International Money Express, Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022; unaudited, compared with Q1 2021. International Money Express (Intermex) provides money transfers primarily from the U.S. and Canada to Latin America and the Caribbean, with services to Africa and Asia, through agents, company-operated stores and digital channels.
Financial performance
| Metric | Q1 2022 | Q1 2021 |
|---|---|---|
| Revenue | $114.7 million | $94.6 million |
| Operating income | $17.1 million | $13.5 million |
| Net income | $11.7 million | $9.0 million |
| Diluted EPS | $0.30 | $0.23 |
| Operating cash flow | $33.3 million | $(32.4) million |
| Capital expenditures | $4.3 million | $1.9 million |
- Revenue increased 21.2%; management attributed fee growth mainly to a 19.7% rise in remittance transaction volume. Principal amount sent rose 29.6% to $4.4 billion, with approximately 10.0 million remittances processed.
- Net income grew 29.8%. Operating margin was approximately 14.9%, versus 14.3% a year earlier; net margin was approximately 10.2%, versus 9.5%.
- Net wire transfer and money order fees were $98.0 million, foreign exchange gains were $15.7 million, and other income was $1.0 million. Foreign exchange gains increased 20.1%, partly reflecting higher volume and peso volatility.
- Service charges from agents and banks rose 21.5% to $77.0 million, broadly tracking volume growth. Salaries and benefits increased 14.5% to $11.3 million; other selling, general and administrative expenses increased 28.4% to $7.1 million. Interest expense declined 28.9% to $1.0 million.
- Management-reported non-GAAP measures: Adjusted EBITDA was $20.7 million, up 23.0%; Adjusted Net Income was $13.4 million, up 25.7%; adjusted diluted EPS was $0.34 versus $0.27. These measures are supplemental and not substitutes for GAAP results.
Financial position and liquidity
- Cash was $157.2 million at March 31, 2022, versus $132.5 million at year-end 2021. Current assets were $265.2 million and current liabilities $113.7 million.
- Gross term-loan principal was $84.2 million; the balance sheet reports debt, net of issuance costs, of $82.1 million including current maturities. No revolving-credit borrowings were outstanding. The company reported $220 million of additional borrowing availability under its facilities.
- Cash from operations improved by $65.7 million year over year, primarily due to a $61.7 million working-capital change, including prepaid wires. Management cautioned that working capital varies with remittance timing and payer prefunding.
- Q1 financing included $1.1 million in scheduled term-loan repayments and $3.6 million in share repurchases. The company reported compliance with its credit covenants, including a minimum fixed-charge coverage ratio of 1.25:1.00 and maximum leverage ratio of 3.25:1.00.
Material changes, outlook and risks
- On March 16, 2022, Intermex agreed to acquire Envios de Valores La Nacional Corp. and LAN Holdings, Corp., which operate remittance businesses in the U.S., Canada and certain European countries. Closing was expected in Q3 2022, subject to customary regulatory approvals. No purchase price is stated in the provided filing text.
- The filing provides no specific numerical earnings or revenue guidance. Management said cash, expected operating cash flows and available borrowing capacity should fund operations, debt service, acquisitions and expected capital expenditures for at least the next 12 months.
- Management said COVID-19 had not materially adversely affected Q1 financial results, but continued to identify pandemic-related uncertainty, inflation, unemployment, interest rates and foreign-exchange volatility as potential influences on future results.
- Key exposures include competition from digital platforms, agent and bank credit risk, cybersecurity and fraud, regulation, political and currency instability, and variable-rate debt. A hypothetical 1% interest-rate change would change annual cash interest expense by approximately $0.8 million.
- Intermex had approximately $5.1 million of deposits at a Mexican financial institution that was closed and liquidated. It recorded an approximately $2.0 million valuation allowance; recovery amount and timing remain uncertain.
- Ordinary-course legal proceedings had no reserves recorded because management said loss probability or damages could not be estimated. The company reported compliance with applicable money-transmitter tangible-net-worth and liquid-asset requirements.
- ASC 842 lease accounting was adopted January 1, 2022, adding approximately $5.6 million of right-of-use assets and lease liabilities without material net-income or cash-flow impact. No material changes to previously disclosed risk factors were reported.
Important facts for investors to verify
- Completion timing, regulatory approvals, purchase price, financing and expected integration costs for the La Nacional and LAN Holdings acquisition.
- Whether Q1 cash-flow strength persists: operating cash flow was materially affected by working-capital timing, especially prepaid wires and receivables.
- Trends in transaction volume, agent network growth, foreign-exchange spreads and agent/bank service costs, which drive revenue and margins.
- Recovery prospects for the Mexican bank deposits and developments in agent receivables and credit-loss provisions.
- Debt covenant headroom, variable interest-rate exposure and the balance between the $40 million repurchase authorization and acquisition or other capital needs.