Description

Elevator Pitch/Summary

We believe Intermex is a compelling long as its valuation (8.5x FCF, 6.4x EBITDA) is pricing the company close to a "cigar butt" but is growing over 20%.  We believe there are flaws with the negative narrative around the company, particularly around the sustainability of its growth and customer base, and a subsequent misunderstanding of management strength and savvy.  We believe they can sustain 10%-20% growth the next couple years which should pave the way for a double over the next 2-3 years through a combination of multiple expansion as the market realizes their runway is much further than realized, along with organic and acquired growth.  Our Base Case target is 9x 2023 EBITDA, 84% upside from current prices, which would over a 50% discount to companies with a similar profile (arguably appropriate given the ongoing regulatory risks).  

Key Thesis Points:

1) Digital unlikely to materially convert Intermex's customers for at least 5+ years (misunderstood narrative)

2) Strong management that knows how to make money and take share (again, misunderstood narrative)

3) Multiple years remaining of 10-15%+ growth with high incremental margins (compounders take note)

4) Distracted competition going "all in" on digital and key competitor (Moneygram) at competitive disadvantage

5) Highly recurring business because of check processing workflow

6) Capex light and no net leverage and a cleaned up board/capital structure provide for a "clean" story

7) Believe private equity or strategics will be interested in acquiring if it stays at these levels

12 Month Target Based on Targeted 2023 Numbers:

Company Description/Business

Intermex is an international money remittance company that focuses primarily on transactions emanating from the United States and going to Mexico, Guetamala, and other Latin America countries.  They make their money by charging a fixed fee for each remittance transaction (85% of revenue), and then also to a lesser degree from foreign exchange arbitrage (14%) that is variable.  Their customer base is primarily low income and focuses on the underbanked.  We believe the service that Intermex provides are essential and mission critical to Latin American immigrants and their families. Because remittances are associated with consistent paychecks, it's also a reasonably recurring revenue base as well.

With money remittance, one can either do it in person ("retail") through sending and paying (i.e. receiving) agents, or digitally.  If in person through an agent, the workflow would generally involve a customer going to one of the locations, which are often quite non-descript, underadvertised stores like bodegas, quick service marts, or telephony stores.  They are usually family businesses trying to augment revenues by offering remittances.  Often a customer will cash their paycheck and conduct the remittance at the same time, so generally the agent location will have both services available.  The most common transaction would then direct the cash to a specific physical location, often a bank in Mexico/Guatemala, where it can then be picked up by the receiving party. 

Here is an example of where one might use Intermex:

If remitting digitally, you can use Intermexonline.com or their app to make transactions, although this does involve needing a bank account.

Mexico and Guetemala are their primary markets, but they also serve Honduras and El Salvador as "Core" markets.  Their emerging markets are a number of other LatAm Countries, along with some African and a few Asian countries, but it's our understanding that the focus is around some select emerging countries like Dominican Republic, Ecuador, Nicaragua, Peru, and Costa Rica.

In terms of market share, you can splice it by receiving country (e.g. Mexico) or by outgoing state/region.  The company claims to be at around 20% market share for their core receiving countries (Mexico, Guatemala, Honduras, El Salvador).  Within the United States, there is a stark difference in market share between Florida and the Southeast (35-50% share) vs. Texas and California (8-12% share).  Part of the growth opportunity is ongoing market share gains in Texas and California in particular.  

Background of Company and Stock

Intermex was founded in 1994 in Washington State of all places.  Two years later, they relocated to Miami, Florida, where they have remained ever since and where they built out their most dominating market share.  After a series of acquisitions and capital infusions, the company was struggling during the Financial Crisis of 2008-2009, at which point they brought in current CEO Bob Lisy, who has led the company for more than ten years.  As we understand it, the company was in pretty rough financial shape in 2008 and had been badly mismanaged, including having many unprofitable locations.  Lisy, per our understanding, executed a long term strategic plan, starting by closing down unprofitable locations and implementing an analytically minded strategic roadmap of expansion and market share gains.  Both the employees and ex-employees we have spoken with have extremely high regard for Mr. Lisy.  

Intermex went public via SPAC in 2018 as International Money Express.  In 2019 they cleaned up the capital structure by eliminating the warrants and in September 2020 they took down a large initial shareholder (Stella Point Capital).  Stella Point originally owned 12 million shares but now owns ~3 mm (and now no shareholder owns more than 10%).  It's been a turbulent corporate environment with a fair amount of board turnover since the SPAC, although it's our understanding that there were several complaints around lack of independence from existing shareholders and the company was seeking to address that.  In late 2020 they promoted a board member to lead independent director while also having two non-independent board members retire and then in October 2020 they added a female Latino independent director Laura Maydon.  Their CEO remains the Chairman of the Board, which isn't ideal, but their board is at least now majority independent.  

They've also had some management turmoil, with the CFO stepping down in November 2020 (accepting an offer at BlockFi). 

CFO issue aside, they now seem like a cleaner company with an enhanced board and simplified capital structure.   They have made no acquisitions since going public, meaning all growth has been organic, have modest gross leverage (net cash), and have a fairly straightforward accounting model (albeit with some volatility in working capital movement).  

Global Remittance Market and World Bank Report

During COVID, there was a belief that remittances would fall significantly.  In fact, the World Bank first predicted that remittance flows to low and middle-income counrtries would "plunge by a fifth in 2020."  However, they ended up only being down 1.6% vs. 2019. Breaking it down further, and more good news for IMXI, remittances to Latin American Caribbean GREW 6.5% in 2020, which was attributed to an "improving labor market in the United States." 

We do believe Intermex  benefits from a stronger US economy, particularly in housing/renovation, as the CEO opined on recently in an interview:

So if you buy into the idea that renovation and homebuilding have a multi-year tail, this will give added fuel to that thesis (or vice versa). 

LatAm has shown an 11% total remittance CAGR since 2009 and has shown growth every year except in 2009:

World Bank attributes the greater than expected performance to "migrants desire to help their families" and "fiscal stimulus."

The TAM for low and middle income remittance was $540 billion in 2020, with LatAm representing $103 billion of that.

Mexico is the third most common destination country to remit internationally to (behind China and India), while the United States is the top country to remit from (ahead of UAE, Saudi Arabia, and Russi).  We believe the US to Mexico corridor is one of the top corridors in the world.

Within LatAm, here is a breakdown, with Mexico and Guetemala leading the way:

You can see the trends in the these countries have shown consistent growth from 2018-2021, absent a one quarter period in 2020:

Unit Economics and Workflow

By far the most typical workflow for Intermex is a customer goes to the retail location (or a "sending location") with either cash or a check to process.

What is a sending location?  The vast majority of their sending locations are local mom and pop stores (e.g. convenience stores, bodegas, telephony stores) whereby an Intermex sales rep has convinced the owners to sell Intermex remittance.  The store owners are referred to as "agents".  A typical sending location will have 2-3 competitors to choose from (e.g. Intermex, Ria, Moneygram, Western Union), and the customer will either direct the agent which service to use, or the agent will pick.  The customer then selects where he/she wants the money sent to, and what location.  The "receiving location" is often a bank in the country it is going to.  For instance, in Mexico it will often go to an Elektra store (~18% of IMXI remittances go through Elektra).

The customer will generally either come with cash, or come with a check that needs to be processed.  In either case, some amount of money (on average between $350-$450) will be going to the receiving location.

We've attempted to diagram below a rough, typical workflow, whereby a transaction goes to Mexico.  Of the $3.

This fairly consistent and predictable model results in a very tight gross margin window, which has basically stayed in the 33% to 34% window:

There is not a lot of leverage from a gross margin basis (with substantial variable costs), however there is fairly consistent operating leverage as the company continues to expand:

While we've described a typical retail transaction, "Digital" is a growing % of total worldwide remittances and should be acknowledged and compared with retail. We will touch on the pros and cons later, but suffice to say in the case of a digital transaction, there is no sending agent fee, so the gross margin can increase significantly.  Based on our research we believe the fixed cost here will be lower, e.g. passing on some of the savings from a lack of agent to the consumer, but the translation fee is often higher, as they attempt to squeeze out more profit through currency arbitrage.  It should also be noted that "digital" has different meanings.  In some cases it can be "digital outgoing" but "retail pick up", meaning there is still an agent fee on one end. Additionally, there is significantly more spend on customer acquisition online then for retail, which for Intermex is largely driven by word of mouth.

Intermex has a digital option and is now investing substantially in that platform, but the vast, vast majority of their customers continue to prefer the agent route.  We discuss this in more detail later.

Competition

Competition first needs to be broken down between "retail" and "digital only".  All of the companies below are attempting to capture market share of people who want to send money internationally, so they are competitors.  However, given IMXI's focus and customer base, we believe Ria is the biggest competitor, as are other smaller ankle biters not shown below (like Dolex).

In the stores we toured, the two options were Ria and Intermex.  We believe this is pretty common.  Why are Moneygram and Western Union sometimes not in the same stores or even neighborhoods?  Part of it, we believe, is that Moneygram and Western Union focus more on "big box" locations like Walmart.  Since they are appealing to a much broader remitter (e.g. sending to many countries all over the world), it doesn't make as much sense for them to attack the smaller Mom and Pop store neighborhoods that Intermex and Ria have penetrated so well.  E.g. Intermex and Ria have more of a hyperlocal, boots on the ground strategy, whereas Western Union and Moneygram have mandates to capture a broader spectrum of customers.

While WU and Moneygram do have competing offers in smaller stores, and do come in at a lower price, our checks indicate the focus on the Latin American customer has generated strong brand awareness and word of mouth for Intermex.  Additionally, their efficiency is superior (e.g. time from sending remittance to availability), they have a loyalty program, and their check processing (whereby you can process a check and send a remittance in one transaction) is a differentiator.  In the stores we visited, Ria would charge the agents a fee for the check transaction while Intermex would not, which incentivizes the agents to push for Intermex.

We would also note that both Moneygram and Western Union are going "all in" on digital, so their focus on smaller mom and pop shops is likely diverted.  Finally, Moneygram is now at a strategic disadvantage as they are being forced (as we understand it) through regulatory action to obtain IDs for ALL transactions, whereas Western Union, Intermex, Ria, and others only need an ID for transaction above $1,000.  Given the high % of customers that are undocumented and underbanked, and the fact that the vast majority of transactions are under $1,000, makes this a pretty material weakness of Moneygrams' retail business...it helps us understand why Moneygram is all in on digital.

We believe the analytical focus on zip codes, the speed of remittance, and the check processing are key reasons Intermex is able to build share despite being more expensive than Western Union.  If you compare Intermex to Ria, their fixed fees will be similar, but Intermex may have a higher translation fee, particularly in areas where they dominate market share.  At the sites we toured, admittedly picked by Intermex, Intermex was generating 90%+ market share versus Ria.  The currency pricing was also quite dynamic and even changed from store to store (sometimes a few blocks away).  Ria's only cited advantage was they had bill pay processing, which we believe is far less important than check processing.

Intermex has a very analytical method to acquiring additional market share.  They continue to be laser focused on where their primary customer base lives, and where they are underpenetrated.  They started in Florida and have built out a dominant share in remittances emanating from Florida, Georgia, Alabama (as well as strong New England and North East share).  We believe their market shares in Texas and California, the two largest states for Mexican immigrants, are still in the 8-12% range, compared with Florida closer to 35-40%.   There is still a lot of market share to take in those two regions, even though they are admittedly more competitive (California in particular).

In aggregate, Intermex is blowing Western Union and Moneygram out of the water, consistently:

On the other hand, if you isolate Euronet's Money Transfer business (which is mostly Ria), the growth rates are more similar:

We think this reflects both IMXI and Ria taking share at the expense of WU and MGI. 

Note Euronet trades at 10.5x NTM EBITDA and 19x NTM earnings, although they do have other businesses.

Current Narrative (aka Bear Case, aka Why This Opportunity Exists)

Intermex is making a strategic error by not going "all in on digital", where both Moneygram and Western Union are now focusing their attention, in addition to well backed competitors like Remitly, Wise, and Xoom.   VC money equals the wave of the future.

As more and more people move from in-store (retail) money remittance to digital, Intermex will lose their customer base, and given the operating leverage in the model, profitability will be hit hard.

Digital is cheaper, easier, and should be a stickier customer in the long term.

Intermex's focus on only a few markets makes it hard to scale the business and they will quickly run into a wall on growth.

Finally, the company's numbers are "too good to be true" and there surely must be something below board going on, aka material money laundering.

Our Take on the Narrative (aka Base/Bull Case)

1) Digital isn't Easier/More Convenient For IMXI's Base

Because Intermex deals with the underbanked and specifically many undocumented immigrants, we view it is unlikely that their customers will move en masse to digital anytime soon.  Key to understanding this is that if you send $1,000 or less in remittance, you basically just need a name and where you are sending it, no questions asked.  If you are sending digital, you almost always need a bank account.  Unless undocumented immigrants and other unbanked populations suddenly en masse get a bank account, this transition will go very slowly.  As we noted, Moneygram, due to their poor compliance policies, is at a competitive disadvantage in that they force ID for all remittances.  

It's our view that a typical Intermex customer (say a tomato farmer in Florida) will far prefer to process their check (or cash) discretely at their local grocery store, and at the same time use a trusted partner in a discrete manner, rather than going into their local Bank of America or even walking into a Walmart.  The geographical convenience and relative privacy, as well as cultural norms, make that workflow far more appealing.  Get your paycheck, head to your local grocery store with Intermex, cash it, and send to your family in Mexico all in one go.

The recent World Bank report seems to agree with this thesis in their latest publication:

"Finally, the shifts from cash to digital and informal to formal channels may also slow down, unless solutions are found for improving access to banking for migrants and for new money transfer operations."

As added evidence, consider the pandemic was a super-stress test for IMXI's base converting to digital...and IMXI seems to have come out of stronger than ever.  Management has commented they did see some uptick in digital during the early parts of the pandemic, but that generally their base *went back* to retail.

2) Digital isn't Necessarily Cheaper

While it is true that a fixed fee is higher (say $10 vs. $5) for an in-person transaction vs. Digital to account for the agent commission, in general if you go in person you will get a range of currency rates and can choose the best one.  If you use digital, the dirty secret is they only give you one currency rate, and it will generally be pretty poor, so they are making their money off the currency arbitrage.  So digital would be cheaper on smaller numbers because of the higher fixed fee, but as your remittance rises, the fixed fee becomes less relevant and potentially a retail transaction could be cheaper.

3) Competitive Distraction Good for Intermex

Moneygram and Western Union's obsession with digital is an opening for Intermex; Intermex (and Euronet) is essentially gobbling up all the profits in the industry as MGI and WU ignore or spend less effort/dollars on that space. Intermex's relatively limited focus on the most profitable and largest markets is actually a strength, as their focus will allow them to take continued market share, especially as their competitors have lessened their focus on retail.  The best agents out there will see Intermex is the best place to work and move there, in some cases taking their customer bases with them.

Digital has additional lesser known costs that are quickly evolving, specifically around fraud compliance.  It is harder for fraud to occur when cash to cash.  WU and MGI and other digital players can in some cases actually be on the hook for fraud, or part of the fraud, so it's very important they have a robust anti-fraud system in place, which costs a lot of money.  The World Bank report notes that as well:

"Anti-money laundering and countering of financing for terror (AML/CFT) regulations and de-risking practices by banks (denying bank accounts to money transfer operators) continue to be onerous for new market entrants using new technologies.  Many migrants do not have the ID documents required to open bank accounts, which prevents them from using online remittance services."

4) Digital vs Retail Lifetime Value

When doing Lifetime Value and Customer Acquisition Cost (LTV/CAC) analysis, the general consensus seems to be that while the customer acquisition cost is higher for digital than retail, the Lifetime Value is also much higher once you get them on your platform.  We question whether companies really have the data to back that up in a meaningful way.

The well funded VC companies entering the space, as well as the large legacy players putting all their chips in the digital basket, does suggest intuitively that CAC will be quite high.  However, are switching costs really so bad?  Are online accounts not price sensitive if they can get lured into lower fees/rates?

When we spoke with the former Chief Information Officer of IMXI, he staunchly believed that retail was ridiculously more attractive than digital from this perspective.  

For what it's worth, here was his estimate:

Digital CAC= $80-$150

Digital LTV= $200-$250, so LTV/CAC of around 2.  Not terrible but not great.

Retail CAC= $4-$11

Retail LTV= $300+, so LTV/CAC of ~60

The CEO also commented on this in a recent interview, with some sharp barbs to his competitors:

The major difference is the retail CAC...because Intermex has a trusted brand in an industry where we would argue that trust demands a premium, the CAC is really very limited.  Most business is generated through word of mouth.  There is little advertising dollars spent because of this...in fact one could argue, Intermex should be spending more on sales and marketing.  

5) Intermex's Numbers are Too Good To Be True

Money laundering is a known issue in this industry.  It's one reason why Moneygram was dinged so hard recently.  Combine that with the very humble stores that Intermex targets for their agents that certainly "look" (to a NY banker anyway) sketchy, and ongoing "against the grain growth" with rising profitability, as well as some high profile laundering cases coming out of Intermex, and perhaps there are enough flags to warrant concern.

While recognizing this WILL occur in this industry, we see no evidence of any kind of widespread money laundering conspiracy that, in the most paranoid, could conclude Intermex is funneling money to Mexico through a drug cartel.  Indeed, we find both their volumes/market shares and costs/transaction they report quite plausible.  

Let's take this headline, for instance:

https://digismak.com/money-transfer-companies-such-as-intermex-transfast-and-sigue-were-used-by-the-jalisco-cartel-to-launder-58-million-dollars/

This was a recent bust that resulted in many millions of dollars run through several remittance firms over several years, including Ria and Intermex.  In this particular case, which we brought to the company's attention, they claim they were the ones that blew the whistle on the offenders and ultimately brought them to justice.  In other words, Intermex worked hand in hand with the authorities.

While it's certainly possible something larger and untoward is going on, we would point out there are numerous checks occurring at state, federal, and company levels that audit and investigate each individual sender on a yearly basis.  Intermex claims to have a large series of alerts and warnings that pop up when there are certain patterns the system picks up by a customer (which we were shown during our store checks).  These alerts follow the guidance of the regulatory bodies like the Department of Treasury, IRS, FinCEN, the CFPB, and all states where they hold a license.

We believe the company works with these agencies and follows the protocols they lay out.  

We would note that, at least since Bob Lisy joined the firm over 10 years ago, there have been no reported regulatory or compliance issues that we are aware of, and that at least outwardly Intermex claims to pride themselves on following anti-money laundering compliance closely.

As a sanity check, we compared the reported Hispanic population numbers per state, estimated IMXI's share in each, assumed roughly 5 transactions per year (we were told it was closer to 7 and we believe the reported numbers understate the true population, but also want to be conservative as there are many LatAm countries where IMXI has low or no market share, so we feel these are reasonable rough estimates):

Obviously this is not including many states that have much smaller populations, but in this exercise we get to an expected remittance number of 35.13 million, when actual LTM transactions were  35.9 million.  This is not meant to be precise, but more a rough sanity check on their reported volumes.

Summary: We believe the Bear Case narrative points are wrong/overstated and that as the company continues to operate and take share, they will ultimately be rewarded with a more favorable multiple.  We believe there are ongoing, multiple growth drivers, including ongoing regional penetration, growing presence within other LatAm countries, Business to Business processing, and potentially acquisitions to consolidate other smaller retail players.  Additionally, we believe the company is investing in digital and will be "ready" when that inflection point occurs, although we believe it will be another 5 years at least.  While there will always be a regulatory discount on all these companies in their multiple due to potential issues like Moneygram is still going through, we believe this current discount of >50% to the market is far too extreme.

Recent Numbers and Developments

1) Sales Growth

Although we note the very easy comp that will get substantially harder in coming quarters (perhaps a risk), the company blew out consensus numbers in Q2, accelerating growth for the 4th consecutive quarter and significantly raising guidance on all lines.

At the midpoint, they raised numbers as seen here:

The $418 to $445 raise was significantly above the Q2 beat, and implies 20% growth in the back half of the year, even as comps begin to get more difficult.

We would also note that management has beaten consensus by an average of 6% the last 6 quarters and not missed once since having a small miss 7 quarters ago.  We think they guide fairly conservatively and would be surprised to see a material miss.

2) FCF and Working Capital

FCF is a bit messy as there is a lot of working capital moving around.  Prepaid Wires in particular can really alter FCF.  For instance, before last quarter there was >$80 mm drag from prepaid wires alone, although we were told this was highly unusual and had to do specifically when the quarter ended.  The next quarter, this number reverted by +$74 mm.

To look at underlying FCF build, we look at FFO-Capex, which paints a much cleaner picture:

While this is a volatile working capital business, it's a very low capex business, as around 1.4% of sales are spent on Capex.  

We believe the company is moving towards generating $75-$80 in FCF.

3) Buyback

After the muted reaction to their blowout Q2 quarter, the company announced a $40 mm buyback.  We don't have a ton of commentary on this except to say it's the first external sign of frustration at the valuation of the company (speaking with Bob Lisy, there is plenty of internal frustration).

Comps

Public Comps

There are two obvious public comps in Western Union and Moneygram.  Western Union and Moneygram have been going "all in" on digital recently, at least by their public commentary, but have seen significant erosion in their retail business.  We believe this is part of the misconception about IMXI...if WU and MGI's agent based business is declining, the whole industry must be in secular decline.

A third comp is Ria who is owned by Euronet, however this is a tougher comp in our view since Euronet has several businesses and remittance is only one piece.

If we compare WU and MGI, here is a profile with some commentary after:

The first thing that jumps off the page is their 3 year revenue CAGR, which I believe is roughly organic for all three.  Taken in concert with their expected revenue growth, and then comparing multiples and leverage, and it doesn't even seem like these companies can be in the same industry.

We understand that MGI/WU Bulls will comment on MGI and WU’s “digital” business, and compare it to recently listed Wise and IPOed Remitly which trade at very high sales multiples.  However, we would exercise caution here.  First, MGI is at a competitive disadvantage for their still substantial retail business.  Second, they are still “on watch” from a regulatory standpoint.  Third, their definition of “digital” is fairly liberal as we understand it (IMXI claims their digital revenue would be higher if they counted digital in the same way MGI does).  Third, MGI is still substantially levered.  Fourth, management at MGI refuses to disclose the relative profitability of digital vs. retail.  And finally, we are terrified by the sheer amount of VC capital flooding into the digital space.  In our experience, this is where one wants to exercise caution about how profitable a transformation might be, and/or how challenging to execute on it.  

If you look at a time series relative valuation, you can see that IMXI has been derating since its SPAC, starting with a 40%+ premium, and ultimately dropping sharply relative to WU/MGI during COVID, but other than that 3-4 month period, IMXI is now as cheap vs. MGI/WU as it's ever been.  

We think this chart is reflective of just how poorly the market understands IMXI.  When the pandemic hit, IMXI got crushed far more than WU/MGI, presumably with the thinking that retail money remittance would get hit hardest, compared with digital...in fact, one could argue this was the ultimate stress test of how quickly LatAm would move to digital.  If you aren't going to convert to digital in a pandemic, when would you?  Instead what we saw is IMXI maintain growth while WU and MGI went deeply negative, and then bounce back hard.  In other words, a global pandemic had effectively no long term expediting of digital.

As a sanity check, we ran an industry neutral screen of US companies with consistent but not extraordinarry organic revenue growth for each of the last three years (>10%, <25%), EBITDA positive each of the last three years, and net cash.  Below you can see how IMXI stacks up against these "consistent, profitable, unlevered growers".  IMXI's growth slots in at the 25% percentile level of the screen, but you can see that in this case the median company on this screen gets 19x NTM EBITDA and 30x FCF.  IMXI was by far the cheapest of any stock on this screen, implying a steep mix of regulatory, small cap, and obsolescence risk.

* note this screen was run when IMXI's price was a bit higher

Target Prices

We are modeling in 18% revenue growth in 2021, 15% growth in 2022, and 12% growth in 2023, for a 16% CAGR.  We model modest EBITDA margin expansion (off a consistent 33% gross margin) to 21% for $122 mm in EBITDA, and target a 9x multiple on that EBITDA to move somewhat closer to comps.  This results in a target ~$30, or 65% upside over the next 12-18 months.

If the company is executing to this plan but is failing to get the multiple recognition we believe it deserves, we believe it could be an activist candidate to have the company go private or get bought out by a strategic. 

Risks

1) US Economy Reverts

Recently the size of the transactions have been growing from Intermex, which has resulted in greater revenue per transaction, mostly very high margin revenue:

While guidance was quite strong for IMXI for the back half of the year, and they claimed they were counting on some reversion occurring already baked in the guidance, there are decent odds that it does revert back as a combination of lower stimulus checks and deceleration of the US economy. 

In this case, we estimate there will be a $6-$8 mm EBITDA headwind if the average size were to revert....total transactions is still by far the most important metric.

We note that while the company still grew in Q2, 2020, it was easily their lowest growth quarter since going public.

2) Regulatory Changes

The biggest to us would be if all remittances were forced to show ID or a bank account, or both.  While on a relative basis this wouldn't really hurt IMXI, we do think at least temporarily it would dampen the outlook for remittances and possibly accelerate digital adoption in IMXI's target market.  Therefore, it behooves IMXI to continuing readying their digital product for significantly more volume as it's always possible the $1,000 or less rule could be eliminated.

3) Digital Transition Happens Faster Than Expected

What is worth watching is if countries start to put incentives in place for digital adoption, which seemed to spur adoption in India and some other Asian countries.

4) Major Acquisition

The company is telegraphing an acquisition, with the CEO being pretty adamant they are looking at a number of companies from various realms to buy.  Since all growth has been organic thus far, an acquisition not only muddies the story but adds the usual integration risk...we have not seen this team's capital allocation savvy.  

Reference Links

World Bank on Remittance-  https://www.worldbank.org/en/news/press-release/2021/05/12/defying-predictions-remittance-flows-remain-strong-during-covid-19-crisis

FT Article- https://www.ft.com/content/da4eddd6-ec7f-46b9-8339-553a0db3b935

Migration and Development-  https://www.knomad.org/sites/default/files/2021-05/Migration%20and%20Development%20Brief%2034_0.pdf 

Hispanic Population-  https://worldpopulationreview.com/state-rankings/hispanic-population-by-state

Catalyst

Ongoing earnings momentum forces price up

Smart acquisition