International Money Express, Inc. — Q3 2023 Form 10-Q
Reporting period: Three and nine months ended September 30, 2023; comparisons are with the same 2022 periods. Figures are in U.S. dollars unless noted. Intermex provides money transfer and related services through agents, company-operated locations, and digital channels. Its network expanded through the November 2022 La Nacional and April 2023 LAN Holdings acquisitions.
Financial results and liquidity
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Revenue | $172.4m | $140.8m | $487.0m | $392.4m |
| Operating income | $24.3m | $20.7m | $67.8m | $61.1m |
| Net income | $14.8m | $16.6m | $42.0m | $44.3m |
| Diluted EPS | $0.41 | $0.43 | $1.14 | $1.14 |
| Operating margin | 14.1% | 14.7% | 13.9% | 15.6% |
| Net margin | 8.6% | 11.8% | 8.6% | 11.3% |
- Q3 revenue grew 22.5%; net income declined 10.8%. Nine-month revenue increased 24.1%, while net income fell 5.1%.
- Q3 net wire and money-order fees were $147.4m, foreign-exchange gains $22.7m, and other income $2.4m. Management attributed revenue growth mainly to higher transaction volumes, expanded agent networks and acquisition contributions; lower average pricing at acquired businesses partially offset growth.
- Q3 operating expenses increased to $148.2m from $120.0m. Agent and bank charges rose with transaction volumes, while salaries, facilities, technology and credit-loss costs also increased. The agent/bank charge ratio improved to 65% of revenue from 67%.
- Interest expense rose to $2.8m in Q3 and $7.6m year to date, primarily reflecting higher rates and revolving-credit borrowings. The Q3 tax provision was $6.6m versus $2.7m, partly because the 2022 quarter benefited from a stock-compensation tax windfall and 2023 had higher state tax expense.
- Management-reported non-GAAP measures: Q3 Adjusted EBITDA was $31.7m (+14.0%) and adjusted net income $18.4m (down from $20.7m). For nine months, Adjusted EBITDA was $86.7m (+13.8%) and adjusted net income $51.0m (down 2.7%). These measures exclude specified costs and are not substitutes for GAAP results.
- Operating cash flow was $82.4m for the nine months, compared with cash used of $9.8m in 2022. Management attributed the swing largely to working-capital timing. Investing used $13.2m; financing provided $2.8m, including $48.0m of net revolver borrowings and $40.6m of share repurchases. Cash increased to $222.4m from $149.5m at year-end.
- At September 30, 2023, current assets were $482.3m and current liabilities $244.0m. Cash was $222.4m; accounts receivable, net, was $163.0m; wire transfers and money orders payable, net, was $159.9m.
- Debt was $201.1m before debt issuance costs and current classification: $124.0m drawn on the revolver and $77.1m term loan. An additional $166.0m was available. The revolving commitment had been increased to $220m; facilities mature June 2026. The company reported compliance with its financial covenants.
Material changes, outlook and risks
- Transaction volume rose 25.7% in Q3 and 26.9% year to date. The agent network increased 38.1% versus September 2022 in Q3 and 16.2% year to date, primarily reflecting acquisitions. Principal sent was $18.3bn year to date, up 20.5%.
- La Nacional restructuring incurred $1.1m in Q3 costs, paid during the quarter. The company expects total plan costs of about $1.4m through year-end and annual expense reductions of about $1.5m, expected mainly in 2024. It does not expect a material revenue reduction or increase in operating expenses from the plan.
- The company repurchased 1.73m shares for $40.6m during the first nine months and had $80.7m remaining under its repurchase authorization. A May privately negotiated purchase included 500,000 shares from related party SPC Intermex, LP for $12.6m.
- LAN Holdings contributed $6.1m of Q3 revenue and $0.1m net loss; year-to-date contribution was $10.9m revenue and $0.1m net loss. Acquisition integration and anticipated benefits remain execution considerations.
- Management stated cash, projected operating cash flows and revolver access should fund operating needs, debt service, acquisitions and expected capital expenditures for at least 12 months. This outlook depends on cash generation and continued access to credit.
- Key risks include foreign-exchange volatility and sustained appreciation of the Mexican peso or Guatemalan quetzal, higher variable interest rates, agent and bank credit exposure, competition from digital platforms, cybersecurity and fraud, regulatory compliance, and acquisition integration. A hypothetical 1% rate change would affect annual cash interest by approximately $0.8m on the term loan and $1.2m on the revolver.
- Credit-loss provision was $3.8m year to date versus $2.0m in 2022, reflecting higher agent receivable write-offs. The company also has about $5.2m deposited with a closed Mexican financial institution, with a $3.6m valuation allowance; recovery timing and amount are uncertain.
- Ordinary-course legal matters have no reserve because management says loss probability or damages cannot be estimated. Management does not expect regulatory examinations to materially affect results or financial condition. Licensing subsidiaries were reported in compliance with minimum liquid-asset and tangible-net-worth requirements.
Important facts for investors to verify
- How much revenue and transaction growth is organic versus attributable to La Nacional and LAN Holdings, and whether acquired operations achieve expected synergies.
- Whether the planned $1.5m annual restructuring savings materialize in 2024, and whether any additional costs arise beyond the estimated $1.4m.
- Cash-flow sustainability: operating cash flow improved sharply, but management cited working-capital timing; assess remittance payables, prefunding and receivable collection trends.
- Debt exposure, borrowing availability, covenant headroom and sensitivity to variable rates as interest costs rise.
- Credit-loss trends, agent concentration and the recoverability of deposits at the closed Mexican bank.
- Share-repurchase pace and funding relative to debt, liquidity needs and credit-agreement restrictions.
- Management’s forward-looking statements are subject to risks; the filing provides no numerical company-wide revenue or earnings guidance.