International Money Express, Inc. — Q1 2021 Form 10-Q
Business and period: Unaudited results for the three months ended March 31, 2021, compared with Q1 2020. Intermex provides money-transfer services, primarily from the U.S. and Canada to Latin America and the Caribbean, through agents, company-operated stores, and digital channels. It reported one operating segment.
Financial performance
| Metric | Q1 2021 | Q1 2020 | Change |
|---|---|---|---|
| Revenue | $94.6 million | $77.3 million | +22.4% |
| Operating income | $13.5 million | $9.6 million | +40.0% |
| Net income | $9.0 million | $5.7 million | +57.9% |
| Diluted EPS | $0.23 | $0.15 | +53.3% |
| Adjusted EBITDA (non-GAAP) | $16.8 million | $13.2 million | +27.4% |
| Adjusted net income (non-GAAP) | $10.6 million | $7.6 million | +40.0% |
Net wire-transfer and money-order fees were $80.9 million, up 20.6%; foreign-exchange gain was $13.0 million, up 36.6%. Management attributed revenue growth mainly to higher transaction volume and network expansion, with foreign-exchange revenue also benefiting from increased average send amounts and Mexican peso volatility. Transactions processed totaled approximately 8.4 million, up 19%; principal amount sent rose approximately 30%, and the agent network grew approximately 13% year over year.
Operating margin was approximately 14.3%, compared with 12.5%; net margin was approximately 9.5%, compared with 7.4%. Service charges from agents and banks increased to $63.4 million from $52.2 million, primarily with volume. Salaries and benefits rose to $9.9 million from $7.4 million, while other SG&A was $5.5 million versus $5.3 million. Interest expense declined to $1.3 million from $1.9 million, mainly reflecting lower market rates and lower revolving-facility drawings in the comparable period.
Cash flow, debt, and liquidity
- Operating cash flow: $(32.4) million, versus $18.8 million provided in Q1 2020. Management attributed the outflow primarily to additional prefunding of paying agents ahead of Latin America’s Holy Week activity, partly offset by stronger operating results.
- Investing cash flow: $(1.9) million, including $1.9 million of property and equipment purchases. Financing cash flow: $14.5 million, including a $15.0 million revolver draw, $1.4 million of option proceeds, and a $1.9 million scheduled term-loan repayment.
- Cash declined to $55.1 million from $74.9 million at December 31, 2020. Prepaid wires rose to $89.1 million from $53.3 million, consistent with increased prefunding. Current assets were $214.6 million and current liabilities $87.5 million at quarter-end.
- Gross borrowings were $102.5 million: $87.5 million under the term loan and $15.0 million under the revolver. The balance sheet reported debt net of issuance costs of $100.9 million. The company reported $38.0 million of additional borrowing availability and compliance with credit-facility covenants.
- The credit agreement matures November 7, 2023; financial covenants include a minimum fixed-charge coverage ratio of 1.25:1.00 and maximum consolidated leverage ratio of 3.25:1.00. Management said cash flows and available borrowing capacity should fund expected needs for at least the next 12 months.
Changes, outlook, and risks
- Growth in volume and revenue drove higher operating income and earnings, while agent-related service costs also increased. Management noted higher wages, sales commissions, marketing expense, rent, and IT costs; lower amortization and interest expense partly offset cost increases.
- The filing provides no formal numerical revenue or earnings guidance. Management described the business as functioning effectively during COVID-19 and said pandemic restrictions had not materially affected Q1 results, but emphasized uncertainty around the pandemic’s duration, customer employment, and future business conditions.
- Key disclosed risks include competition, especially digital platforms; foreign-exchange volatility and sustained appreciation of the Mexican peso or Guatemalan quetzal; agent and financial-institution credit or liquidity risk; cybersecurity, fraud, and regulatory compliance; interest-rate exposure on variable-rate debt; and restrictions or disruptions affecting remittances. A hypothetical 1% rate change was estimated to change annual cash interest on the term loan by approximately $0.9 million.
- Ordinary-course legal claims and proceedings remain outstanding. Management said loss probability and damages could not be estimated, and no reserve was established; it did not expect legal or regulatory matters to have a material adverse effect based on information then available. Required licensing liquidity and tangible-net-worth requirements were met at March 31, 2021.
- No material changes to previously disclosed risk factors were reported. Management concluded disclosure controls were effective; no material change in internal control over financial reporting was reported.
Important facts for investors to verify
- Whether the large Q1 operating cash outflow reverses as seasonal agent prefunding is settled, and how prepaid wires and receivables evolve.
- Whether transaction growth and foreign-exchange gains persist, and how much earnings depend on exchange-rate volatility and average send amounts.
- Debt repayment capacity, revolver usage, covenant headroom, and exposure to floating interest rates before the 2023 maturity.
- Agent receivable and counterparty credit quality, especially amid pandemic-related economic uncertainty.
- Potential future costs or effects from regulatory, cybersecurity, fraud, legal, and compliance matters; the filing does not quantify potential legal losses.
Amounts are rounded. Non-GAAP measures are company-defined supplements and should be considered alongside GAAP results. Interim results are unaudited and may not indicate full-year performance.