Good morning, and welcome to the International Money Express, Inc. Fourth Quarter and Full Year 2022 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded. I would 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 2023 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 Slide 2 of 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 is 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 of 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 Chris Hunt, Acting Chief Operating Officer; Joseph Aguilar, President-Latin America; Randy Nilsen, Chief Revenue Officer; and Marcelo Theodoro, Chief Digital Officer. Let me now turn the call over to Bob.

Good morning, everyone. Welcome and thank you for your interest in Intermex. With yet another year of exceptional performance behind us, we are proud to have established Intermex is the public market's fastest growing omnichannel remittance company. The number of industrious and hardworking Latin American immigrants working in the U.S. that rely on Intermex to transfer money to support their families and loved ones back home continues to grow. With our state-of-the-art proprietary technology and our carefully chosen, highly productive network of retail agents, Intermex stands apart from its peers by delivering a value-added service for our consumers and a value-added partnership for thousands of retailers across the country. Our unique customer-focused omnichannel business model drives sustained long-term growth and value for the company and its shareholders. Looking at the fourth quarter, we finished another strong year on a high note. We delivered double-digit growth without interruption. Additionally, we produced online digital growth of 80% in transactions in Q4. We continue to efficiently develop our offering with a focus on unit economics and sustainable profitability. On Slide 3 for the quarter, we generated revenues of $154 million, up 21%. Net income of $13 million, down slightly; adjusted net income of $18 million, up 10% and adjusted EBITDA of $29 million, up 22%. And for the year, revenues of $547 million, up 19%; net income of $57 million, up 22%; adjusted net income of $70 million, up 22% and adjusted EBITDA of $105 million, up 21%. During the quarter, we also set a single day record with almost 250,000 wire transfers on December 23. As customers in large numbers turn to Intermex to send money home to the Christmas holidays. We believe this supports our belief when remittances absolutely need to arrive without a hitch, senders have the greatest trust in…

Thank you, Bob, and good morning everyone. I’ll provide some context for the fourth quarter and full year 2022 results followed by review of the guidance for 2023 that we provided this morning in the press release. The competitive advantage we’ve created for ourselves combined with highly efficient management of our growing lines of business continues to drive strong operating results. As Bob mentioned, we’re making intelligent investments in people, innovative new products and scalable technologies that position the company for the sustainable double-digit growth that our shareholders have come to expect. We continue to execute on our omni-channel strategy, expanding our ecosystem of productive and profitable network retail agents, while rapidly growing what we feel is a best-in-class digital offering. On Slide 7, building on the strength of our retail business, the number of unique active customers grew 31% during the fourth quarter. These customers generated a record $14 million remittance transactions, 23% more than a year ago. Contributing to this growth in total remittances was an 84% increase in digitally originated transactions as robust customer acceptance of our mobile app continued. These numbers reflect double-digit growth in our core business and the contribution of two months of activity from La Nacional, which is a thread which runs through our fourth quarter results. On Slide 8, the strength of our business fundamentals drove a 19% increase in total principle transferred to $6 billion for the three-month period. For the full year, total principle transferred increased 21% to $21 billion. The average remittance amount was down 4% for the quarter at $421 per transaction. Intermex’s core business average trend [ph] was down only slightly, but the broader trend was fueled by La Nacional as transaction amounts to the DR are an average lower than the majority of the Intermex core…

We will now begin the question-and-answer session. [Operator Instructions] Our first question will come from Mike Grondahl with Northland Securities. You may now go ahead.

Hey guys. Two questions. The first one, just any update on the sales force and kind of your outlook for agent growth. And then secondly, can you talk a little bit about pricing trends that you’re seeing and what kind of pricing is embedded in your 2023 guidance?

Yes. I’ll take the first part of that for second – I’ll take the second part of that first, let me put it that way, Mike. So in terms of the pricing, we have seen particularly in fourth quarter, more aggressive behavior by the small competitors and maybe one or two of the larger companies, public companies relative to price at retail. We have not, if you would look at our numbers, we haven’t had any real decline in terms of our revenue per transaction or gross margin. As usual, we haven’t really responded to that in broad fashion. We’re doing it very strategically. We’ve seen that kind of come and go many times throughout the years. The industry that I’ve been around many, many years, you see small competitors, flurry and get aggressive with price in certain regions of the country. And then others will join in and the challenge is to kind of hold that line, because you’ll end up kind of driving prices down permanently. So we’ve seen some of that. As we look towards our 2023, we see a small reduction in revenue per a little bit relative to the FX gain and as we see that coming down, the fee itself though is remaining stable – generally stable. So we don’t see a big degradation. There will be markets where we need to be more aggressive, particularly end markets in – very, very aggressive markets in the West, like California. We continue to see very aggressive behavior there along with the whole west coast. And so we’ll respond to that, but again, more strategically than we will on a broad fashion of lowering our overall sort of revenues and gross margins. Relative to the sales force, and I’ll ask Randy to chime in, but we’re almost in full capacity with our – what we call district managers. I think yesterday, we reviewed, we had one position open. We are adding a number of people rovers to what we call regional sales executives, which are people that are in addition to the district managers, they’re going out and doing nothing but adding new retail locations strategically. They’ll be heavily weighted towards the western states, because that’s where we’re more underrepresented in terms of agents per foreign bonds and wires per foreign bonds. So we’ll be working against that. As we’ve talked about in many times, that’s sort of a crop, if you will, and the seeds that we plant today will manifest themselves beginning later in the year, but really be – really impactful in 2024 as those folks are up and going. Randy, anything to add to that?

Yes. Hi, Mike. Just really quickly as Bob mentioned that we’re in the process of rolling out new hardware and software to our agents. And as we got into the thick of things the back half of last year, it caused us to really take a look at our agent base and the productivity of our agent base, specifically the new agents that we had brought on over the course of the year. And we realized that we got a little bit away from the focus that we like to have in terms of high quality agents. So we have taken a hard look at the number of agents we’re bringing on versus the quality of agents we’re bringing on. And you’ll see, hopefully, our plan is to bring on higher quality agents throughout the course of 2023 and we may even churn. I wouldn’t be surprised at all if we churn some of the lower producing agents out of our network simply because we don’t want to be putting the cost of new equipment and software, if we’re not going to get the return out of that investment.

Got it. That’s helpful guys. Thank you.

Next question will come from David Scharf with JMP. You may now go ahead.

Great, thanks. Good morning and thanks for taking my questions. Hey, I wanted to follow-up on Mike’s question regarding sales force and specifically agent growth. I know in years past, you’ve kind of shied away from providing an agent count number. You’ve spoken more broadly about the opportunity in various regions. But it is kind of one of the most tangible ways for investors to kind of visualize those seeds that you’re planting as you noted Bob. Can you provide us with a framework for thinking about the growth in the footprint that’s embedded in your guidance or the growth in the productivity per agent that’s embedded in your guidance based on the comments about refocusing on agent productivity?

Yes. I think the first piece of it is that we need to drive same-store sales. We’ve got a base of agents and for instance, if you could drive same-store sales with the core of agents of in the middle teens, for instance. Now I’m not saying it’s there today, but it has been and in our highest growth times, then that’s going to drive and provide the base. You’re always going to get more growth from same-store than you are from new. You’ll get the growth from the new agents in their second year, which by definition is same-store. So our – what Randy was talking about is a focus not so much on new agent locations, certainly there is, but to bring up new agent locations and then not be as productive is not a great thing. Our average retailer averages well over 400 transactions a month. So you could kind of calculate back from our transactions to get a number of how many retailers we have. That number is a number we’d like to drive to well over 500 per month. Now, the mix of that means you’re bringing in new retailers that are kind of early stage that may be only producing 50 or 100 wires at the beginning or even 200 wires, and that mix kind of brings you down a bit, but that really driving force will be the performance from existing and that rifle shot approach. We think though, let’s take for instance somewhere like California. We think that we could easily double our agent network there and we’re putting the resources there to be able to do that. We know we’re going to have on the ground there 10 or 12 people that are selling, which in the past we’ve had maybe as many as only six or seven or eight. So we’re going to be increasing resources, driving more agents. But in the end of the day, as Randy said, we’re going to be also looking at productivity. So it’s not so much about the number we add in terms of the productivity of them. And we haven’t really been disclosing the number of new adds we have or the number of new adds that we’re targeting. But I can tell you that 80% of our growth will come from same-store and the remainder of the growth comes from new agents.

Got it, got it. Understood. And I know in years past you used to have some slides that actually broke out kind of the percentage of your agents that were one to three, maybe three to five years old and over five, given that they had different growth trajectories. Any more kind of granularity into that just visually, I think provides a healthy window into how much organic…

Yes, I understand. And we’ll take a look at that. I think part of our challenge is, is that we’re compete against a lot of companies that are not public and have access to a lot of data, and we look at the other public companies and what they’re sharing and we sometimes may be overshared and then it made us a really great target for competitors. So we don’t want to overshare, we want to give the market as much as we possibly can and give our competitors as little as we possibly can, right? So that’s that fine line that we walk.

Absolutely. Understood. Hey, one follow-up regarding the buyback $100 million is a formidable figure. I’m just curious what is the analysis that goes into coming up with such that figure precisely versus $75 million or $125 million? Is it covenant restricted based on how much of net income you’re allowed to buyback based on your loan agreements? Is it based on internal formula as a multiple or percentage of free cash flow over certain periods of time? Just a little color on kind of how that $100 million figure derived?

Yes, David, this is Andras. I’d say, we’ve proven that the buybacks been a good use of capital and I think the program that we’re buying under, we don’t plan, I guess, in the short-term to change much. But we did think having an allocation of, as you said, a formidable number like a $100 million gave us the opportunity that, hey, if we wanted to kind of re-look how we think at capital allocation, we have then the flexibility to go and increase the buyback if it makes sense. So I think the point is we wanted a number that allowed us to run with the current program for a while and also allowed for the latitude if we wanted to rethink capital allocation for the company.

Understood. Great. Thank you.

Our next question will come from Alex Markgraff with KeyBanc Capital Markets. You may now go ahead.

Hey, everyone. Thanks for taking my question. I actually had a couple. First just on the principal send amount. I appreciate the kind of breakout between core Intermex and La Nacional. I guess just curious in the 2023 guide, maybe just a bit more detail as to what’s embedded in your assumptions around principal send amounts?

Yes, I would say for the – I would say, we’re planning relatively flat. So for the Intermex send amounts – well, I’ll just tell you where we ended for the fourth quarter. The Intermex average send was $434 million and La Nacional was right around $300 million. And we plan those in to be relatively flat. Now, it’s not relatively – it’s not flat sequentially, so it’s going to be flat when you compare quarter-to-quarter in the year. So we’re planning flat. The good thing about Mexico is Mexico’s actually growing a bit, so that could help us a little bit, but we’re not going to bank on that because in general, send amounts are – for most geographies are not increasing.

Okay, thanks. I appreciate the detail there. And then just one more around the guidance. If you consider the midpoint of revenue and adjusted EBITDA and the margin implied there, I think it’s maybe 100 basis points of compression from 2022. Just kind of curious, I assume a lot of that’s related to La Nacional. Any sort of commentary in terms of organic margin expansion…

Yes. That’s…

Go ahead.

I think you got it Alex. And I think that to – I know we’ll get the question in the call back, so it’s better to address it here. Within our guide for the year, we’ve got revenue for La Nacional and this is for four quarters of the U.S. business and three quarters of the European business, revenue about $85 million, EBITDA about $4 million, and then net income about $2.5 million. And you’ll see in our K, which we’ve released previously, we’re going to update the number in the K that’s going to say that we expect that business once fully integrated, which is going to take a little bit of time, about $80 million to $90 million in revenue, and then that same 9% and 11% EBITDA margins that we had mentioned in in previous K. So it’s going to take a little while for us to work it up there, but I think we’re optimistic and excited to get started.

Okay. That’s great. Yes, that was my follow-up. So just to kind of clarify on that last point around some of the optimization that’s going on. It sounds like there is, within the guide you provided today some conservatism or some potential revisions to that as you kind of optimize the integration. Is that a fair summary?

Yes, that’s fair.

Yes, I think – this is Bob. If the integration goes along faster, then that’ll certainly happen. I want to make clear what we have with La Nacional is exactly what we expected. We knew that it was a business that had a lot of upside potential in the U.S. and that it had to be right sized. It had a lot of – I think things that were being invested in that were probably in their minds great for the future, but were not necessarily things that we thought were consistent with how we saw the business in the future. So we’ve already started to cut some of those expenses and you’ll see some of that even affect the revenue year-over-year. So the revenue over time for the U.S. business could go down year-over-year, but the EBITDA will come way up. And then when the European business is really the trump card, I mean, that’s a solid business that from everything we understand is making money today, small amount of money, but has an opportunity to grow many times and over. In the addition to that, the European business, which we haven’t talked much about, but I want to take this opportunity, provides us with a bigger opportunity in the online business than we have in the U.S. Our core strength in the U.S. is in countries where the digital online business is not as big a driving force as it might be with other countries. And the destinations from the U.S. are much more retail oriented. But when we get to Europe, there’s two factors. One, the countries that would be receiving the money are ones that are due more or greater percentage of their business digitally. And then secondly, in Europe, there’s a lot less folks that might find themselves there undocumented. So they have a much greater percentage of folks that are paid on payroll and are paid with their bank accounts. And so they become candidates for the digital side. So we’re excited about that. There were many facets to the La Nacional acquisition and investment that we saw, and it’s kind of in stages. And what you see today is very much the unrefined piece of the business. There’s all these other things in terms of creating the right sizing and then the opportunities in Europe and online that will fall in with La Nacional over time.

Great. Thank you both for all the commentary. Appreciate it.

[Operator Instructions] Our next question will come from Chris Young with Credit Suisse. You may now go ahead.

Hi. Thanks for taking our question and also appreciate the great color on La Nacional including the 2023 contribution and also the margin profile, the opportunities there both in Latin America and in Europe. I just wanted to dig in a little more as the – right now the La Nacional’s margins are lower and you mentioned they’re optimizing the agent locations, but just wanted to understand structurally are the margins lower because of some of the legacy agent commission contracts or for some of the reasons? And then if you could probably just break down the contribution from the Latin America versus the Europe from La Nacional and then at what level of the revenue which is being, will bring the business to Latin America to the right margin profile that you desire?

Okay. So let me, hopefully I’ll remember every one of those questions. That was pretty extensive. But on the first piece, you asked about margins. So La Nacional, the U.S. piece is driven by their business to Dominican Republic, which is a country where most of the money is sent in U.S. dollars. So there doesn’t – there is not any profit made and the exchange rate are very little. Some of it goes in local currency. And so as a market throughout the U.S. outbound, the Dominican market is not as profitable as Mexico for sure or even Guatemala. So you’re going to see smaller margins there. The other piece is until it’s right sized is the business still has all of the overhead that any business would have with a much lower revenue. And so that’s part of what we’re doing in terms of that sort of SG&A cost, right. And making it right sized and making sure that it makes. Go ahead. Were you saying something? And in making sure that it’s right size. So that has a lot to do with it. What was your – help me with the other questions. What was the next question?

I was just wondering how big is the Dominican Republic portion versus the Europe portion? And then when the business is right sized, what do you think is kind of a run rate revenue there before you kind of start growing the revenue again?

Well, the opportunity with the U.S. business with La Nacional has always been about making it more profitable and increasing the margins. It’s never been one that we’ve talked about having great growth opportunity. We do believe we’ll grow it, it may grow slower than our core business in the U.S. The big growth opportunity with La Nacional is in their European division. We’ve always said that, and in which we haven’t talked anything about Canada, which we also have a small business in Canada. Now together, we’ll have a more formidable business in Canada that opens up. Today, they’re in the Quebec province, we’re not. So that growth will come from off U.S. shore. La Nacional in the U.S. will be our brand that drives business primarily across the eastern seaboard where most Dominicans are to the Dominican Republic. Now, in those stores, for instance, or in our agents, we’ll offer other countries, but it’s a very, very small mix. Second largest countries, probably Colombia, but it’s not – it’s very, very small compared to Dominican Republic. So it really is a country – a company focused primarily in the U.S. to Dominican Republic. The rest of the world opens up even more countries than we even currently serve. The European business sends a lot of money to places like Morocco and Africa and in other parts of Africa, sub-Saharan Africa to Asia, to Eastern Europe. So it’s a broader business that has huge opportunity for growth over time versus the U.S. business, which is a stabilizing sort of mission in making it more profitable with more mild growth over time.

And allow me to just elaborate a little bit on what’s in the guide too. As I mentioned, the guide revenue is about 85 million. From the U.S. contribution about 70 million to 75 million and Europe about 12 million. EBITDA from the U.S. about 3 million and Europe a little over 1 million. And then from a net income standpoint, about one point – about one to one and a half in the US and one to one and a half in Europe. In our guide and obviously that’s before we’re putting our playbook to work.

All right. Thanks a lot for – to both of you. Really appreciate the very thorough [ph] and very helpful color.

Our last question will be a follow-up from Mike Grondahl with Northland Securities. You may now go ahead.

Hey, thanks guys for taking the follow-up. My question was just about the software and kind of hardware upgrade that you mentioned in 3Q of this year. One, kind of curious like the cost of that upgrade. And two, Bob, what are the two biggest benefits we should watch for or think about related to it?

Well, I think there’s and Chris will chime in on this because he certainly are now COO, but comes from the CIO position. But for me, there’s a number. One is that to put a new piece of equipment in the agent locations where much of the equipment is old and obsolescent and like that is a really big plus. And to increase the software quality is also a big plus. Now that’s just from an aesthetics perspective and optics. But in addition to that, it does a number of things. One is it makes it easier for them to process check direct. It’s going to make it easier for us when we roll out our GPR card at retail. It’s also enables us enhancements related to our other online activities. It makes our AML, which is important perspective better and faster and more efficient. It makes sure that the already quality service that we have at retail not only stays at the speed it’s at, but is actually even a little faster even though the requirements for regulatory sort of behaviors are going up. So it does a lot of things to continue to put us or keep us in the forefront of the highest quality of hardware, software mix at the retail locations. The fastest in terms of processing, the highest reliability, the easiest of use that then dovetails with our world-class customer service. And that makes it, I think, very appealing for our retailers. And I’ll turn over to Chris and from a technical perspective of anything that I might have missed.

I think that the biggest advantage we have is as we think about our omnichannel strategy and being able to go to market with new products building and releasing this new software on the new architecture and new platform allows for that scalability. So we have a lot of ways that we’re going to be able to interact with consumers not only in a retail location, but also tie that into further strategy. So it’s going to be a big benefit. It is a big benefit already. We’re seeing some very positive numbers from the growth from agencies that are using it. So we’re very excited about it.

Got it. Okay. Hey, thank you.

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

Yes. Thank you all for joining us and we look forward to talking to you all soon. Have a great day.

The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.