Release Date: August 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- International Money Express Inc (IMXI, Financial) achieved a record total revenue of $171.5 million for Q2 2024.
- Adjusted EBITDA reached $31.1 million, with a margin of 18.1%.
- Adjusted EPS grew by 10% year-over-year, demonstrating strong operational efficiency.
- The digital business outpaced market growth, significantly expanding margins and profitability.
- The integration of La Nacional resulted in a threefold increase in its EBITDA, highlighting successful strategic acquisitions.
Negative Points
- Adjusted EBITDA fell slightly short of internal expectations.
- The company faced several economic and market-specific challenges during Q2.
- Retail market conditions were challenging, with a reported decline in retail remittances.
- Interest expenses rose to $3.1 million due to higher revolver usage and slightly higher software costs.
- The company booked a $2.7 million restructuring charge to streamline offshore operations, impacting GAAP EPS.
Q & A Highlights
Q: Can you talk a little bit about your assumptions for growth in key markets and across the two channels? Are you seeing incremental pressure in the US on your agent base?
A: Most pressure at retail is not from major competitors but from smaller regional players. We believe we are outperforming the market at both retail and digital. The challenge is that we are currently overweight in retail and underweight in digital. We are investing in digital to balance this out. Retail remains strong, with 75% of remittances originating there. We are also enhancing our retail sales organization to drive growth.
Q: Can you expand on the capital allocation priorities? Are buybacks off the table now, and are you focusing more on M&A?
A: We expect buyback activity to look more like Q2 for the rest of the year. We closed a UK acquisition, which gives us a license there. We are also looking at M&A opportunities, including agent retailers in the US and digital business opportunities that could leapfrog us ahead quickly.
Q: Can you clarify the macro trends, particularly in Mexico? Are the June trends holding, or have they pulled back?
A: The June trend was driven by a weakening peso due to election activities in Mexico. This was short-lived, and we haven't seen the same resurgence in July. The market is choppy, with digital representing a large share of growth. We believe the retail market is currently around -3% to -4%, and we are outperforming it slightly.
Q: How big is the European business as a percentage of Intermex as a whole, and what are your plans for digital in Europe?
A: Our European business is currently low single digits as a percentage of our overall business, primarily driven by Spain and Italy. We see significant opportunities in Germany, France, and the UK. The European market is more advanced towards digital, with a higher presence of bank accounts, making it easier for consumers to adopt digital solutions.
Q: What does "invest in digital" specifically mean?
A: Most of the investment will be in marketing to drive customer acquisition. We have already built a strong digital application, and our unit economics are very attractive. The challenge now is to invest in marketing to drive consumers to our digital platform.
Q: What are the challenges at retail, and are they macro-driven or competitive?
A: The challenges at retail are primarily macro-driven, not competitive. The retail market is currently smaller than it was a year ago, and we are seeing a cyclical downturn. We are making changes in our sales organization to better execute and mitigate these challenges.
Q: Why is there a focus on digital in Europe?
A: The European market has a higher presence of bank accounts, making it easier for consumers to adopt digital solutions. This is different from the US, where many consumers are unbanked. We see a significant opportunity to grow our digital business in Europe.
Q: What were the key failings of competitors that led to their demise, and what are you doing differently?
A: Competitors like Small World and Sigue were too diluted and lacked focus. They also had technology issues. We are metrically driven, focusing on profitable markets like Mexico and Guatemala. Our technology is strong, and we are making strategic investments to ensure sustainable growth.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
