International Money Express, Inc. — Q2 2021 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2021. Unaudited results; amounts below are in U.S. dollars unless noted. Intermex provides money transfer services, principally from the U.S. and Canada to Latin America and the Caribbean, through agents, company-operated stores and digital channels.
Financial performance
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Revenue | $116.7m | $85.1m | $211.3m | $162.3m |
| Operating income | $19.3m | $13.9m | $32.8m | $23.5m |
| Net income | $13.2m | $9.0m | $22.2m | $14.7m |
| Diluted EPS | $0.34 | $0.24 | $0.57 | $0.39 |
| Adjusted EBITDA (non-GAAP) | $23.2m | $17.4m | $40.0m | $30.6m |
- Revenue grew 37.3% in Q2 and 30.2% in the first half. Net income increased 47.3% and 51.4%, respectively.
- Operating margin was approximately 16.5% in Q2 versus 16.3% a year earlier, and 15.5% for the first half versus 14.5%. Net margin was approximately 11.3% and 10.6% in Q2, and 10.5% and 9.0% for the respective six-month periods.
- Net wire transfer and money order fees rose to $99.3m in Q2 and $180.2m in the first half. Net foreign exchange gains were $16.7m and $29.7m, respectively.
- Operating cash flow was $70.3m for the first half, versus $21.5m in 2020. Management attributed the increase partly to $41.5m of working-capital changes and business growth. Investing cash outflow was $3.2m; financing cash outflow was $2.3m.
- Cash was $139.7m at June 30, up from $74.9m at year-end 2020. Current assets were $229.7m and current liabilities $98.7m.
- Debt principal was $87.5m, reported net of unamortized issuance costs as $85.0m on the balance sheet. The company reported $220m of additional borrowing availability and compliance with credit covenants at quarter-end.
Changes and significant developments
- Remittance transaction volume increased 33.4% in Q2 and 26.6% in the first half year over year; principal amount sent rose approximately 53.2% and 42.2%, respectively. Management cited agent-network growth, with the network up approximately 17.9% from June 2020, as a key contributor.
- Agent and bank service charges increased with transaction volume. Salaries and benefits also rose, reflecting hiring, retention, wage increases and share-based compensation. Lower intangible amortization partly offset these cost increases.
- On June 24, 2021, the company refinanced its credit agreement. The amended facility includes a $150m revolving credit line, an $87.5m term loan and an uncommitted incremental facility of up to $70m; maturity is June 24, 2026. The term loan’s scheduled quarterly repayments begin in September 2021.
- Six-month diluted EPS was $0.57 versus $0.39. Adjusted diluted EPS, a non-GAAP measure, was $0.67 versus $0.48. The filing cautions that non-GAAP measures are supplemental and may not be comparable across companies.
Outlook, risks and contingencies
- No specific revenue, earnings or transaction-volume guidance is provided. Management said operating cash flows and revolving-credit access are expected to fund debt service, working capital and expected capital expenditures for at least the next 12 months.
- Management reported no material adverse financial effect from COVID-19 in the reported periods, but warned that renewed outbreaks, restrictions and economic effects remain uncertain. Risks include unemployment, inflation, agent and bank credit exposure, competition from digital platforms, cybersecurity, regulation, fraud and foreign-exchange volatility.
- Foreign-exchange volatility contributed to higher gains in the period; sustained appreciation of the Mexican peso or Guatemalan quetzal against the U.S. dollar could pressure margins. A hypothetical 1% interest-rate change was estimated to change annual cash interest expense by approximately $0.9m.
- The credit agreement requires a minimum fixed-charge coverage ratio of 1.25:1.00 and maximum consolidated leverage ratio of 3.25:1.00. It also restricts certain indebtedness, liens, investments and distributions.
- Ordinary-course legal matters have no recorded reserve: management said loss probability and damages could not be estimated, while also stating it did not expect asserted or unasserted claims to have a material adverse effect. The company reported compliance with applicable licensing tangible-net-worth and liquid-asset requirements.
- Management concluded disclosure controls were effective as of June 30, 2021; no material change in internal control over financial reporting was reported. No material changes to previously disclosed principal risk factors were identified.
Important facts for investors to verify
- Whether transaction growth, agent-network expansion and foreign-exchange gains are sustainable, and how much earnings depend on peso and other currency movements.
- The quality and repeatability of operating cash flow, given the substantial working-capital contribution during the first half.
- Revolver usage, actual borrowing availability after letters of credit and other conditions, debt repayment schedule, interest exposure and ongoing covenant headroom.
- Credit quality of sending agents and financial institutions, including receivables, notes receivable and potential effects of economic deterioration.
- Potential outcomes of unreserved legal matters and the continuing costs of regulatory, fraud-prevention and cybersecurity requirements.