International Money Express Q1 2023 Earnings Call Transcript

Quartr
Provided by Quartr
May 4, 2023

There are 12 speakers on the call.

Operator

Good morning, and welcome to International Money Express Incorporated First Quarter 2023 Earnings Conference Call. A listen only mode. Afterwards, we will conduct a question and answer session. As a reminder, today's conference is being recorded. I would now like to turn the conference over to Mike Galentine, VP of Investor Relations.

Operator

Please go ahead.

Speaker 1

Good morning, and welcome to our quarterly earnings call. I would like to remind everyone that today's call includes forward looking listen to the Q2 and full year 2023 guidance, and actual results may differ materially from expectations. Listen only mode. For additional information on International Money Express, which we refer to as Intermex or the company, listen only mode. Please see our SEC filings, including the risk factors described therein.

Speaker 1

Listen only mode. All forward looking statements on this call are based on assumptions and beliefs as of today. You should

Speaker 2

and not rely on

Speaker 1

our forward looking statements as predictions of future events. Please refer to Slide 2 of our presentation for a listen of certain forward looking statements. The company undertakes no obligation to update such information, except as required by applicable law. Listen. On this conference call, we discuss certain non GAAP financial measures.

Speaker 1

Information required by Regulation G under the Securities and Exchange Act for such non GAAP financial measures listen only mode. Our earnings press release and our annual report on Form 10 ks, listen, including reconciliation of certain non GAAP financial measures to the appropriate GAAP measures.

Speaker 2

Listen only mode.

Speaker 1

These can be obtained in the Investors section of our website at intermexonline.com. Presenting on today's call is our Chairman, the list of our Chief Executive Officer and President, Bob Lissy and Chief Financial Officer, Andres Spendy. Also on the call today are Chris Hunt, Chief Operating Officer Joseph Aguilar, President, Latin America listen to Randy Nilsen, Chief Revenue Officer and Marcelo Seodoro, Chief Digital Officer. Let me now turn the call over to Bob. Listen.

Speaker 3

Good morning, everyone, and thank you for joining us. As always, we appreciate your interest in Intermex. We had another strong quarter building upon the company's sustained track record of healthy growth. On Slide 3, Intermex grew revenue and EBITDA in double digits once again. Listen.

Speaker 3

Additionally, the key fundamentals that drive our superior operating performance quarter after quarter are trending in the right direction. Listen Our CFO, Andres Bendy, will review the numbers in greater detail during his portion of our prepared remarks. Without question, our core business is strong and we are on track to meet our full year expectations. As a public company's fastest growing omnichannel remittance company, listen. Intermex is positioned to excel well into the foreseeable future.

Speaker 3

As you know, the business we have built in the U. S. List provides a differentiated value proposition to the Latin American quarter that is unparalleled in the industry. Listen. Because of our unique value added model, an increasing number of consumers from Latin American community turn to Intermex to send money home.

Speaker 3

Listen. Powered by our state of the art proprietary technology, we deliver value added service to our consumers listen and thousands of highly productive retail agents who partner with us nationwide. Our customer focused omni channel business is powered by superior list of technology that is difficult to replicate. The rock solid foundation the company has been built upon drives our sustained growth and creates uncommon value for our shareholders. With all the elements of the National acquisition now closed, the integration of Land's U.

Speaker 3

S. List. Business is well underway, and we're well into the process of assessing the significant opportunity that exists for our business in Europe. Listen. While we acquired La Nationale primarily for its geographical complement and superior brand to the Dominican Republic, listen.

Speaker 3

Nationale's European eye transfer business presents an attractive growth opportunity for Intermex. The eye transfer division is listen only mode. We see an opportunity to grow revenues and income many times over. While our digital business in the US is demonstrating strong growth, listen. The digital opportunity is likely larger and a near term target for us in Europe.

Speaker 3

The iTransfers business represents significant digital opportunity with minimal risk list of channel conflict. The consumer base of senders is more likely to be banked in Europe. This will present the perfect landscape for us to thoughtfully execute our omni channel strategy. Across Europe, we can selectively focus on retail and or digital, listen when and where it makes the most sense, an advantage that few retail providers and no digital players a listen to the call today. Currently, iTransfers operates in Spain, Italy and 1 company owned location in Germany, representing a tremendous outbound remittance opportunity.

Speaker 3

Listen. We think iTransfers current presence bolstered with Intermex's strategy and capital creates a powerful combination. We're excited about the growth ahead. Listen. As we have stated previously, there are a number of components of the La National Investment that will become much more efficient over time, listen driving higher margins.

Speaker 3

Simultaneously, to seizing the opportunity in Europe, which is underway, we have made great progress ramping up the full list of scale integration and rightsizing of La Nationale's U. S.-based business. The upside potential for La Nationale in the U. S. Is more about right a listen to the retail network and maximizing efficiencies and margins.

Speaker 3

Growth opportunities will exist, but they will be driven by careful profitable growth. Listen. We are also instituting our disciplined operating rigor and efficiency to the U. S. Operations.

Speaker 3

Listen. By that, I mean our focus will be enhancing margins by capturing synergies and eliminating waste wherever possible. Listen. Well, Nationale's US footprint actively has been reduced by some 500 unprofitable retail agents under our management, with some additional reductions planned. Listen.

Speaker 3

Shortly after closing, we also rightsized the sales organization to match the reduced service area footprint. Listen. Our formalized restructuring plan is in place and we will be at a run rate of 9% to 11% EBITDA margin by late 2023 or early 2024. La Nacionale is proving to be a great asset for Intermex and we're just getting started. Listen.

Speaker 3

On Slide 4, including Le National, prompts us to rethink how we discuss market share in the US and Latin America. Listen. Adding the Nationale's substantial presence in the Dominican Republic changes the equation. Instead of tracking our listen to the market at 4 largest countries in Latin America. It now makes sense for us to expand that to the top 5 countries, list of which the Dominican Republic is part.

Speaker 3

These countries amount to 82% of the money sent from the U. S. To Latin America and the Caribbean. Listen. We estimate our 2022 market share in these 5 key Latin American receiving countries was just over 20% listen when adding L'NASH now.

Speaker 3

It further solidifies our position as one of the leading remittance providers in that market. Listen. Additionally, if you look at slide 5, showing the top 8 countries, which represent 92% of the money transferred from the US to the region, listen. You see that Intermex has steadily grown our market share to almost 20% for 2022.

Speaker 2

A listen.

Speaker 3

Our priority continues to be expanding our footprint in the most important zip codes for our sending consumers with a differentiated value position for both our consumers and our agent partners. The majority of transaction growth is the balance coming from new agents. Listen. When we recruit a new agent retailer, it provides incremental transactions in year 1, but that same retailer will grow by larger percentages in years 2 and 3. A continued pipeline of quality new agents is critical to new store performance, but even more important to same store growth over time.

Speaker 3

Listen. Based on Intermex's superior service for both the consumer and the agent retailer, our share of the remittances within the store will grow listen as we become the preferred provider over time. To accelerate our 2023 growth, we have added more than a dozen regional sales executives listen to our new job is strategically add high performance new retail locations, especially in the West, where the unfilled market opportunity is greatest for us. Listen. The potential for growth in the region is significant and we're confident that our investment will prove to have an excellent return in terms of building our business in the Western state.

Speaker 3

Listen. In summary, it has been another strong quarter for Intermax. Our best in class retail core business continues to perform at a high level. Listen. The addition of La Nacionale's U.

Speaker 3

S. Business and the eye transfer business in Europe has provided significant growth opportunities. We're excited about the top and bottom line potential contributions of these two business units as they are right sized and instilled with the Intermex approach to the market. With that, I'll turn the call over to Andres, who will drill down into the numbers and offer us perspective on our Q1 operating performance. Andres?

Speaker 4

Listen. Thanks, Bob. Intermex had another strong quarter, thanks to our competitive advantage in the marketplace and the highly efficient management of our growing lines of business. Listen. The intelligent thoughtful investments we make in people, innovative new products, scalable technologies and new markets continue to drive the company's double digit growth.

Speaker 4

Listen. We're executing a differentiated omnichannel business strategy. We're expanding our ecosystem of productive and profitable retail agents with a laser focus on efficiency, engaging in only the right partnerships in the right geographies. We're also rapidly growing a best in class digital offering listen and differentiating that growth will focus on profitability as opposed to growth at any cost. On Slide 6, with the

Speaker 5

strength of our underlying business

Speaker 4

along with the addition of La Nacional has driven up the number of unique active customers by 37% during the Q1 listen to 3,600,000. These customers generated a record 12,900,000 remittance transactions, 29% more than a year ago. Listen. On Slide 7, within the growth of the overall transactions was a 68% increase in digitally originated transactions listen as strong customer acceptance of our mobile app continues. 30% of our trend in the end of the year either sent or received digitally, up almost 5% from a year ago.

Speaker 4

Listen. These numbers reflect double digit growth in our core business and the contribution of Lenacenel's U. S.-based business. Listen. The international entities of the La Nacional transaction didn't close until April 5, following final approval from the Bank of Spain, which we received on March 22.

Speaker 4

Listen. The international entities did not impact the Q1, but we consolidated for the majority of Q2, in line with our expectations and our previous guidance. Listen. Adding to Bob's comments, we think adding La Nacion now to our portfolio is an excellent use of capital, and we're excited about what we've achieved to date and what lies ahead for us. Listen.

Speaker 4

We're confident in our ability to capitalize on material opportunities that business presents to us in both the U. S. And Europe. Listen. Now that the business is entirely under our management, we're excited about enhancing profitability in the U.

Speaker 4

S. And providing capital and strategy listen to fuel growth for iTransfers in Europe. On Slide 8, total principal transfer grew 22% to 5,300,000,000 driven by the strength of our core business coupled with the addition of last now. The average remittance amount was down 5% for the quarter listen year over year at $4.15 per transaction. The decline is primarily due to lower average transaction amount through the Dominican Republic, listen, which are now a larger share of our business since the acquisition of Lenacional.

Speaker 4

Our core remittance trend continues to be down only slightly, about 0.8%. Listen. For comparison purposes, the core INOMAX average SIN was $4.33 during the quarter compared with $301 for lenacinil. Listen. As Bob mentioned earlier, with La Nacion fully consolidated, now makes sense to look at the 5 largest markets in Latin America and the Caribbean where we compete listen and our market share is up 150 basis points from the Q1 of last year to over 21%.

Speaker 4

On Slide 9, looking at the top line, agent and customer growth contributed to the 27% year over year increase in revenue, listen, reaching $145,400,000 during the 3 month period. As for the contribution to revenue from our digital business, we continue to thoughtfully pay spending listen to our app and online offerings to match or stay ahead of consumer acceptance. We're successfully growing the digital business efficiently and profitably with the revenue contribution of our digitally originated transaction, up 79% year on year in the Q1. Listen. We keep a tight pulse on consumer behavior, which positions us to intelligently invest in digital, always ensuring the unit economics are there to support it.

Speaker 4

Listen. It was a very good quarter and growth in the business was strong. It's worth mentioning, however, that net income growth, while in line with our expectations, was listen to the Q1 of 2019. Seasonality in 1Q in the La National business, higher interest and depreciation expense listen and a higher effective tax rate did keep growth in check. Net income was up just under 1% at 11,800,000 listen.

Speaker 4

GAAP EPS growth was better at about 3%, driven by our opportunistic stock buyback activity. Listen. Looking at Slide 10, adjusted EBITDA increased more than 16% to $24,100,000 benefiting from strong revenue growth, listen only mode, partially offset by that same seasonality exhibited by La Nacional and an exceptionally strong February 2022, which made for a challenging comp within the quarter. Listen. Adjusted net income was up 6% during the Q1 to $14,200,000 impacted by the same underlying drivers as GAAP net income, but excludes items list like share based compensation, transaction related expenses, amortization of certain intangibles and the tax impacts related to those items.

Speaker 4

To the balance sheet on Slide 11. Intermex continues to be an efficient operator and strong generator of cash. The company ended the quarter on a Friday with a cash balance of $85,500,000 It's worth it to mention that Friday is the operational low point weekly for cash balance for the business.

Speaker 2

By the end of the call. Net free cash

Speaker 4

generated is our internal measure, which excludes working capital cyclicality, and it remains strong during the quarter listen at almost $14,000,000 an increase of more than 37% from the Q1 of last year. From a buyback perspective, we continue to be active in the market during the 3 month period, purchasing 316,000 shares for just under $7,600,000 at an average price of $23.95 per share. Listen. Additionally, we previously disclosed it in our Q4 call, but it's worth mentioning again the Board's recently authorized additional $100,000,000 for share repurchases. Listen.

Speaker 4

The opportunistic buyback program has another excellent use of capital, and we anticipate remaining active. The company has repurchased over 3,100,000 shares for about $66,900,000 This includes the original $40,000,000 authorization in 2021 listen to the amounts we purchased directly from a significant shareholder in the Q3 of last year. Also worth mentioning is the recent April upsize listen to the revolving line with our credit facility, which now has a capacity of $220,000,000 up from $150,000,000 listen. This additional capacity gives us more flexibility to grow organically and through M and A, while also creating additional room for opportunistic buyback. Listen.

Speaker 4

On Slide number 12, we're holding firm on our guidance for the full year based on our positive Q1 results. We'll go through it once again today. For the year, we expect the following: revenue to be in the $67,000,000 to $688,500,000 range, an increase of 22% to 26%, listen to net income of $66,500,000 to $69,000,000 an increase of 16% to 20% and adjusted EBITDA to the $120,000,000 to $124,500,000 range, an increase of 14% to 18%. For the Q2, we expect the following: listen to revenue to be in the $168,600,000 to $174,100,000 range, an increase of 23% to 27%. Listen.

Speaker 4

Net income of $16,800,000 to $17,100,000 an increase of 5% to 7% and adjusted EBITDA listen to $30,700,000 to $31,400,000 range, an increase of 11% to 14%. This guidance considers the full impact of La Nacional, listen to the U. S. Business that closed in the Q4 and the international business we just closed at the start of 2Q. We also want to highlight that starting with our listen to earnings release.

Speaker 4

We'll start to communicate guidance in the following three metrics: revenue, EPS and adjusted EBITDA. Listen. In summary, we continue to execute and feel well positioned to deliver another strong year for our shareholders. With that, I'll turn it over to the operator for questions.

Speaker 6

Listen. Thank you very much. A listen only mode.

Speaker 2

Listen listen.

Speaker 6

And we'll proceed with our first question on the line from Mayank Tandon with Needham. Please go right ahead with your question.

Speaker 7

Listen. Thank you. Good morning. Congrats on the quarter. I wanted to first start, Bob, with the investments that you need to make in Europe to be able to capture the opportunity.

Speaker 7

And to that effect, could you talk about what other markets you would be targeting on the SENSE side? And who are the recipient countries in this case when you start to expand into Europe beyond the current countries that you mentioned?

Speaker 3

List. The last part of it was who are the countries that say that again.

Speaker 7

Just to be clear, I was wondering if you are also looking to expand beyond list. The countries that you mentioned, that National already has a presence in, Spain, Italy and Germany. And then also from a recipient country, what are the corridor? Is that we should be keeping an eye on that?

Speaker 3

That was the question I was wondering with the last part. Okay. So yes, listen. There's a huge amount of opportunity as we've looked at it from First Pass in Spain and in Italy. Listen.

Speaker 3

And right now, we've just really just cracked the seal in Germany. We only have one company owned store. A listen. And so there's a lot to work through in those three countries. But in addition to that, France would be certainly a country we would expand to in the longer run, possibly U.

Speaker 3

K. But the first piece is that listen. There's room in those three countries to expand greatly. Actually, we do more business today in Spain than in Italy. Italy is actually a bigger outbound market.

Speaker 3

Listen. And Spain is not exactly a huge market share at this time. So it's a fledgling business. The good thing about it is though listen That business is small as it is, has been able to grow with its own power so far and it's growing profitably. Listen?

Speaker 3

For us, what it will be is a couple of things. One will be the sort of the efficiencies that we bring, a really targeted listen to who are the immigrants and where are they, how do we tap into them, how do we provide the value added quality approach to drive wires. Listen. The second one will be investment, but we won't just invest. We recognize today, our efforts are not 100% efficient.

Speaker 3

And so there's opportunities to re guide ourselves to expanding out Europe to saying we expanded out the U. S. A listen and create high performing retailers that are capturing wires. So that's the first part about. The second part is, there'll be some we already go listen to deliver from Europe to a different set of countries than we do necessarily out of the U.

Speaker 3

S. Listen. Some countries will still be important. There's still some decent amount of volume going to listen? Certain South American countries and some Caribbean countries.

Speaker 3

Obviously, Mexico won't play as big role in it. But for instance, in Germany, You wouldn't necessarily know, but one of the biggest partners, one of the biggest corridors would be Turkey. So we'll work to get a better relationship to send money back Turkey, a lot of money going to Sub Saharan Africa, some money going over to Asia, money going over to Eastern Europe. And we have some a list of solid relationships in that area today right out of the chute. But one of the things we'll be doing is building better connectivity With payers in those countries.

Speaker 3

It's very easy to get bank connectivity. There's a listen. Big networks like Visa and Mastercard that can provide that for everybody. The key will be to layer on top of that payers that will differentiate us as listen to us in the U. S.

Speaker 3

And payers that can do over the counter cash and can do various ways of dispersing cash, so that again, we continue with that omnichannel model that we brought to bear in the U. S. And we carry that over to Europe.

Speaker 7

Listen. That's great color. Thank you for that. And just as a quick follow-up question, I wanted to ask on margins. You already are running ahead of the medium term margin goal that a list of that last year.

Speaker 7

So just wanted to get any thoughts. Is there any reason to expect a step back in margins or have the dynamics changed the list of the medium term target might be rendered too conservative.

Speaker 8

Yes. I think you're referring back to the Investor Day in 2022. Listen? I think we have an opportunity to do a bit better than what those margins would have guided to. I think as we increase the amount of business that we're doing in digital, you'll see a little bit of downward pressure obviously from bringing on La Nacional, which is a lower margin business by nature.

Speaker 8

They've gone down a bit, but I think we have the opportunity to do better than that.

Speaker 7

Listen. Great. I'll get back in queue. Thank you so much.

Speaker 3

Thank you.

Speaker 6

Thank you very much. We'll get to our next question on the line from the line of David Scharf with GMP Securities. Go right ahead.

Speaker 9

Hey, good morning. Thanks for taking my question. Listen. Bob, just to start, less a question on kind of the quarter. I wanted to get listen.

Speaker 9

Maybe your updated thoughts on the slides regarding market share listen And how we ought to think about, particularly for those top 5 Latin American received countries, list. How we ought to think about ultimately the TAM, the opportunity for you. I mean, as you think about list. How good this business can get, do you look at it from a bottoms up perspective, meaning here's all the underserved zip codes in the U. S.

Speaker 9

That are sending to these countries that we're not in and we can be in? Or do you look at it more top down in the sense that here's listen based on your experience, your sense for kind of what a natural feeling is for market share, because at 21%, it's already pretty formidable. Listen. I mean, which way should investors think about the business as they try to assess how big Intermex's U. S.

Speaker 9

To those 5 countries could get?

Speaker 3

Listen? Well, it would be bottom up. We to me, a top down is a bit of a fantasy. It's a bit of an arbitrary number. A listen.

Speaker 3

And so we look at bottom up. And I think that my support for that would be that a consumer a listen That's sitting in Salinas, California doesn't care that we have a huge share in Atlanta, Georgia. We still have the same opportunity to gain share a listen and get more wires from that consumer there. And so we look at what our performance looks like zip code by zip code. Listen.

Speaker 3

Frankly, some of these zip codes have more challenges than others, and we've talked about that for years. We're not as early as an entrant. There's a listen to some irrational exuberance of competitors that over discount to gain what they think is share on unprofitable wires. A listen. But at the same time that we look at that, we see a huge opportunity of when we talk about our growth and the growth listen.

Speaker 3

We're not talking about attaining in the Western States or in California anything close to the kind of margins. Listen. We've never projected that to the market that we attain in certain states out east or even the same market share that we have. We recognize there's a huge amount of headroom and a huge amount of open field for us to compete in. And that is That I think could still drive market share.

Speaker 3

Now there's 2 ways to think about that. One is Mexico and Guatemala, where we are listen. Clearly, a market leader. Guatemala, we're the number one brand, we believe, in the world sending money to Guatemala of any kind, digital or retail. A listen.

Speaker 3

Mexico, we're amongst the probably the 2 largest brands sending money to. But there's also brand there's also countries that coming on with tremendous growth that have a huge upward opportunity. We've seen a lot of growth in countries like Nicaragua and Ecuador listen. In Colombia, these don't have the same margins as Mexico, but there's a huge amount of growth there. So we have those core countries that still have a lot of open a list of zip codes that are either not fully built out or not built out at all.

Speaker 3

And And then you have these other countries in Latin America that we purposely built that way because we started with the foundation of Mexico and Guatemala listen for a number of reasons, largest markets, most profitable transaction. And this is just all part of that plan. So we believe there's still an opportunity to move our overall share listen to those big five. And then the next group, which includes countries like Nicaragua, Ecuador, Colombia, the 8th, which is like 90 some percent of the market. We think there's a tremendous opportunity still to gain share in those markets.

Speaker 3

A listen And by the way, those markets are also growing. So there's going to be growth by holding service and then there's a growth that we

Speaker 2

think will

Speaker 9

grow faster than the market. Got it. Understood. Thank you for the color. A couple of just quick follow ups for Anders.

Speaker 9

Any input on the tax rate listen for the quarter that we ought to have about the year?

Speaker 8

Yes. No, that was a that's a good one to note and talk about. With the acquisition of La Nacional, list? That is a lot of revenue driven to the New York, New Jersey area. So higher state tax jurisdictions.

Speaker 8

It's just a listen. Apportionment, it's attracting more of our bottom line and overall tax rate. So it's really additional La Nacional a listen and the spillover from that concentration of business.

Speaker 9

Okay. Should we think about the full year effective rate then?

Speaker 4

Listen? Yes, I think closer to 29 versus the 27 that you would have seen

Speaker 8

in the past is probably a better way to look at it.

Speaker 9

Got it. Got it. And, hey, listen. Recognize on the cash side, obviously, ending on a Friday, I think as much as like half of your listen. Cash can get eaten up by prefunding for the weekend.

Speaker 9

But more broadly, can you update us on how we ought to think about a list. Sort of a conversion rate of EBITDA to free cash flow, what you're running at as we think about how much Is ultimately left for

Speaker 4

About 60% to 65%.

Speaker 9

Listen. 60, 60 thought, got it. And then lastly, somewhat related, as we think about buybacks, listen. Can you also remind me, are there any covenant restrictions? I mean, I know some companies might have a a listen.

Speaker 9

Aggressive authorization, but they're limited by loan covenants, but for example, repurchasing only 50% of net income on a trailing listen. Is there anything restricting the level of buybacks, Terry?

Speaker 8

Yes. We're unrestricted up to 2.25x listen of trailing 12 every year, even if we're beyond that 2.25%. So if you look, we would it would be detailed in our past releases.

Speaker 4

Got it. Got it.

Speaker 9

Listen. Perfect. All right.

Speaker 4

Thank you.

Speaker 7

And by the way,

Speaker 8

our covenant calculation isn't the straight up where you end on the quarter because we have that revolver, right? Listen. So you're taking about a 14 day average, which would suggest that on average, our leverage is pretty low from a covenant perspective.

Speaker 6

Listen. We'll get to our next question on the line. Listen. So Mike Grondahl with Northland Securities. Go right ahead.

Speaker 10

Hey, guys. Good morning. Could you guys break out listen to revenue from La Nationale in 1Q and what's embedded in 2Q, just so we can listen to understand the core revenue growth rate?

Speaker 8

Yes, no problem. Happy to do that. This is Andres. In listen. 1Q on Assunel revenue was $17,500,000 And then for the year And then that's all U.

Speaker 8

S, right? And then for the year, La Nacional U. S. Is probably going to be around 75,000,000 listen. And then 3 quarters of I transfer is going to be around $12,000,000 to $13,000,000

Speaker 10

Got it. Got it. Listen. That's helpful. We can back into that 1Q core growth then.

Speaker 8

1Q core growth is about 11.5% in terms of transaction revenue.

Speaker 10

A About 11.5. Okay.

Speaker 8

I think 11.5. Let's get you 11.5. So spot on in the core business.

Speaker 10

Listen. Got it. And then kind of for Bob, I think, you talked about hiring 12 regional directors, 12 salespeople. 1, how recent did you hire those? And what triggered that?

Speaker 10

You've always had this very large outsized opportunity out west. Listen. So I'm kind of curious what triggered the hiring of those 12, especially if it was really recent. Listen. And then I hate to pile on one more, but obviously that's going to the goal is to drive some a list of agent growth there.

Speaker 10

Can you talk about what new agent growth has been and sort of what your expectations are for it? I know you don't give us an exact number, but just how we should think about the growth rate for agent?

Speaker 3

Yes. And I'd like to start by saying we're never trying to listen. Deliver agent growth. We're trying to deliver transaction and revenue growth. So it's really easy to deliver agents.

Speaker 3

Listen. We could add, we could double our agent network tomorrow. We probably have the smallest network of any company listen to the kind of volume business we have in the market today. So this is about driving revenue. Agents are a vehicle and they're our channel partner and we really listen.

Speaker 3

Expect and value them, but it's not about adding, it's about adding quality agents. So I want to just reemphasize the importance of how we target in the right places with prequalifying an agent that we know or believe will deliver a certain amount of transactions, listen, not just putting up agents. The second part is, it's not necessarily just we've always had and they're called RSUs, they're a list of regional sales executives, and they're people that float. So what that means is they might not be in an exact just district. A listen.

Speaker 3

They might be in Southern Cal and there might be 4 districts in Southern Cal and they're selling in 2 or 3 of them or they might be selling in 1. And Randy will deploy them as listen to the open opportunities. Those open opportunities have been there. That's correct. There's no doubt about it.

Speaker 3

And we've been working against those. Listen. But this year, we felt that we needed to put a little bit more, generation in new retailers that would be driving wires that would start a listen to build the pipeline a little bit faster, particularly in the Western States, and we're able to put them in the plan and still be able a listen? Be in line with consensus. So the opportunity was to do invest a little bit more in those areas.

Speaker 3

We also think that the list. The marketplace has gotten a little tougher in the West. There's, aggressiveness, as we talked about, relative to Particularly some of the private companies, but at least 1 or 2 of the public companies that have a list Discounting in a way that we need to be more assertive to continue to grow our market share in those states. So all of those things being considered that that's where the investment comes from.

Speaker 10

And maybe just a follow-up. So the list. The 12 were all added in 23, like really recently. And are most of them out west? Or can you say sort of what listen.

Speaker 3

No, they weren't all added in 'twenty three, number 1. Some of them were with us in Q4 and they're not all West. There's a disproportionate share. If you think about West as Texas and West, there's a bigger share, but we have some in some markets in the East as well, listen where we have opportunities to grow our market.

Speaker 10

Got it. Got it. Well, good to hear about that growth and thanks guys.

Speaker 3

Listen. Okay. Thank you.

Speaker 6

Thank you very much. Listen. And we'll get to our next question on the lines from Chris Zhang with Credit Suisse. Go right ahead.

Speaker 11

Great. Thanks for taking our question. I had one on the value added services that you highlighted at your Investor Day. Listen only mode. So those include the co branded processing, the GPR card and additional incremental products, including in the international market.

Speaker 11

Listen. Maybe can you give us an update on the size of the value added service in terms of what portion of contribution a list of They have on your overall revenue and what's the growth rate there and also with the National acquisition, listen. What are some of the opportunities on the value added service side you're seeing?

Speaker 3

Okay. Well, we wouldn't listen. Consider them value added, we consider them products onto their own. When we talk about value add, we talk about all the ingredients of our core product. But If we talk about the GPR card or we talk about our payroll card, those are fledgling products that are in early stages.

Speaker 3

We think that over the course of the next several years, listen? They can be significant contributors in revenue, but even more so in terms of EBITDA. They're really high margin products. We think we're well positioned because no one is really delivering a card to the Latin American community the way that some folks have done through the Walmarts and with the little hooks, the list. The L hooks and stuff like that.

Speaker 3

No one's really done that in our community of consumers. So we think there's a huge opportunity there, but it's really early on and you're not going to see a listen A significant impact from either card, that's our payroll card or our GPR card, in terms of our revenue a or EBITDA growth for a couple of years. It's going to be a nonmaterial, but it will grow. We're very satisfied with how we've been able to grow the payroll card, but at this point, it's a small business.

Speaker 11

Listen. Okay. I appreciate all the color, Bob. And just a follow-up on the quarter, in terms of the unique customers at the end of the quarter. There's a very slight decline from 3.7% to 3.6%.

Speaker 11

Understand there might be some rightsizing with the National acquisition listen Or maybe some seasonal factors. Can you maybe unpack the cost of the slight decline and also understand that You're more focused on the transaction revenue growth where you delivered pretty robust growth in the Q1. So, I'm just trying to understand the dynamics of the customer.

Speaker 2

I would

Speaker 3

just talk about I just want to make sure you're referring to the decline. Is that a year over year? Is that Q4 to Q1 you're referring to? The Q4 to

Speaker 7

Q1 to Q1, so from

Speaker 11

3.7 quarters. So from 3.17 and 4.43 to 3.1.

Speaker 3

We've cautioned all the analysts like a lot of times, I can do it again, that listen. Sequential quarters do not work in our industry. The weakest month of the year is January, the 2nd weakest month is February. The strongest months of the year. 2 of those are in Q4, October December.

Speaker 3

So by design, you're going to have a lot more new customers. Listen I'm pleased that we will be that close, really, to be frank. And to be honest, it shows that our business is doing better in Q1 than in Q4 with listen holding the line that close with that less of a business relative to how things seasonally are slower in January February.

Speaker 11

Yes, that still looks fair. Yes, I do see that seasonality in the Q1 of 'twenty two, in the Q1 of 'twenty one, it's flattish. So I just wanted to make sure that's more seasonal and that will answer my question. Thank you.

Speaker 3

Listen. Okay, great. Thank you.

Speaker 6

Thank you very much. I will now proceed with our final question for today is from the line of Alex Margraf listen with KeyBanc Capital Markets. Go right ahead.

Speaker 5

Hey, thanks for taking my question. Just a follow-up on the sales a listen to the headcount commentary. I'm just curious after the 12 or so hires that you outlined, how you're thinking about it the balance of the year? Is there more opportunity or desire to kind of continue to add to that space? Just any comments there is the first question.

Speaker 3

Listen? Right now, we are on hold in terms of additional hires. Listen. We want to make sure that we maximize the efforts. Now we'll have a significant upgrade in the number of people out in the marketplace, a listen And the key will be to make sure that we're efficient in driving increased transactions or gross margins from each of those people's book of business.

Speaker 3

Listen? We could add more later, but there's not a plan at this point. We'll first make sure that these additional headcounts are listen and basically getting to a point where they're painted for themselves within the time period that we expect that to happen, Which is kind of within 6, 7 months, where they're bringing in a business that they've exceeded their cost and then they're starting to be contributors.

Speaker 5

Listen. Very clear. And then maybe Bob, just for you. Would love to just kind of revisit your perception of the competitive environment and some of the various end markets that you noted across Europe. Maybe kind of a I don't know if you can provide a similar analysis as you did just a few questions around U.

Speaker 5

S. To LatAm, that would be helpful though.

Speaker 3

Yes. So the question is assessment of the competition U. S. To Latin America?

Speaker 5

No, sorry, just around the various end markets that you noted across Europe list that you're currently in and kind of are looking to get a larger circle then?

Speaker 3

Yes. I don't know that we have all the data. I think Some of the same players are there. Some of the public 3 public companies that you know over there. There's another strong competitor that has listen to some decent size by the name of small world.

Speaker 3

And there's some small regional guys. It's equally a listen. I would say from my early acquaintance with it, it's a market that's not unlike the U. S. And its fragmentation of some smaller players, regional listen guys.

Speaker 3

Think of the countries there almost like states and regions here in the U. S. Some people are in Italy, some people are in Spain. So listen? There will be and there'll be the 3 public companies will be there, obviously, that you're familiar with.

Speaker 3

But the The game will be a little bit different, but the process that we go under, which is really to how big is the market, list of who owns it, how do we get it, what do we get if we get it. We're, I think, different than almost any company in the industry that we don't aimlessly go out after opportunities Just because they're big. Can we get that business? What do we get if we get it? Is there a return on investment?

Speaker 3

And we'll go through analyzing that market and finding the key opportunities as we have in the U. S. That are the ones that can drive the business forward the fastest. Listen. We it's really easy to go ahead and us to expand into 30 or 40 or at least 10 countries in Europe quickly.

Speaker 3

But the business will be driven by Spain, Italy, France, Germany, maybe another 1 or 2 countries. And so our focus will be similar that it's been to the U. S. From the U. S.

Speaker 3

We focus primarily on Mexico and Guatemala. We drove tremendous volumes, a high market share and high profitability in that foundation and it built from there. Listen. So it will for us, I don't want to sound like we're not concerned about the competition, but it's about execution, market analysis listen and awareness of the opportunities and return on investment. The same basic core competencies that we brought to the business in the U.

Speaker 3

S. Played out in a little different marketplace. And so that's the way we'll approach it.

Speaker 5

Awesome. Thank you.

Speaker 2

Listen. Thank

Speaker 6

you. Thank you very much. Mr. Lisi, we have no further questions on the line. Listen.

Speaker 6

I'll now turn the call back to you for any closing remarks.

Speaker 3

Well, thank you all for joining us. We appreciate your time and look forward to talking to you all soon. Have a great day.

Speaker 6

Thank you. And that does conclude the conference call for today. We thank you for your participation. You may disconnect your lines. Have a good day, everyone.

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Earnings Conference Call
Fulton Financial Q1 2023
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