with directly data that comes from our agent retailers for instance [inaudible]
Speaker Change: that are always going to want us to add a few centibles makes their job easier, right? So, that's where I would describe it to.
Speaker Change: Thank you for all the helpful progress. Good luck Summer.
Thank you, appreciate it.
Speaker Change: Thank you. I'm showing no further questions at this time. I'd like to turn it back to the Bible to see for any closing remarks.
Bob Lisy: Thank you all for your time and attention. And I know we'll be speaking to some of you here in the upcoming hours. We look forward to that. Have a great day. Thanks.
Speaker Change: This concludes today's conference call. Thank you for participating and you may now disconnect.