International Money Express, Inc. — Q2 2023 Form 10-Q
Business context and reporting period. This unaudited filing covers the quarter and six months ended June 30, 2023. Intermex provides money-transfer services through agents, company-operated stores, and digital channels, primarily from the U.S. and Canada to Latin America and other destinations. Results include La Nacional, acquired in November 2022, and LAN Holdings, acquired April 5, 2023.
Financial performance
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Revenue | $169.2 million | $136.9 million | $314.5 million | $251.6 million |
| Operating income | $24.7 million | $23.2 million | $43.6 million | $40.3 million |
| Net income | $15.4 million | $16.0 million | $27.2 million | $27.6 million |
| Diluted EPS | $0.42 | $0.41 | $0.73 | $0.71 |
| Operating margin | 14.6% | 17.0% | 13.9% | 16.0% |
| Net margin | 9.1% | 11.7% | 8.6% | 11.0% |
Revenue rose 23.5% in Q2 and 25.0% for the first half. Management attributed growth chiefly to higher transaction volume—up 26.7% in Q2 and 27.6% year to date—and the expanded agent network. Six-month principal amount sent increased 20.8% to $11.7 billion; transactions processed increased 27.6% to approximately 28.0 million. Higher revenue did not translate into higher GAAP net income: Q2 net income fell 3.5%, and first-half net income fell 1.6% year over year.
Agent and bank service charges were 66% of revenue in both Q2 and the first half, compared with 67% in 2022. Total operating expenses were 85% of Q2 revenue and 86% of first-half revenue, versus 84% in each 2022 period. Salaries and benefits and other SG&A rose substantially, reflecting acquisitions, hiring and retention, expanded facilities, technology, and compliance costs. Adjusted EBITDA, a non-GAAP measure, increased 11.7% to $30.9 million in Q2 and 13.6% to $55.0 million for the first half. Adjusted net income was $18.4 million in Q2 and $32.6 million year to date; these measures exclude specified costs and should be considered alongside GAAP results.
Cash flow, debt, and liquidity
- Six-month operating cash flow was $8,000, compared with $4.6 million in 2022. Management attributed the decline primarily to working-capital timing, including prefunding payers and changes in transmittal-related balances.
- Investing cash outflow was $10.0 million, including $5.5 million net cash used for the LAN Holdings acquisition. Financing cash inflow was $6.5 million, including $40.0 million net revolving-credit borrowings and $30.5 million of share repurchases.
- Cash and cash equivalents were $147.4 million at June 30, 2023, down from $149.5 million at year-end. Current assets were $402.6 million and current liabilities were $176.0 million.
- Debt carrying value was $193.3 million, comprising $116.0 million drawn on the revolver and $78.8 million in term-loan borrowings before debt-cost presentation. The company reported $174.0 million of additional borrowing availability; the revolving facility commitment was increased to $220 million in April. Credit agreement maturity is June 2026.
- Interest expense rose to $2.7 million in Q2 from $1.1 million, and to $4.8 million for the first half from $2.1 million, mainly because of higher rates and increased revolver borrowings. The company said it complied with its credit covenants at June 30.
Material changes, outlook, and risks
- The acquisitions expanded the agent network and geographic reach, including remittance services from Spain, Italy, and Germany. LAN Holdings contributed $4.7 million revenue and $28,500 net income from its acquisition date through June 30. Its purchase accounting and related tax assessment remained preliminary.
- The company repurchased 1.23 million shares for $30.5 million in the first half. This included a May privately negotiated purchase of 500,000 shares from related party SPC Intermex, LP for $12.6 million. Approximately $90.7 million remained under the repurchase authorization at June 30.
- No quantitative earnings guidance is provided in the filing. Management stated that cash, projected operating cash flows, and revolver access should be sufficient for at least the next 12 months to cover operations, debt service, acquisitions, and expected capital expenditures.
- Management highlighted risks from foreign-exchange volatility, especially sustained appreciation of the Mexican peso or Guatemalan quetzal; rising variable interest rates; agent and financial-institution credit exposure; competition and digital disruption; cybersecurity, fraud, and regulatory compliance; and economic and political conditions in operating markets.
- Legal claims arise in the ordinary course; management said loss probability and damages could not be estimated for certain proceedings and no reserve was recorded. A Mexican bank liquidation represents approximately $5.2 million of deposit exposure, with a $3.6 million valuation allowance. Regulatory examinations were not expected by management to have a material adverse effect; licensed subsidiaries were reported in compliance with required liquidity and net-worth rules.
Important facts for investors to verify
- Whether transaction growth and acquisition-related revenue convert into stronger GAAP earnings and operating cash flow; first-half operating cash flow was only $8,000.
- Integration progress, final purchase accounting, and expected economics of La Nacional and LAN Holdings, including LAN Holdings’ preliminary goodwill and intangible valuations.
- Debt levels, borrowing availability, covenant headroom, and sensitivity of interest expense to further rate changes.
- Credit quality of sending agents and recovery prospects for the Mexican bank deposits, alongside the status and potential cost of legal or regulatory matters.
- The effect of continued buybacks—including the related-party transaction—on liquidity, leverage, and per-share results.