International Money Express, Inc. — Q3 2021 Form 10-Q
Reporting period: Three and nine months ended September 30, 2021. Amounts are in U.S. dollars; financial statement amounts below are in millions unless noted. Intermex provides money transfer services, primarily from the U.S. and Canada to Latin America, through agents, company-operated stores and digital channels.
Financial results
| Metric | Q3 2021 | Q3 2020 | First nine months 2021 | First nine months 2020 |
|---|---|---|---|---|
| Revenue | $120.7 | $95.6 | $332.0 | $257.9 |
| Operating income | $16.1 | $14.6 | $48.9 | $38.1 |
| Net income | $11.5 | $9.5 | $33.7 | $24.2 |
| Diluted EPS | $0.29 | $0.25 | $0.86 | $0.63 |
| Operating margin | 13.3% | 15.2% | 14.7% | 14.8% |
| Net margin | 9.5% | 9.9% | 10.2% | 9.4% |
Q3 revenue rose 26.3% year over year; net income increased 21.2%. For the first nine months, revenue increased 28.7% and net income 39.5%. Growth was driven primarily by higher transaction volume: transactions increased 23.4% in Q3 and 25.4% for the nine-month period. Management also cited agent-network growth and higher average transfer amounts; foreign-exchange revenue benefited from peso volatility. Q3 service charges from agents and banks were $81.4 million, or 67% of revenue, versus $63.9 million. Q3 operating margin declined year over year as expenses grew faster than revenue.
GAAP diluted EPS was $0.29 in Q3 and $0.86 for the nine months. Management reported non-GAAP adjusted EBITDA of $22.9 million for Q3, up 19.8%, and $62.9 million for the nine months, up 26.6%; these measures exclude specified costs and are not substitutes for GAAP results.
Cash, debt and liquidity
- Cash was $125.1 million at September 30, 2021, versus $74.9 million at December 31, 2020. Current assets were $243.3 million and current liabilities $104.2 million.
- Nine-month operating cash flow was $60.7 million, compared with $31.6 million in 2020. Investing cash outflow was $5.5 million, principally capital expenditures; financing cash outflow was $4.7 million. Ending cash was $125.1 million.
- Gross term-loan borrowings were $86.4 million; debt net of deferred origination costs was $84.1 million on the balance sheet. The company had no revolving borrowings reported and stated that $220 million of additional borrowing capacity was available.
- The June 2021 amended credit agreement provides a $150 million revolving facility, an $87.5 million term loan and up to $70 million in uncommitted incremental facilities; maturity is June 2026. The company reported covenant compliance. The agreement includes leverage and fixed-charge coverage tests and restricts certain payments, including repurchases.
- Management stated that cash generated from operations, together with revolver availability, should cover debt service, working capital and expected capital expenditures for at least the next 12 months.
Material developments, outlook and risks
- Bank closure in Mexico: A local institution holding approximately $5.2 million of company deposits was closed and placed into liquidation. Intermex recorded a $2.0 million pretax provision; recovery amount and timing remain uncertain. The balance sheet included $3.239 million of funds held by seized banking entities.
- Other unusual expense: The company wrote off $1.0 million of software development expenditures in Q3. Other SG&A also increased with advertising, travel, IT and business-growth costs.
- Share repurchases: An August 2021 program authorized purchases up to $40 million. Intermex reported $1.2 million spent on 70,440 program shares through September 30, with $38.8 million remaining. The quarter’s total share purchases also included shares withheld for employee taxes.
- Outlook: No numerical revenue or earnings guidance is provided. Management noted that it expects compliance enhancements and related costs to continue, and said operating cash flows and available funding should meet expected needs over the next year.
- Key risks: COVID-19 and economic uncertainty; foreign-exchange movements; agent, bank and counterparty credit risk; competition from digital platforms; cybersecurity and fraud; regulatory compliance; and variable-rate debt exposure. A 1% rate change was estimated to change annual cash interest on term debt by about $0.9 million. Management said the pandemic had not materially harmed results for the periods reported, but future effects remain uncertain.
- Ordinary-course legal matters had no recorded reserve because management could not estimate loss probability or damages; management did not expect regulatory examinations to have a material adverse effect. The company reported compliance with applicable minimum net-worth and liquid-asset requirements.
Important facts for investors to verify
- Progress and recoverability of the approximately $5.2 million deposit affected by the Mexican bank liquidation, including any further loss recognition.
- Whether transaction-volume and revenue growth persist, and how service costs, FX gains and operating margins evolve.
- Actual revolver usage, debt amortization, interest-rate exposure and continued compliance with credit covenants.
- Cash-flow conversion and working-capital movements, particularly the substantial increase in accounts receivable.
- Repurchases made after quarter-end and remaining authorization, considering credit-agreement restrictions and operating liquidity needs.