International Money Express, Inc. — Q2 2022 Form 10-Q
Reporting period: Three and six months ended June 30, 2022; unaudited. The company provides omnichannel money-transfer services, primarily from the U.S. and Canada to Latin America and the Caribbean, with additional destinations in Africa and Asia.
Financial performance
Amounts below are in millions of dollars, except per-share data. Comparisons are with the corresponding 2021 period.
| Metric | Q2 2022 | Q2 2021 | First half 2022 | First half 2021 |
|---|---|---|---|---|
| Revenue | $136.9 | $116.7 | $251.6 | $211.3 |
| Operating income | $23.2 | $19.3 | $40.3 | $32.8 |
| Net income | $16.0 | $13.2 | $27.6 | $22.2 |
| Diluted EPS | $0.41 | $0.34 | $0.71 | $0.57 |
| Operating margin | 17.0% | 16.5% | 16.0% | 15.5% |
| Net margin | 11.7% | 11.3% | 11.0% | 10.5% |
- Q2 revenue rose 17.3%; net income rose 20.8%. First-half revenue rose 19.1%; net income rose 24.5%.
- For the first half, net wire-transfer and money-order fees were $215.6 million, up 19.6%; net foreign-exchange gains were $33.9 million, up 14.0%. Management attributed growth mainly to increased transaction volume and agent-network expansion, with currency volatility also contributing to foreign-exchange revenue.
- Q2 service charges from agents and banks increased 18.2% to $92.1 million, broadly tracking volume growth. Salaries and benefits rose 15.5% to $11.7 million in Q2. Reported operating expenses were 84% of revenue in both Q2 comparison periods.
- First-half adjusted EBITDA, a non-GAAP measure, was $48.4 million versus $40.0 million; adjusted net income was $31.6 million versus $25.9 million. These measures exclude specified costs; they are not substitutes for GAAP results.
Cash flow, balance sheet and debt
- Cash was $114.6 million at June 30, 2022, down from $132.5 million at year-end 2021. Current assets were $274.3 million and current liabilities were $116.9 million.
- First-half operating cash flow was $4.6 million, versus $70.3 million in 2021. Management attributed the decline primarily to a $72.8 million working-capital change, including timing of remittance settlements and payer prefunding; it noted significant prefunding ahead of early-July holidays.
- First-half investing cash use was $6.9 million, mainly equipment purchases, plus $0.2 million for an agent-location acquisition. Financing cash use was $15.6 million, including $13.6 million of share repurchases and $2.2 million in scheduled term-loan repayments.
- Term-loan borrowings were $83.1 million gross ($81.2 million net of current portion and debt issuance costs); no revolving-credit borrowings were outstanding. The company reported $220 million of additional borrowing capacity, including the uncommitted incremental facility. Debt matures in 2026. Management said it was in compliance with credit covenants.
- 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. Debt bears variable rates; a hypothetical 1 percentage-point rate increase was estimated to raise annual cash interest by about $0.8 million.
Material changes, outlook and risks
- Transaction volume increased 18.1% in Q2 and 18.8% in the first half year over year. The agent network grew 10.8% from June 2021 to June 2022; first-half principal sent increased 25.4% to $9.7 billion, and remittances processed rose 18.8% to 21.9 million.
- On March 16, 2022, the company agreed to acquire La Nacional and LAN Holdings, subject to regulatory approvals, with closing expected in late Q3 or early Q4 2022. Expected cash consideration is approximately $50 million, plus up to $3 million contingent consideration in 2023. After integration, expected within four quarters after closing, management estimated annual revenue contribution of $70–$80 million and an adjusted EBITDA margin of 9%–11%. These are acquisition expectations, not company-wide guidance.
- Management stated that cash, projected operating cash flows and available revolving borrowings were expected to cover operations, debt service, working capital, acquisitions and capital expenditures for at least the next 12 months. The filing provides no specific consolidated full-year revenue or earnings guidance.
- Risks highlighted include foreign-exchange volatility and sustained appreciation of the Mexican peso or Guatemalan quetzal, agent and bank credit exposure, competition (including digital platforms), cybersecurity and fraud, regulatory compliance, inflation and economic uncertainty, and acquisition integration and financing. COVID-19 had not materially adversely affected reported first-half results, but future effects remained uncertain.
- Accounts receivable, net, increased to $97.2 million from $67.3 million at year-end. The first-half credit-loss provision was $1.5 million versus $0.7 million, with management citing increased write-offs involving agents unable to pay on original terms.
- The company reported approximately $5.1 million of deposits at a closed Mexican financial institution and a valuation allowance of about $2.0 million; recovery timing and amount remain uncertain. Ordinary-course legal proceedings had no reserve because management said loss probability or damages could not be estimated. Management did not expect regulatory examinations to have a material adverse effect.
- The company repurchased 727,901 shares for $13.6 million in the first half; $20.8 million remained under its $40 million program at June 30. ASC 842 lease adoption added approximately $5.6 million of right-of-use assets and lease liabilities at January 1, 2022, without material net-income or cash-flow impact.
Investor verification points
- Check whether subsequent filings confirm the La Nacional and LAN Holdings closing, purchase-price adjustments, financing and integration progress against the stated timetable and contribution estimates.
- Assess whether operating cash flow improves as working-capital timing and prefunding normalize, and monitor the rise in agent receivables, credit-loss provisions and write-offs.
- Verify debt capacity, covenant compliance and sensitivity to variable interest rates, particularly as acquisition funding and continued buybacks affect liquidity.
- Track foreign-exchange spreads and transaction economics, including the impact of peso and quetzal movements, and monitor recovery of the Mexican bank deposits.
- Compare subsequent results with management’s stated 12-month liquidity assessment and monitor competitive, regulatory, cybersecurity and economic risks.