Thank you for standing by. This is the conference operator. Welcome to the International Money Express Inc. Second Quarter 2022 Earnings Conference Call. As a reminder, all participants are in listen-only-mode, and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. [Operator Instructions] I would now like to turn the conference over to Mike Gallentine, Vice President of Investor Relations. Please go ahead.

Good morning, and welcome to our quarterly earnings call. I would like to remind everyone that today's call includes forward-looking statements, including our updated 2022 guidance and actual results may differ materially from expectations. For additional information on International Money Express, which we refer to as Intermex or the company please see our SEC filings, including the risk factors described therein. All forward-looking statements on this call are based on assumptions and beliefs as of today. You should not rely on our forward-looking statements as predictions of future events. Please refer to our slide in our presentation for a description of certain forward-looking statements. The company undertakes no obligation to update such information, except as required by applicable law. On this conference call, we discuss certain non-GAAP financial measures. Information required by Regulation G under the Securities and Exchange Act for such non-GAAP financial measures included in the presentation slides our earnings press release and our annual report on Form 10-K, including reconciliation of certain non-GAAP financial measures to the appropriate GAAP measures. These can be obtained in the Investors section on our website at intermexonline.com. Presenting on today's call is our Chairman, Chief Executive Officer and President, Bob Lisy; and Chief Financial Officer, Andras Bende. Also on the call today are Joseph Aguilar, our Chief Operating Officer; Randy Nilsen, Chief Revenue Officer; and Chris Hunt, Chief Information Officer. Let me now turn the call over to Bob.

Good morning, and thank you for joining us. As always, we appreciate your interest in Intermex. The company's unprecedented growth continued unabated during the second quarter as we set a number of notable performance records and reached some significant milestones. On Slide 3. During the 3-month period, we completed a record number of remittances, driving record revenues, adjusted EBITDA and net income. I'm proud to report that Intermex is selling almost twice as many transactions as we did when we became a public company just 4 years ago. To put our history of performance excellence in perspective, we have met or beaten EBITDA expectations every quarter since we went public in 16 out of 16 quarters. Intermex is delivering sector-leading profitable growth and consistently strong operating results, creating significant value for our shareholders. As for important milestones on Slide 4. We surpassed 4 million wires in a single month for the first time in May. Strong volume during Mother's Day weekend, which is always a significant event in our industry, helped us achieve that record. We sold 650,000 wires during Mother's Day weekend and 232,000 wires on Mother's Day itself, which also were company records. We ramp up every year from Mother's Day because we know how important it is for our customers honor their mothers, grandmothers and other important women in their lives by sending money/ Our omnichannel strategy, which we articulated several quarters ago is the foundation for our impressive growth. This strategy enables remittance centers to match their preferred way of sending wires home using various payment methods, including conveniently located best-in-class agents or our state-of-the-art digital platform. Turning to Slide 5. Our network of high quality, high volume neighborhood agents is the largest and most established distribution channel. Our growing network of highly efficient Intermex agents…

Thanks, Bob, and good morning, everyone. The positive second quarter results we reported this morning from the clear competitive advantage we've created for Intermex. Intermex stands out as an innovator and leader in the fintech and remittance sectors, thanks to our efficient business management and intelligent investments in people with products and technologies. We're delivering consistently strong results and sustainable growth as we expand the company's footprint in the U.S. and globally. Building off yet another quarter of strong agent growth that Bob mentioned earlier. On Slide 8, you can see the number of unique active Intermex customers grew 15% in the second quarter. The growth in customers, in turn, generated a record 12 million remittance transactions, 18% more than a year ago. Contributing to the growth in total remittances on Slide 9 was a 170% increase in digitally originated transactions, as customer acceptance of our new mobile app continued at a triple digit pace. 26% of our transactions were sent or received digitally during the second quarter, demonstrating our commitment to omnichannel and meeting the needs of our customers however they choose to transact and with exceptional customer service. On Slide 10, this record activity in the second quarter resulted in a 22% increase in the principal amount transferred over $5 billion for the 3-month period. The average remittance amount continued to grow by 3% versus a year ago to $447 per transaction. With the strategy of capturing share through efficiency, technology and service, the company has continued to grow faster than the markets in which we compete. We now have a 22% share in our primary 4 markets, which account for 75%, through all the money transferred from the U.S. to Latin America. To reiterate, those markets are Mexico, Guatemala, Honduras and El Salvador. And as Bob earlier,…

Thank you [Operator Instructions] Our first question comes from David Scharf of JMP Securities. Please go ahead.

Great. Good morning, everybody. Thanks taking my questions. I was wondering if you can give us an update. You know, particularly as it relates to the runway of growth that you highlighted at newer agents. Is there a vintage analysis in terms of what percentage of your installed agents are both under 24 months old and under 12 months old, just sort of give us a sense of how much near-term organic opportunity there is there?

Yeah. David, I'm going to turn it over to Randy to answer.

Sure. Yeah, hi. Good morning, David. Yeah, so we look at our agents in terms of cohorts, and we know at any point in time we've got a trailing 12 new agents versus the same-store agents. And it's right around 15% of our agent base would be new and with that's increasing each month, each quarter as we have put additional resources, primarily in the Western United States to help us build out the infrastructure there. And as Bob said, most importantly, that as new agents move from the trailing 12 and to same-store agents, 13 months and more, their volume will double between month 13 and 24 and then months 24 to 36, get a nice bump again. So we really get about 3 years of nice growth from the agents that we have.

Got it. Got it.

We have increased our activity, we put more people in the field that's what we call regional sales executives, which are people not dedicated to a specific district who are adding to and filling those emptying or underserved and un-served zip codes. So we expect that, that investment, which we've been making, which has been easily sort of managed through upturn, so you’re still seeing us continuing to grow that bottom line EBITDA and net income, even though we've invested in more people in the field. And the seeds from that really don't start to blossom for three or three as those agents start to ramp up. And then again, that volume almost doubles in year 2, and it grows again in year 3. So there's an investment that's there that we expect to reap the benefits of in future quarters that we've been making this year so far.

Got it. So just to be clear, the 15% that you noted, Randy, those were agents that are - basically one through 12 months, if it's before they reached that kind of 13 to 24 that Bob just noted, see such a big ramp?

Yeah, yeah. So the way we look at it is, new agents are agents that have been with us 12 months or less, and I just did the math. Right now, it looks like about 20% of our agent base who has been with us less than 20% - sorry, less than 1 year, 12 months.

Okay. Got it. And related to that, I mean, you're obviously very - it's a high-touch model in terms of the agent relationship and communication monitoring. Are they - do you get feedback from them about you know, on the ground, what they're seeing as the sources of growth? I mean do they communicate specifically perhaps what other vendors, because obviously, there's no exclusivity. What other remittance competitors primarily taking share from if their locations or is it entirely foot traffic? Any color that the agents are actually providing you so we can better understand how you're outpacing industry growth so much?

I think there's a couple of things. One is, is that, as you know, the industry has and continues to grow. So there's growth there. Our best source though for, who's doing well and who's not doing so well tends to be more the payers because that's not anecdotal, it's universal. They deal with all of the remitters and they have a sense about who's growing and who is not. There are companies we won’t name names in both the smaller folks for struggle. And then we know that some of the larger companies who have their model, we've seen has not necessarily yielded growth over the years. Now that growth doesn't come exactly one-for-one, you know, the market leader, some people would think of it the yellow and back, there's a lot of business in big box stores. And that business, as I've always said, has moved away from back to be box stores year after year after year. So it's not necessarily that we take it directly from, say, a Western Union in retail, people are leaving the big box stores, and they are coming into the convenient location in the neighborhoods where we've done an excellent job of executing because we understand the number of foreign borns that live by each zip code. So in doing that, we have that waiting agent, the best agent possible for us in that neighborhood. We do that whole selection process to make sure we have the best agents that on-site business review. All of those things are what contributes to our outsized performance. But I would say who's losing in terms of market share, there are some people that are bigger than us, overall bigger companies anyway. And there are some smaller guys that are struggling. It's not universal. There's some smaller guys that are doing pretty well. But it's not universal that, you know, it's all coming from the large providers, public providers and all going to the small guys or vice versa.

Got it. And maybe last kind of follow-up to the different topic. I'd be remiss if I didn't ask you about future capital action plans. I know there's still capacity left on the existing authorization. But more broadly, and I think this was - it was parked in my mind because I think it was mentioned in the press release about a scheduled debt repayment. And setting aside the high free cash flow conversion, 60% of EBITDA, your balance sheet even after this acquisition is under levered. I mean it's negative net debt effectively. And is there a target that to EBITDA ratio that you think of business like this could and should support on a sustainable basis? And maybe related to that, I have to believe that your revolver covenants have a ratio like that defined. And I'm wondering if so, what that limit is, if that gives us any window into ultimately how much debt for capital actions above and beyond EBITDA are potential?

Yeah, David, this is Andras. So I'll take that one. I would say that we don't have a target, but I think that we feel that all comfort to move to utilize the debt portion of the balance sheet a bit more I would say that our comfort levels above 2.5 times, probably start to wind down a bit, so that gives you some goalposts to work with. I think that we don't have a lot of appetite above that or getting near to the 3 range. But that's where we stand right now, but we don't have any hard and fast targets.

Perfect. That's very helpful. Thank you so much.

And I think we wouldn't push the debt in a way that we didn't have a great use for that right now, we're funding our growth very easily. As I said, we made a strong investment in making a big investment in our digital and card. We made a strong investment in our retail, more people out in the field. We continue to look and be vigilant towards potential acquisitions. We felt like a Nacional a perfect acquisition for us. There could be others, it's our intent to find more, but what we won't do is just buy things that could not necessarily be helpful to our shareholders just because we have cash in our buckets. So that we won't do.

Understood. Thank you.

Our next question comes from Mike Grondahl of Northland Securities. Please go ahead.

Hey, guys. Thanks and congrats on the results. Could you give us an update on the sales force, maybe the number of sales people out in the field compared to a year ago? And then you talked a bit about new agents and whatnot. How does the pipeline look the next 3 to 6 months for kind of continued growth in agents?

Yeah. Hey, Mike, it's Randy. Good morning. Last year, Q2, we probably ran sales exceed on the - feet on the street, about low 40s, maybe 41, 42 sales force. This year positions probably mid-50s, now we run - we've always got a few vacant positions, of course, but that’s allocated headcount probably low 40s compared to mid-50s this year. With respect to your question about pipeline, we anticipate it's going to be very similar to the rest of the year as to what we see in the first part of the - first half of this year. I think Bob mentioned we had record-breaking quarter in terms of a number of new retail locations that we added to the network in Q2. And we anticipate we'll see similar type of results at the back half of the year.

Great. Great. And then maybe just two more. Did you - have you seen any decline in average send amount or just really any effects due to inflation, higher gas prices kind of on your end consumer. Are you seeing?

Yeah. Mike, this is Andras. We get the inflation question a lot. I think that you have to think about who our consumer is and the typical consumer is somebody who's come to the U.S. to live very efficiently and work and generate as much as they can to send home to their families and eventually return to a better economic situation. So that cohort has benefited very much from an outsize growth of wages, particularly to that consumer base. So we've seen that. I think that's part of what's bolstered the growth in remittent sent. When you think about the inflation side from a cost perspective to these consumers, they're not as exposed to maybe gasoline and energy prices as the typical American consumer, they're definitely not as exposed to the overall goods like the stuff like basket bucket, those bucket that's an inflation. But as we have seen that number start to taper, that gross starts to taper a bit in Q2. So we're only up about 3% year-over-year. I think you're starting to see some impact of that has come through. But we are still growing. And we'll just continue to keep an eye on it. I wouldn't say it's something that has us worried that we're going to see a drastic shift in principal size sent.

Got it. Thank you.

Our next question comes from Alex Markgraff of KeyBanc Capital Markets. Please go ahead.

Hey, team. Thanks for taking the question. Just a couple for me. First, could you expand a little bit on some of the near term priorities with the addition of Marcellus. Just kind of what specifically do you see as the most high-value activities to tackle?

Yeah. Well, we're - they'll be the same level of activities that we've been. I think no one in the industry - I know you folks have a high opinion of Remitly, but they continue to sort of sink like a rock. And we're not going to participate in the behavior that will continue to have us lose on a unit economic basis relative to each transaction online. So I think the first company that really understands how to master online, the way we mastered retail. And I don't suggest that we've done that yet, but that's what we will be spending time to do. And then today, regardless of the customer acquisition costs, which are extremely high, the unit economics just do not provide for an opportunity to do well with that business. And so we'll continue to work on that, but we're work at that in a way that's reasonable in same, so that we can deliver profitability on the online business. The other thing is Marcel brings a huge amount of experience. He worked with Mastercard for years, and we still believe there's a huge opportunity for our cared products, particularly in the Hispanic community and in the Hispanic community, maybe even those folks that are not in the remittance business, don't send money back home. They could be second and third generation, but they still are not necessarily fully banked by U.S. Banks. So we think there is a huge opportunity for our GPR card through our retailers. Netspend has done a great job and others of managing through the big box stores to their card product and through check cashes. But that hasn't really touched the Hispanic community well. So we think that's a huge opportunity for us. Today, we've made really good progress related to our payroll card, but our GPR card will be one of the top in terms of getting that card out in the hands of consumers as quickly as possible. So to be focused on really building the online business but building it in a key way that hasn't been done so far with the word called profitability. And then secondly, building that GPR part. And I think those are two really interesting verticals for us moving forward.

Got it. And then perhaps one for Randy, just kind of expanding on the commentary around new agent growth. Any way to kind of describe the contribution of the new agents in the Western states. I know you all had talked about kind of hitting our stride in the West, at the Analyst Day earlier this year. Just I don't know if you can take a step further and provide some more color around that commentary. But just curious if you can maybe translate that around contribution to growth from new agents in the West versus some of the kind of core regions in the U.S.?

Yeah. Well, I'll answer the question this way. The new resources that we've added to the team that Bob referred to the regional sales executives, two thirds of those incremental heads have been added in the Western. So as they start to hit their stride and activate new agents primarily in un-served or un-served zip code, we'll see that contribution from that team in the West opposed to the resources in the East. So we've already started to see the contribution they've been making this year, and they will continue to grow in the back half of the year.

Okay. Appreciate the color. Thank you.

Thank you

[Operator Instructions] Our next question comes from Timothy Chiodo of Credit Suisse. Please go ahead.

Great. Thank you. I wanted to talk a little bit about your underlying customer and the recession resistance inherent in the model. So I believe that most of the customers sending their remittance we talked in the past there in industries such as agriculture, construction, services, meaning restaurants, hotels, et cetera.\ During the last recession, the remittances were impacted pretty meaningfully into Mexico, but at the same time, it wasn't very different recession, right? There was a housing downturn. So maybe you could just talk a little bit about how sort of the recession resistance or the stability of the model through any potential recession. Clearly, you're not seeing anything in your results now, which is great.

Well, which may be even more important, we didn't see much results through the last recession. The macro numbers could have been very weak, and we certainly battle through those. But from 2009 through 2015, the industry virtually did not grow much at all and we more than tripled our business. So a lot of that was taking share. And a lot of it was because some of the competitors have kind of pulled back and they felt the recession and they started to - just take the investment away from retail and away from the things that were really their lifeline. It isn't dissimilar to what happened during COVID, when COVID was struck, we reinvested and make sure we had our full team out in the field and a lot of our competitors pull back. And as you through COVID, we never had one single quarter where we actually shrunk year-over-year. Our second quarter was mild growth or modest growth and that’s for sure. But no quarter was one where we actually fell off. So we first of all, I think it's an approach. We do think we have a different way of handling that. We think our precision related to the marketplace and our nimbleness and are somewhat of our aggressiveness is to exploit the way other people will react to a downturn. But I think additionally, we do a lot of business, not necessarily in urban centers. In urban centers are where those customers will work in service industries, which will have the most kind of impact as there's a downturn. We do a lot of business in areas at agricultural and we do a lot of business with our consumers who are working in construction related, so they may not be building new homes or new home development but it could be putting decks on the backyard or working on landscaping, things that sometimes actually do better in a recession because people don't necessarily buy a new home but they do and fix up their homes. So we feel pretty good about the core business. We have a really large sector of our consumers that are in agricultural, and we think that's really resistant completely to a recession. And again, housing starts in the construction industry strong, it's really the two headed these for us. The service is also sort of there, but we're not as dependent on urban consumers as we are in rural consumers generally. And that really bolsters us related to the agricultural and sometimes even the housing sort of starts and construction workers.

Excellent. Really appreciate that context. Thank you.

Okay. Welcome.

Our final question is a follow-up from Mike Grondahl of Northland Securities. Please go ahead.

Yeah. Thanks, guys. Hey, Bob, a question for you. You know, roughly 1.5 years or 2 years ago or even a little bit more, you guys started investing in the digital side. And while others were going kind of crazy with their digital spend. You took a real measured cautious approach and your retail business was growing like a weed, you didn't throw away dollars to get poor unit economics, if you will. And I think the biggest mentioned a 1.5 years ago was just the CAC [ph] was a lot to get those customers. A lot of marketing spend social media, et cetera. Have you seen any narrowing of that CAC in the last 1.5 years? I mean is it still really wide to your retail business? Or I'm just trying to get a sense if there's been any…

Yeah. I mean, I think there's two things, right? One is, let's put it sort of reset the expectations, whereas the digital business is growing to Latin America, and that's where we're focused. It doesn't mean we don't service other countries. And certainly, with the Nacional business will be, obviously, in many more countries, particularly outbound from Europe. But when you talk about our bread and butter today, that business, even though the percentages of online is growing faster than retail, the absolute dollars of retail have grown much faster over the last 10 years, 5 years than they have at online. So there still is a market in retail that adds more absolute dollars than the market that adds absolute dollars in terms of the digital business. So that’s number one. When you have that, you say gosh, there's a huge business already in retail. It's been deemphasized by some of the major players. And it's bigger already to start and is adding more consumers with less focus on it. So we still think that, that business is really easier, lower-hanging fruit in the digital business. Having said that, we're an omnichannel provider. We coined that phrase, I don't know, probably six quarter ago, four to six quarters ago, maybe eight quarters ago and others have kind of begun to use it now. But we want to provide every option of the consumer than they might want. So on this side of the border, we have digital, and it's growing for us in triple digits. It's still a relatively small piece of our business, but it's certainly growing significantly, and it's a real business now. We also have the ability to do transactions in retail, but we have the ability to capture transactions in retail also through debit cards.…

Great. Yeah, you're clearly executing well, and thanks for that insight.

This concludes…

If there's no other questions. Do we have any other questions, operator?

This concludes the question-and-answer session. I would like to turn the conference back over to Bob Lisy for any closing remarks.

Thank you all for joining us. We appreciate you joining us for the call today. And we look forward to talking to you all soon and hopefully reporting continued great results. Talk to you soon. Operator This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.