International Money Express(IMXI) - 2021 Q2 - Quarterly Report

Cover Page Information Registrant Information International Money Express, Inc. is identified as the Delaware-incorporated registrant with principal offices in Miami, Florida - Registrant: International Money Express, Inc.[1] - Jurisdiction of incorporation: Delaware[5] - Principal Executive Offices: Miami, Florida[2] Securities Information The company's common stock ($0.0001 par value) trades on the Nasdaq Capital Market under the symbol IMXI Securities Information | Title of each class | Trading Symbol(s) | Name of each exchange on which registered | | :------------------ | :---------------- | :---------------------------------------- | | Common stock ($0.0001 par value) | IMXI | Nasdaq Capital Market | Filing Status The registrant is an Accelerated Filer and Emerging Growth Company, having filed all required reports electronically - The registrant has filed all required reports and submitted Interactive Data Files electronically during the preceding 12 months[3] - Filing status: Accelerated Filer and Emerging Growth Company[3] Shares Outstanding As of July 30, 2021, 38,593,052 shares of common stock were outstanding - As of July 30, 2021, 38,593,052 shares of common stock ($0.0001 par value) were outstanding[6] SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS This report contains forward-looking statements subject to risks like COVID-19, competition, and regulatory compliance - The report contains forward-looking statements reflecting current views, subject to risks and uncertainties that could cause actual results to differ materially[11][12] - Key risk factors include: changes in applicable laws or regulations, factors relating to business operations and financial performance (e.g., COVID-19 pandemic, competition, foreign exchange rates, cyber-attacks, agent relationships, credit risks, bank failures, new technology, debt obligations, interest rate risk from LIBOR elimination, product development, customer confidence, regulatory compliance, international political factors, U.S. tax laws, political instability, consumer fraud, economic conditions, immigration laws, brand and intellectual property protection, key personnel retention)[14] - These risks are also described in the 'Risk Factors' and 'Management's Discussion and Analysis of Financial Condition and Results of Operations' sections of the Annual Report on Form 10-K for the year ended December 31, 2020[14] PART 1 - FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Unaudited condensed consolidated financial statements, including Balance Sheets, Statements of Operations, Equity, and Cash Flows, are presented - The condensed consolidated financial statements are unaudited and prepared in accordance with GAAP[32][33] - Interim results are not necessarily indicative of the results that may be reported for the entire year[33] Condensed Consolidated Balance Sheets This table presents the condensed consolidated balance sheets as of June 30, 2021, and December 31, 2020 Condensed Consolidated Balance Sheets (in thousands) | Metric | June 30, 2021 | December 31, 2020 | | :-------------------------------- | :------------ | :---------------- | | Total assets | $302,423 | $259,473 | | Cash | $139,716 | $74,907 | | Accounts receivable, net | $70,540 | $55,017 | | Total current assets | $229,698 | $186,726 | | Total liabilities | $181,247 | $165,212 | | Total stockholders' equity | $121,176 | $94,261 | Condensed Consolidated Statements of Operations and Comprehensive Income This table presents the condensed consolidated statements of operations and comprehensive income for the three and six months ended June 30, 2021, and 2020 Condensed Consolidated Statements of Operations and Comprehensive Income (in thousands, except for share data) | Metric | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total revenues | $116,747 | $85,062 | $211,323 | $162,313 | | Operating income | $19,284 | $13,876 | $32,775 | $23,514 | | Net income | $13,227 | $8,978 | $22,204 | $14,666 | | Basic earnings per common share | $0.34 | $0.24 | $0.58 | $0.39 | | Diluted earnings per common share | $0.34 | $0.24 | $0.57 | $0.39 | Condensed Consolidated Statements of Changes in Stockholders' Equity This table presents the condensed consolidated statements of changes in stockholders' equity for the three and six months ended June 30, 2021, and 2020 Changes in Stockholders' Equity (in thousands) | Metric | Balance, December 31, 2020 | Net Income (6 months) | Issuance of common stock (6 months) | Share-based compensation (6 months) | Adjustment from foreign currency translation, net (6 months) | Balance, June 30, 2021 | | :----------------------- | :------------------------- | :-------------------- | :---------------------------------- | :---------------------------------- | :--------------------------------------------------------- | :--------------------- | | Common Stock (Amount) | $4 | $0 | $0 | $0 | $0 | $4 | | Additional Paid-in Capital | $59,310 | $0 | $2,429 | $2,270 | $0 | $64,009 | | Retained Earnings | $34,960 | $22,204 | $0 | $0 | $0 | $57,164 | | Accumulated Other Comprehensive Loss | $(13) | $0 | $0 | $0 | $12 | $(1) | | Total Stockholders' Equity | $94,261 | $22,204 | $2,429 | $2,270 | $12 | $121,176 | Condensed Consolidated Statements of Cash Flows This table presents the condensed consolidated statements of cash flows for the six months ended June 30, 2021, and 2020 Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $70,290 | $21,473 | | Net cash used in investing activities | $(3,181) | $(1,591) | | Net cash used in financing activities | $(2,348) | $(3,830) | | Effect of exchange rate changes on cash | $48 | $(184) | | Net increase in cash | $64,809 | $15,868 | | Cash, beginning of period | $74,907 | $86,117 | | Cash, end of period | $139,716 | $101,985 | Notes to Condensed Consolidated Financial Statements NOTE 1 – BUSINESS AND ACCOUNTING POLICIES This note describes the Company's money transmitter business, COVID-19 impact, consolidation, and accounting policy evaluations - The Company operates as a money transmitter between the United States and Canada to Mexico, Guatemala, other countries in Latin America, Africa, and Asia through a network of authorized agents and 34 Company-operated stores[28] - The COVID-19 pandemic, including the Delta variant, continues to cause significant uncertainties, but the Company's operations have continued effectively without material adverse effects on customer service to date[29][30] - Recent accounting guidance adopted on January 1, 2021, for Goodwill Impairment, Cloud Computing Arrangement Implementation Costs, and Income Taxes did not have a material impact on the condensed consolidated financial statements[34][35][36] - The Company is evaluating the impact of new guidance on Leases (Topic 842), to be adopted on January 1, 2022, and Financial Instruments – Credit Losses (Topic 326), to be adopted on January 1, 2023[37][38] NOTE 2 – REVENUES This note details revenue streams from wire transfer fees, money order fees, and foreign exchange gains, including loyalty program accounting Revenues (in thousands) | Revenue Type | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Wire transfer and money order fees, net | $99,306 | $72,793 | $180,218 | $139,888 | | Foreign exchange gain, net | $16,655 | $11,660 | $29,703 | $21,214 | | Other income | $786 | $609 | $1,402 | $1,211 | | Total revenues | $116,747 | $85,062 | $211,323 | $162,313 | - The Company has a loyalty program where customers earn points for wire transfers, redeemable for discounted fees or favorable exchange rates, with revenue deferred until redemption or expiration[40] - For substantially all revenues, the Company acts as a principal and reports revenue on a gross basis, controlling the service and being primarily responsible for fulfilling customer contracts[42] NOTE 3 – ACCOUNTS RECEIVABLE AND NOTES RECEIVABLE, NET OF ALLOWANCE This note details accounts and notes receivable from sending agents, net of allowances for credit losses, which remained stable at approximately $2.0 million Accounts Receivable, Net (in thousands) | Metric | June 30, 2021 | December 31, 2020 | | :------------------------ | :------------ | :---------------- | | Accounts receivable | $72,026 | $56,520 | | Allowance for credit losses | $(1,486) | $(1,503) | | Accounts receivable, net | $70,540 | $55,017 | Allowance for Credit Losses (in thousands) | Metric | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :------------------------ | :----------------------------- | :----------------------------- | | Beginning balance | $2,042 | $1,236 | | Provision | $667 | $1,101 | | Charge-offs | $(888) | $(1,186) | | Recoveries | $207 | $199 | | Ending Balance | $2,028 | $1,350 | - Notes receivable, net, from sending agents totaled $415 thousand (current) and $594 thousand (long-term) at June 30, 2021, with interest rates ranging from 0% to 16% per annum, and $1.6 million collateralized by personal guarantees and business assets[44] NOTE 4 – PREPAID EXPENSES AND OTHER CURRENT ASSETS This note outlines prepaid expenses and other current assets, which increased to $5.0 million at June 30, 2021, from $3.5 million at December 31, 2020 Prepaid Expenses and Other Current Assets (in thousands) | Metric | June 30, 2021 | December 31, 2020 | | :-------------------------------- | :------------ | :---------------- | | Prepaid insurance | $297 | $465 | | Prepaid fees and services | $1,230 | $1,452 | | Notes receivable, net of allowance | $415 | $466 | | Assets pending settlement | $229 | $218 | | Prepaid income taxes | $1,861 | $103 | | Prepaid expenses and current assets - other | $953 | $817 | | Total | $4,985 | $3,521 | NOTE 5 – GOODWILL AND INTANGIBLE ASSETS This note details goodwill and intangible assets, with goodwill constant at $36.3 million and net intangibles decreasing to $17.9 million due to amortization Goodwill and Intangible Assets (in thousands) | Metric | December 31, 2020 | Amortization Expense | June 30, 2021 | | :---------------- | :------------------ | :------------------- | :------------ | | Goodwill | $36,260 | $0 | $36,260 | | Intangibles | $20,430 | $(2,580) | $17,850 | - Intangible assets (agent relationships, trade name, developed technology) are amortized over 15 years using an accelerated method, while other intangible assets (Company-operated stores) are amortized straight-line over 10 years[49] - No impairment charges were recognized during the three and six months ended June 30, 2021[49] NOTE 6 – WIRE TRANSFERS AND MONEY ORDERS PAYABLE, NET This note breaks down wire transfers and money orders payable, net, which increased to $55.0 million at June 30, 2021, from $41.7 million at December 31, 2020 Wire Transfers and Money Orders Payable, Net (in thousands) | Metric | June 30, 2021 | December 31, 2020 | | :-------------------------------- | :------------ | :---------------- | | Wire transfers payable, net | $22,436 | $11,806 | | Customer voided wires payable | $15,180 | $13,374 | | Money orders payable | $17,366 | $16,566 | | Total | $54,982 | $41,746 | - Customer voided wires payable primarily consist of unclaimed funds from uncollected wire transfers, subject to state unclaimed property laws with abandonment periods ranging from three to seven years[51] NOTE 7 – ACCRUED AND OTHER LIABILITIES This note details accrued and other liabilities, which increased to $25.8 million at June 30, 2021, from $22.4 million at December 31, 2020 Accrued and Other Liabilities (in thousands) | Metric | June 30, 2021 | December 31, 2020 | | :-------------------------------- | :------------ | :---------------- | | Commissions payable to sending agents | $14,566 | $12,500 | | Accrued salaries and benefits | $3,248 | $2,957 | | Accrued bank charges | $1,602 | $1,170 | | Deferred revenue loyalty program | $2,944 | $2,750 | | Total | $25,822 | $22,380 | - The deferred revenue loyalty program liability increased from $2.75 million at December 31, 2020, to $2.94 million at June 30, 2021, with $1.04 million deferred and $0.84 million recognized during the period[52] NOTE 8 – DEBT This note describes the Company's debt structure, including a refinanced $150 million revolving credit facility and an $87.5 million term loan facility maturing in June 2026 Debt (in thousands) | Metric | June 30, 2021 | December 31, 2020 | | :------------------------ | :------------ | :---------------- | | Term loan facility | $87,500 | $89,383 | | Less: Current portion of long-term debt | $(3,882) | $(7,044) | | Less: Debt origination costs | $(2,466) | $(1,760) | | Debt, net | $81,152 | $80,579 | - On June 24, 2021, the Company entered into an Amended and Restated Credit Agreement (A&R Credit Agreement) providing a $150 million revolving credit facility and an $87.5 million term loan facility, with a maturity date of June 24, 2026[55] - Interest on the term loan and revolving credit facility is determined by reference to LIBOR or a 'base rate' plus an applicable margin (2.50%-3.00% for LIBOR, 1.50%-2.00% for base rate), with effective interest rates for the six months ended June 30, 2021, of 5.19% for the term loan and 0.98% for the revolving credit facility[57] - The A&R Credit Agreement requires maintaining a quarterly minimum fixed charge coverage ratio of 1.25:1.00 and a maximum consolidated leverage ratio of 3.25:1.00[59] NOTE 9 – FAIR VALUE MEASUREMENTS This note explains the Company's fair value measurements, adhering to a three-level hierarchy, with most financial assets and liabilities approximating fair value - Fair value is defined as an exit price and measured using a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs other than quoted prices), and Level 3 (unobservable inputs)[62] - Goodwill and intangible assets are non-financial assets measured at fair value on a nonrecurring basis, utilizing Level 3 inputs[63] - Cash balances, accounts receivable, prepaid wires, accounts payable, and wire transfers/money orders payable are carried at amortized cost, which approximates their fair values due to short turnover[64] - The fair value of the term loan facility and revolving credit facility approximates their book value, estimated by discounting future cash flows using current market interest rates[65] NOTE 10 – SHARE-BASED COMPENSATION This note details share-based compensation plans, with $2.3 million recognized for the six months ended June 30, 2021, and $11.3 million unrecognized expense - The 2020 Omnibus Equity Compensation Plan has 3.4 million shares available for issuance, with 2.6 million remaining as of June 30, 2021[66] Share-Based Compensation Expense (in thousands) | Award Type | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Stock Options | $600 | $600 | $1,300 | $1,200 | | RSUs | $300 | $100 | $500 | $200 | | RSAs | $78 | $0 | $101 | $0 | | PSUs | $200 | $0 | $300 | $0 | | Total | $1,178 | $700 | $2,201 | $1,400 | - Unrecognized compensation expense as of June 30, 2021: - Stock options: approximately $4.5 million (weighted-average period of 1.6 years)[68] - RSUs: approximately $3.5 million (weighted-average period of 2.1 years)[71] - RSAs: approximately $1.1 million (weighted-average period of 2.3 years)[73] - PSUs: approximately $2.2 million (weighted-average period of 2.5 years)[76] NOTE 11 – EARNINGS PER SHARE This note presents basic and diluted earnings per share calculations, showing significant year-over-year increases due to higher net income Earnings Per Common Share | Metric | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income for basic and diluted EPS | $13,227 | $8,978 | $22,204 | $14,666 | | Weighted-average common shares outstanding – basic | 38,433,748 | 38,035,279 | 38,336,977 | 38,035,146 | | Weighted-average common shares outstanding – diluted | 39,027,414 | 38,047,792 | 38,937,699 | 38,043,233 | | Earnings per common share – basic | $0.34 | $0.24 | $0.58 | $0.39 | | Earnings per common share – diluted | $0.34 | $0.24 | $0.57 | $0.39 | - As of June 30, 2021, 0.6 million options and 53,864 RSUs were excluded from the diluted EPS calculation because their inclusion would be anti-dilutive[80] NOTE 12 – INCOME TAXES This note reconciles the income tax provision, highlighting the impact of state taxes, foreign rates, and non-deductible expenses Income Tax Provision (in thousands, except for tax rates) | Metric | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Income before income taxes | $18,030 | $12,243 | $30,181 | $20,011 | | U.S statutory tax rate | 21% | 21% | 21% | 21% | | Total tax provision | $4,803 | $3,265 | $7,977 | $5,345 | - The effective income tax rate is influenced by state taxes, non-deductible expenses, share-based compensation, and foreign tax rates[83] - No valuation allowance was required on U.S. federal or state deferred tax assets, but one was recorded for Canadian net operating loss carryforwards[120] - The CARES Act did not have a material effect on the Company's annual effective tax rate or income tax provision for the periods presented[85] NOTE 13 – COMMITMENTS AND CONTINGENCIES This note outlines operating lease commitments totaling $4.6 million and discusses legal and regulatory matters not expected to have a material adverse effect Future Minimum Rental Payments Under Operating Leases (in thousands) | Year | Amount | | :--- | :----- | | 2021 | $816 | | 2022 | $1,322 | | 2023 | $970 | | 2024 | $815 | | 2025 | $696 | | Thereafter | $0 | | Total | $4,619 | - The Company is subject to legal proceedings and claims in the ordinary course of business, but management does not believe any will have a material adverse effect[87] - The Company's domestic subsidiaries comply with minimum tangible net worth and liquid asset requirements under applicable licensing laws[89] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on financial condition, operations, COVID-19 impact, and key performance factors - This MD&A should be read in conjunction with the Unaudited Condensed Consolidated Financial Statements and related Notes included in this Quarterly Report on Form 10-Q[90] - Forward-looking statements within this section involve risks and uncertainties, as discussed in the 'Risk Factors' section[90] COVID-19 Update The COVID-19 pandemic, particularly the Delta variant, continues to create economic uncertainties, though operations have continued effectively without material adverse effects to date - The COVID-19 pandemic, including the new Delta variant, continues to significantly affect economic conditions and cause uncertainties[91] - The Company has adjusted standard operating procedures, reconfigured facilities, expanded cleaning, implemented distancing, and required PPE to protect employee health and safety[92] - Despite operational challenges, the business continues to function, and customer service has not been materially adversely affected; however, the ultimate impact on financial condition, results of operations, and cash flows remains uncertain[93][94] Overview International Money Express, Inc. is a rapidly growing money remittance company focused on the U.S. to Latin America corridor, with expanded services to Africa and Asia - The Company is a rapidly growing money remittance services company primarily focused on the United States to Latin America and the Caribbean (LAC) corridor, with expanded services to Africa and Asia[96] - Services are available in all 50 U.S. states, Washington D.C., Puerto Rico, and 13 Canadian provinces, enabling remittances to 17 LAC countries, seven African countries, and two Asian countries[96] - Agent network grew by approximately 18.0% from January 2020 through June 30, 2021[98] - Principal amount sent increased by approximately 53.2% for the three months ended June 30, 2021, and 42.2% for the six months ended June 30, 2021, compared to the same periods in 2020[98] - Total remittances processed increased by approximately 33.4% for the three months ended June 30, 2021, and 26.6% for the six months ended June 30, 2021, compared to the same periods in 2020[98] - The Company is regulated as a Money Service Business (MSB) with FinCEN and is subject to various state, federal, and international regulations, including anti-money laundering and consumer protection laws[99] Key Factors and Trends Affecting our Business This section discusses factors influencing the business, including COVID-19 impact, Latin American instability, regulatory requirements, and intense competition - Latin American political and economic conditions, including high unemployment, currency controls, and weak currencies, remain unstable, partly due to COVID-19[102] - Long-term sustained appreciation of the Mexican peso or Guatemalan quetzal against the U.S. dollar could negatively affect revenues and profitability[102] - The Company is subject to strict legal and regulatory requirements, continuously enhancing its compliance programs to detect and prevent cyber-attacks, fraud, money laundering, and other illicit activities, which may result in increased costs[103][104] - The market for money remittance services is highly competitive, with competitors including large providers (Western Union, MoneyGram, Euronet), financial institutions, and smaller niche providers, where the Company competes on value, service, quality, technology, and brand recognition[105][108] - The Company qualifies as an 'emerging growth company' under the JOBS Act, benefiting from exemptions such as auditor attestation for Section 404, delayed adoption of new accounting standards, and exemption from mandatory audit firm rotation[110][114] How We Assess the Performance of Our Business Performance is assessed using GAAP and non-GAAP measures, with transaction volume as the primary revenue driver, and the business operating as a single reportable segment - Performance is assessed using GAAP measures (revenues, service charges from agents and banks, salaries and benefits, other selling, general and administrative expenses, net income) and non-GAAP measures (Adjusted Net Income, Adjusted Earnings per Share, Adjusted EBITDA)[111] - Transaction volume is the primary revenue generator, derived from customer transaction fees and foreign exchange gains[112] - Operating expenses include: Service charges from agents and banks (agent commissions, bank fees), Salaries and benefits (cash and share-based compensation for corporate, sales, and store employees), Other selling, general and administrative expenses (IT, telecommunications, rent, insurance, professional services, advertising, provision for credit losses), and Depreciation and amortization (computer equipment, software, intangible assets like agent relationships, trade name, developed technology)[113][116][117][118][119][120] - Non-operating expenses include interest expense on debt and income tax provision[113][116][117][118][119][120] - The business is organized around one reportable segment providing money transmittal services between the U.S./Canada and various international countries[123] Results of Operations Three Months Ended June 30, 2021 Compared to Three Months Ended June 30, 2020 Total revenues increased by 37.3% to $116.7 million, driven by higher transaction volume and foreign exchange gains, leading to a 47.3% rise in net income Revenues (in thousands) | Revenue Type | Q2 2021 | Q2 2020 | Change ($) | Change (%) | | :------------------------------ | :------ | :------ | :--------- | :--------- | | Wire transfer and money order fees, net | $99,306 | $72,793 | $26,513 | 36.4% | | Foreign exchange gain, net | $16,655 | $11,660 | $4,995 | 42.8% | | Other income | $786 | $609 | $177 | 29.1% | | Total revenues | $116,747 | $85,062 | $31,685 | 37.3% | - Wire transfer and money order fees increased primarily due to a 33.4% increase in transaction volume and a 17.9% growth in the agent network[128] - Foreign exchange gain increased due to higher transaction volume and increased foreign exchange volatility in the Mexican peso[129] Operating Expenses (in thousands) | Expense Type | Q2 2021 | Q2 2020 | Change ($) | Change (%) | | :-------------------------------- | :------ | :------ | :--------- | :--------- | | Service charges from agents and banks | $77,864 | $56,271 | $21,593 | 38.4% | | Salaries and benefits | $10,175 | $7,069 | $3,106 | 43.9% | | Other selling, general and administrative expenses | $7,079 | $5,155 | $1,924 | 37.3% | | Depreciation and amortization | $2,345 | $2,691 | $(346) | -12.9% | | Total operating expenses | $97,463 | $71,186 | $26,277 | 36.9% | - Salaries and benefits increased due to talent acquisition and retention, increased wages, sales commissions, and share-based compensation[131] - Other selling, general and administrative expenses increased due to higher advertising and promotion, professional fees, travel, and IT-related expenses[133] - Depreciation and amortization decreased mainly due to lower amortization of intangibles (trade name, developed technology, agent relationships) as they are amortized on an accelerated basis, partially offset by increased depreciation of computer equipment[134] - Net income increased by $4.2 million to $13.2 million, driven by higher revenues partially offset by increased operating expenses[136] Six Months Ended June 30, 2021 Compared to Six Months Ended June 30, 2020 Total revenues grew by 30.2% to $211.3 million, driven by increased transaction volume and foreign exchange gains, resulting in a 51.4% increase in net income Revenues (in thousands) | Revenue Type | YTD 2021 | YTD 2020 | Change ($) | Change (%) | | :------------------------------ | :------ | :------ | :--------- | :--------- | | Wire transfer and money order fees, net | $180,218 | $139,888 | $40,330 | 28.8% | | Foreign exchange gain, net | $29,703 | $21,214 | $8,489 | 40.0% | | Other income | $1,402 | $1,211 | $191 | 15.8% | | Total revenues | $211,323 | $162,313 | $49,010 | 30.2% | - Wire transfer and money order fees increased primarily due to a 26.6% increase in transaction volume and a 17.9% growth in the agent network[154] - Foreign exchange gain increased due to higher transaction volume and increased foreign exchange volatility in the Mexican peso[155] Operating Expenses (in thousands) | Expense Type | YTD 2021 | YTD 2020 | Change ($) | Change (%) | | :-------------------------------- | :------ | :------ | :--------- | :--------- | | Service charges from agents and banks | $141,237 | $108,498 | $32,739 | 30.2% | | Salaries and benefits | $20,050 | $14,428 | $5,622 | 39.0% | | Other selling, general and administrative expenses | $12,582 | $10,492 | $2,090 | 19.9% | | Depreciation and amortization | $4,679 | $5,381 | $(702) | -13.0% | | Total operating expenses | $178,548 | $138,799 | $39,749 | 28.6% | - Salaries and benefits increased due to talent acquisition and retention, increased wages, sales commissions, and share-based compensation[157] - Other selling, general and administrative expenses increased due to higher advertising and promotion, professional fees, travel, and IT-related expenses, partially offset by a reduction in provision for credit losses[159] - Depreciation and amortization decreased mainly due to lower amortization of intangibles, partially offset by increased depreciation of computer equipment[160] - Net income increased by $7.5 million to $22.2 million, driven by higher revenues partially offset by increased operating expenses[163] Non-GAAP Financial Measures This section provides reconciliations for non-GAAP financial measures, Adjusted Net Income, Adjusted EPS, and Adjusted EBITDA, used to evaluate core operating results - Non-GAAP financial measures (Adjusted Net Income, Adjusted Earnings per Share, Adjusted EBITDA) are used to evaluate performance by excluding items not indicative of core operating results, such as non-cash compensation, amortization of intangibles, and litigation settlements[137][138][141][150] - Adjusted EBITDA is a primary metric for management, excluding interest expense, income tax provision, depreciation and amortization, and non-cash share-based compensation, among other items[139][141][150] - These non-GAAP measures have limitations, such as not reflecting debt service, tax payments, asset replacement costs, or the full impact of certain charges, and may not be comparable to similarly titled measures used by other companies[140] Adjusted Net Income and Adjusted Earnings per Share Adjusted Net Income (in thousands) | Metric | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net Income (GAAP) | $13,227 | $8,978 | $22,204 | $14,666 | | Share-based compensation | $1,374 | $686 | $2,270 | $1,408 | | TCPA settlement | $0 | $23 | $0 | $46 | | Other charges and expenses | $176 | $97 | $293 | $244 | | Amortization of intangibles | $1,263 | $1,710 | $2,525 | $3,421 | | Income tax benefit related to adjustments | $(763) | $(671) | $(1,382) | $(1,366) | | Adjusted Net Income | $15,277 | $10,823 | $25,910 | $18,419 | - Adjusted Net Income for the three months ended June 30, 2021, increased by $4.5 million (41.2%) to $15.3 million[143] - Adjusted Net Income for the six months ended June 30, 2021, increased by $7.5 million (40.7%) to $25.9 million[164] Adjusted Earnings per Share | Metric | Q2 2021 Basic | Q2 2021 Diluted | Q2 2020 Basic and Diluted | YTD 2021 Basic | YTD 2021 Diluted | YTD 2020 Basic and Diluted | | :-------------------------------- | :------------ | :-------------- | :------------------------ | :------------- | :--------------- | :------------------------- | | GAAP Earnings per Share | $0.34 | $0.34 | $0.24 | $0.58 | $0.57 | $0.39 | | Adjustments (net) | $0.06 | $0.05 | $0.04 | $0.10 | $0.10 | $0.09 | | Adjusted Earnings per Share | $0.40 | $0.39 | $0.28 | $0.68 | $0.67 | $0.48 | Adjusted EBITDA Adjusted EBITDA (in thousands) | Metric | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net Income (GAAP) | $13,227 | $8,978 | $22,204 | $14,666 | | Interest expense | $1,254 | $1,633 | $2,594 | $3,503 | | Income tax provision | $4,803 | $3,265 | $7,977 | $5,345 | | Depreciation and amortization | $2,345 | $2,691 | $4,679 | $5,381 | | EBITDA | $21,629 | $16,567 | $37,454 | $28,895 | | Share-based compensation | $1,374 | $686 | $2,270 | $1,408 | | TCPA settlement | $0 | $23 | $0 | $46 | | Other charges and expenses | $176 | $97 | $293 | $244 | | Adjusted EBITDA | $23,179 | $17,373 | $40,017 | $30,593 | - Adjusted EBITDA for the three months ended June 30, 2021, increased by $5.8 million (33.4%) to $23.2 million[151] - Adjusted EBITDA for the six months ended June 30, 2021, increased by $9.4 million (30.8%) to $40.0 million[171] Liquidity and Capital Resources The Company maintains strong liquidity through operating cash flow and a refinanced $150 million revolving credit facility and $87.5 million term loan facility - Principal sources of liquidity are cash generated by operating activities and borrowings under the revolving credit facility[175] - On June 24, 2021, the Company entered into an Amended and Restated Credit Agreement (A&R Credit Agreement) providing a $150 million revolving credit facility and an $87.5 million term loan facility, with a maturity date of June 24, 2026[179] - As of June 30, 2021, total indebtedness was $87.5 million, with $220.0 million of additional borrowings available under these facilities[180] - The Company was in compliance with financial covenants (minimum fixed charge coverage ratio of 1.25:1.00 and maximum consolidated leverage ratio of 3.25:1.00) as of June 30, 2021[183] - Management believes that projected cash flows from operations, combined with the revolving credit facility, are sufficient to fund liquidity requirements for at least the next twelve months[176] Contractual Obligations This section details the Company's contractual obligations as of June 30, 2021, totaling $104.5 million, including debt and operating leases Contractual Obligations as of June 30, 2021 (in thousands) | Obligation | Total | Less than 1 year | 1 to 3 years | 3 to 5 years | More than 5 years | | :------------------------ | :------ | :--------------- | :----------- | :----------- | :---------------- | | Debt, principal payments | $87,500 | $4,375 | $10,938 | $72,187 | $0 | | Interest payments | $12,367 | $2,774 | $5,183 | $4,410 | $0 | | Non-cancelable operating leases | $4,619 | $1,530 | $1,981 | $1,108 | $0 | | Total | $104,486 | $8,679 | $18,102 | $77,705 | $0 | Off-Balance Sheet Arrangements The Company reports no material off-balance sheet arrangements likely to affect its condensed consolidated financial statements - The Company is not a party to any material off-balance sheet arrangements[194] Critical Accounting Policies and Estimates This section refers to critical accounting policies and estimates from the 2020 Annual Report on Form 10-K, noting no material changes - There were no material changes to the critical accounting policies and estimates from the Annual Report on Form 10-K for the year ended December 31, 2020[196] - Key critical accounting policies and estimates include: - Revenue Recognition - Accounts Receivable and Allowance for Credit Losses - Goodwill and Intangible Assets - Income Taxes[198] Recent Accounting Pronouncements Readers are directed to Note 1 of the unaudited condensed consolidated financial statements for details on recent accounting pronouncements - Refer to Note 1 of the unaudited condensed consolidated financial statements for further information on recent accounting pronouncements[197] Item 3. Quantitative and Qualitative Disclosures about Market Risk This section discusses the Company's exposure to foreign currency, interest rate, and credit risks, and their management - The Company is exposed to foreign currency risk, interest rate risk, and credit risk[199][204][206] Foreign Currency Risk The Company manages foreign currency risk through spot transactions, limiting exposure to two business days, though long-term currency appreciation could affect margins - Foreign currency exposure on spot transactions is limited as all transactions are settled within two business days[199] - Wires payable denominated in foreign currencies (primarily Mexican pesos and Guatemalan quetzales) were $15.3 million at June 30, 2021[200] - Prepaid wires denominated in foreign currencies were $11.6 million at June 30, 2021[201] - Revenues from foreign subsidiaries represent less than 1% of consolidated revenues, making a 10% change in currency rates against the U.S. dollar result in a de minimis change to overall operating results[202] - Long-term sustained appreciation of the Mexican peso or Guatemalan quetzal as compared to the U.S. dollar could negatively affect the Company's margins[203] Interest Rate Risk The Company is exposed to interest rate risk on its variable-rate term loan and revolving credit facility, where interest is tied to LIBOR or a base rate - Interest on the term loan facility and revolving credit facility is variable, determined by reference to LIBOR or a 'base rate' plus an applicable margin[204] - A hypothetical 1% increase in the interest rate on the $87.5 million outstanding indebtedness as of June 30, 2021, would increase annual cash interest expense by approximately $0.9 million[205] Credit Risk The Company is exposed to credit risk from bank cash balances and agent receivables, managed through diversification, reviews, and collateral - The Company is exposed to credit risk from cash balances held in various U.S. and foreign banks, some of which may exceed federally insured limits or are uninsured[206] - Credit risk also arises from receivable balances and notes receivable ($1.6 million outstanding at June 30, 2021) from sending agents, with most notes collateralized by personal guarantees and business assets[207][208] - The provision for credit losses was approximately $0.7 million (0.6% of total revenues) for the six months ended June 30, 2021, a decrease from $1.1 million (0.7% of total revenues) for the same period in 2020[209] Item 4. Controls and Procedures The CEO and CFO concluded that disclosure controls and procedures were effective as of June 30, 2021, with no material changes in internal control over financial reporting - The Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective as of June 30, 2021, providing reasonable assurance for timely and accurate reporting[213] - No changes in internal control over financial reporting occurred during the most recently completed fiscal quarter that materially affected, or are reasonably likely to materially affect, internal control over financial reporting[214] Evaluation of Disclosure Controls and Procedures Disclosure controls and procedures are designed to ensure timely and accurate reporting, with the CEO and CFO concluding their effectiveness as of June 30, 2021 - Disclosure controls and procedures are designed to ensure information required for Exchange Act reports is recorded, processed, summarized, and reported timely and accurately[211] - A control system provides reasonable, not absolute, assurance that objectives are met due to inherent limitations[212] - The CEO and CFO evaluated and concluded that disclosure controls and procedures were effective as of June 30, 2021[213] Changes in Internal Control Over Financial Reporting No material changes in internal control over financial reporting occurred during the most recently completed fiscal quarter - No changes in internal control over financial reporting occurred during the most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting[214] PART II - OTHER INFORMATION Item 1. Legal Proceedings The Company is subject to various legal claims and proceedings in the ordinary course of business, none expected to have a material adverse effect - The Company is subject to various claims, charges, and litigation matters in the ordinary course of business[216] - Management believes that no asserted or unasserted legal claims or proceedings will have a material adverse effect on the Company's business, financial condition, and results of operations[216] - Further information regarding certain legal proceedings is incorporated by reference from Note 13 – Commitments and Contingencies[217] Item 1A. Risk Factors No material changes to principal risk factors from the 2020 Annual Report on Form 10-K have occurred - No material changes to principal risk factors from the Annual Report on Form 10-K for the year ended December 31, 2020[218] - Prospective investors are encouraged to consider previously disclosed risks and current report information[218] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds There were no unregistered sales of equity securities or use of proceeds to report during the period - None[219] Item 3. Defaults Upon Senior Securities There were no defaults upon senior securities to report during the period - None[220] Item 4. Mine Safety Disclosures This item is not applicable to the Company - Not applicable[221] Item 5. Other Information There is no other information to report under this item - None[222] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including key credit agreements and Sarbanes-Oxley Act certifications - Exhibit 10.1: Increase Joinder No. 2 to Credit Agreement, dated May 12, 2021[224] - Exhibit 10.2: Amended and Restated Credit Agreement, dated June 24, 2021[225] - Exhibits 31.1, 31.2, 32.1, 32.2: Certifications pursuant to Sections 302 and 1350 of the Sarbanes-Oxley Act by the Chief Executive Officer and Chief Financial Officer[225] SIGNATURES The Quarterly Report on Form 10-Q was signed by Robert Lisy, CEO, and Andras Bende, CFO, on August 6, 2021 - The report was signed by Robert Lisy, Chief Executive Officer and President, and Andras Bende, Chief Financial Officer, on August 6, 2021[229]