International Money Express, Inc. — Q3 2022 Form 10-Q
Reporting period: Three and nine months ended September 30, 2022. The company provides money-transfer and related services, primarily from the U.S. and Canada to Latin America and the Caribbean, through agent locations, company-operated stores and digital channels. Amounts below are in U.S. dollars; financial statement figures are in millions unless noted.
Financial performance
| Metric | Q3 2022 | Q3 2021 | 9M 2022 | 9M 2021 |
|---|---|---|---|---|
| Revenue | $140.8 | $120.7 | $392.4 | $332.0 |
| Operating income | $20.7 | $16.1 | $61.1 | $48.9 |
| Net income | $16.6 | $11.5 | $44.3 | $33.7 |
| Diluted EPS | $0.43 | $0.29 | $1.14 | $0.86 |
| Adjusted EBITDA (non-GAAP) | $27.8 | $22.9 | $76.2 | $62.9 |
- Q3 revenue increased 16.6%, operating income 28.8% and net income 44.5% year over year. Nine-month revenue increased 18.2% and net income 31.3%.
- Q3 operating margin was approximately 14.7% versus 13.3% a year earlier; net margin was approximately 11.8% versus 9.5%. For nine months, operating margin was approximately 15.6% versus 14.7%, and net margin approximately 11.3% versus 10.2%.
- Growth was driven chiefly by transaction volume: Q3 volume rose 16.0% and nine-month volume 17.8%. The nine-month principal amount sent increased 22.2% to $15.2 billion; the company processed approximately 34.1 million remittances, up 17.8%.
- Agent and bank service charges increased with transaction volume. Salaries and benefits also rose, reflecting hiring and retention, wage and bonus increases, and higher share-based compensation. Q3 included a $1.1 million cumulative catch-up expense for performance stock units.
- Nine-month operating cash flow was negative $9.8 million, compared with positive $60.7 million in 2021. Management attributed the change mainly to an $83.0 million working-capital swing, including timing of remittance orders and payer prefunding around September 30. Investing cash outflow was $9.4 million; financing cash outflow was $8.0 million.
Balance sheet, debt and liquidity
- At September 30, cash was $105.1 million; total assets $398.9 million; and stockholders’ equity $145.0 million. Current assets were $318.1 million and current liabilities $133.6 million.
- Debt totaled $125.0 million before $1.8 million of unamortized origination costs: $82.0 million term loan and $43.0 million revolver. Debt was $85.3 million at year-end 2021. Cash less gross debt was approximately negative $20.0 million.
- The company reported $177.0 million of additional borrowing availability and compliance with its credit-facility covenants. The facilities mature June 24, 2026; covenants include a minimum fixed-charge coverage ratio of 1.25:1 and maximum leverage ratio of 3.25:1.
- Cash declined by $27.4 million from year-end 2021. The company used $43.7 million for share repurchases during the first nine months and had $18.3 million available for future repurchases at September 30. It repurchased 1,172,485 shares from related party SPC Intermex, LP for $27.6 million in August.
Outlook, risks and unusual items
- Management stated that cash, expected operating cash flows and available revolving-credit borrowings should fund operating needs, debt service, acquisitions and capital spending for at least the next 12 months. No general company revenue or earnings guidance is provided in the filing.
- La Nacional acquisition closed November 1, 2022, after quarter-end, for $42.3 million cash, subject to customary adjustments; up to $2.4 million additional consideration may be payable based on 2023 targets. The LAN Holdings acquisition remained subject to regulatory approvals, with closing expected in late Q4 2022 or early 2023. Once both businesses are integrated, management expects annual revenue contribution of $70–$80 million and an Adjusted EBITDA margin of 9%–11%; integration is expected to take four quarters after each closing. These are forward-looking estimates, and the filing says a GAAP reconciliation is unavailable without unreasonable effort.
- A Mexican financial institution closed in 2021, leaving the company exposed to approximately $5.2 million in deposits. A delayed liquidation process led to an additional $1.6 million provision in Q3 2022; the company reported a valuation allowance of approximately $3.6 million.
- Key risks include foreign-exchange volatility, rising interest rates on variable-rate debt, agent and bank credit exposure, competition from digital platforms, cybersecurity, regulatory compliance, inflation and acquisition integration. The filing reports higher agent receivable write-offs and a $2.0 million provision for credit losses for the nine months.
- Ordinary-course legal proceedings remain unresolved; management said loss probability and damages could not be estimated and recorded no reserve. Management reported effective disclosure controls and no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether working-capital outflows and payer prefunding normalize, and how operating cash flow develops after the quarter.
- Actual acquisition closing status, purchase-price allocation, integration costs, and performance versus the $70–$80 million revenue and 9%–11% Adjusted EBITDA margin estimates.
- Future recovery, if any, of the Mexican bank deposits and whether additional credit-loss provisions are required.
- Debt covenant headroom and sensitivity to interest-rate increases; the filing estimates a 1% rate move would change annual cash interest by approximately $0.8 million on the term loan and $0.4 million on the revolver.
- Repurchase-program capacity and capital allocation after significant buybacks and the increase in borrowing.