Executive Summary / Key Takeaways

• International Money Express (IMXI) is executing an omnichannel strategy, leveraging its highly profitable, cash-generating retail network to fund accelerated investment in its fast-growing digital channels.
• Recent performance, particularly in Q1 2025, reflects a unique market dynamic of increasing principal volume but declining transaction count, impacting fee revenue despite overall volume growth.
• IMXI's proprietary technology provides a competitive edge, enabling operational efficiencies in retail (faster processing) and supporting the expansion of its digital platform and wires-as-a-service offerings.
• The company is making significant investments in digital customer acquisition and retail optimization, aiming to balance its business mix and capture market share in both segments, while managing costs through restructuring.
• While macroeconomic and political uncertainties present headwinds, IMXI's strong balance sheet, robust cash flow generation, and strategic initiatives position it to pursue growth, capital allocation (including share repurchases), and potentially strategic alternatives to unlock shareholder value.

Setting the Scene: A Remittance Powerhouse Adapts

International Money Express, Inc. ($IMXI) stands as a significant player in the cross-border money remittance market, primarily connecting the United States, Canada, and parts of Europe to Latin America and the Caribbean. With a history spanning decades, including a notable transformation under current leadership since 2008, IMXI has built its foundation on a robust and highly profitable retail network. This network, comprising authorized agents in retail locations and Company-operated stores, has historically been the engine driving revenue and generating substantial free cash flow.

In an industry undergoing rapid evolution, marked by the increasing adoption of digital platforms, IMXI is strategically pivoting. The company is actively pursuing an omnichannel approach, recognizing that while digital is the future growth vector, the traditional retail channel remains vital, particularly for its core customer base. This strategy is not about abandoning retail but about leveraging its financial strength to fuel aggressive expansion in the digital realm, aiming for a more balanced business portfolio that reflects the broader market's mix.

Central to IMXI's operations and competitive positioning is its proprietary technology. Developed and refined over 20 years, this "state-of-the-art system" underpins both its retail and digital services. In the retail channel, recent operational upgrades have significantly improved transaction processing time, reducing it from 20 seconds to just 9 seconds, a tangible benefit enhancing the agent experience and operational efficiency. The system boasts impressive reliability, with 99.995% total uptime for retail operations. For the digital business, this technology provides the necessary infrastructure for its app and supports the growing wires-as-a-service platform, enabling seamless integration with partners and facilitating transfers using IMXI's licenses and payer network. This technological backbone, coupled with a focus on compliance and customer service, forms a critical competitive moat, enabling faster, more reliable, and safer money movement compared to less sophisticated players.

Navigating the Competitive Currents

The money remittance market is intensely competitive, featuring a mix of large global players and numerous smaller, niche providers. IMXI competes directly with giants like Western Union (WU), MoneyGram (MGI), and Euronet (TICKER:EEFT, through Ria Money Transfer), as well as digital-first companies like PayPal (PYPL) and other emerging platforms.

Compared to global leaders like Western Union and MoneyGram, IMXI operates on a smaller scale, particularly in terms of overall global network size and brand awareness outside its core corridors. While Western Union boasts a massive agent network and strong global brand recognition, IMXI's strength lies in its deep penetration and tailored services within its primary U.S. to LAC corridors, where it has historically gained significant share. IMXI's retail sales and marketing costs are notably efficient, remaining well below 10% of gross margin, a metric that underscores the profitability of its core business and provides a cost advantage in this segment compared to some competitors.

In the digital space, IMXI is rapidly catching up. While companies like PayPal and MoneyGram have established digital footprints and are investing heavily in innovation (e.g., MoneyGram's focus on blockchain), IMXI believes its proprietary app offers a best-in-class user experience, evidenced by high user engagement and retention. Crucially, IMXI has significantly improved the unit economics of its digital transactions, with the gross margin per digital transaction now stated to be superior to that of retail, approximately 40% higher as of Q2 2024, reaching $6.00 to $6.50 per transaction by Q3 2024. This improved profitability per digital transaction positions IMXI to compete more effectively, even if its customer acquisition costs require significant investment.

Recent market dynamics highlight shifts in the competitive landscape. The demise of competitors like Sigue and Small World, attributed by IMXI's management partly to technology issues, misinvestments, and lack of focus, suggests that operational efficiency and strategic clarity are paramount. Furthermore, some larger players are reportedly de-emphasizing retail to focus more on digital, which IMXI views as an opportunity to gain share in the still-significant retail segment (estimated at 70-75% of the market to key LAC destinations).

IMXI's strategic response involves not only accelerating its own digital growth but also optimizing its retail operations and pursuing targeted M&A. The acquisition of Amigo Paisano enhances its digital capabilities and talent, while the UK acquisition expands its European footprint. The integration of La Nacional and i-Transfer is expected to yield significant synergies and margin expansion by 2025. The company is also bolstering its retail sales force and refining its pricing strategy to drive incremental volume in underpenetrated areas, demonstrating a commitment to competing effectively in both channels.

While barriers to entry, such as regulatory licensing and the need for robust banking and payer relationships, protect established players like IMXI, the competitive environment necessitates continuous investment in technology and customer acquisition, particularly in the digital domain.

Performance and Strategic Execution

IMXI's financial performance in recent periods reflects the interplay of market dynamics, strategic investments, and operational efficiency. Total revenues were $144.3 million in Q1 2025, compared to $150.4 million in Q1 2024. This decrease was primarily driven by a 5.3% decline in wire transfer and money order fees, net, despite a 3.7% increase in principal amount sent. This unique trend of higher principal per transaction but fewer transactions negatively impacted fee revenue, although foreign exchange gain remained relatively stable at $20.2 million. Other income, including wires-as-a-service fees and abandoned property revenue, saw a healthy 29% increase to $4.0 million.

Operating expenses were well-managed, decreasing slightly to $130.2 million in Q1 2025 from $130.8 million in Q1 2024. Service charges from agents and banks decreased in line with transaction volume, while salaries and benefits saw only a modest 1.1% increase. Other selling, general, and administrative expenses increased by 10% to $11.0 million, primarily due to planned increases in digital marketing and IT expenses supporting expansion. Provision for credit losses increased to $2.1 million, reflecting higher receivable balances and a slight increase in write-offs. The company also incurred $0.3 million in restructuring costs and $1.2 million in transaction costs related to strategic alternatives evaluation in Q1 2025.

Operating income declined to $14.1 million in Q1 2025 from $19.6 million in Q1 2024, and net income fell to $7.8 million from $12.1 million. Adjusted EBITDA was $21.6 million in Q1 2025, down from $25.4 million in Q1 2024, with adjusted EBITDA margins at 15.0%. Management noted that if Q1 volumes had been sent with more normalized transaction amounts, revenue and operating income would have been significantly higher.

Despite the Q1 softness, the underlying business remains strong, particularly in cash flow generation. Net cash provided by operating activities was $41.3 million in Q1 2025, demonstrating the continued ability of the core business to generate cash.

The company maintains a strong balance sheet, with $151.8 million in cash and cash equivalents and $147.4 million outstanding on its $425 million revolving credit facility as of March 31, 2025. This facility provides ample liquidity and flexibility, including for strategic investments and share repurchases, subject to leverage covenants with which the company was in compliance.

IMXI has been actively returning capital to shareholders, repurchasing 367,873 shares for $5.0 million in Q1 2025 and 1.12 million shares for $23.4 million in Q1 2024. As of March 31, 2025, $59.5 million remained available under the repurchase program.

Strategic initiatives are underway to drive future growth. The company is making a significant investment in digital marketing and infrastructure in 2025 and beyond to accelerate digital customer acquisition and revenue growth. The wires-as-a-service pipeline is expanding, offering a lower-CAC growth avenue. Retail operations are being optimized through targeted agent acquisition in underpenetrated markets and efforts to increase share in existing locations. Restructuring efforts, including the shutdown of an offshore center, are expected to yield approximately $2 million in annual savings starting in the second half of 2025.

Outlook and Risks

Based on Q1 2025 results and observed market dynamics, IMXI revised its full-year 2025 guidance. The company discontinued quarterly guidance due to increased uncertainty and volatility. The updated full-year 2025 guidance is:

• Revenue: $634.9 million to $654.2 million
• Diluted EPS: $1.53 to $1.65
• Adjusted Diluted EPS: $1.86 to $2.02
• Adjusted EBITDA: $103.6 million to $106.8 million

This guidance reflects the expectation that the trend of higher principal volume but lower transaction count will continue, particularly impacting fee revenue. It also incorporates the planned increase in digital investment and the anticipated benefits from restructuring and retail initiatives, with performance expected to improve relative to Q1 throughout the year, partly due to easier year-over-year comparisons in the latter half of 2024.

However, the outlook is subject to several risks. Macroeconomic factors, including inflation, recession risks, and labor market conditions, can impact remittance volumes. Political and immigration policies in the U.S. and destination countries introduce uncertainty. Volatility in foreign exchange rates can affect revenue and profitability. The competitive landscape is intense, requiring continuous investment and execution. Credit risk from agents and financial institutions, regulatory compliance, cybersecurity threats, and the ability to successfully integrate acquisitions are also key considerations. The shift in consumer behavior observed in Q1 2025, if prolonged, could continue to pressure transaction-based revenues.

Conclusion

International Money Express is navigating a dynamic market by leaning into its core strengths and strategically investing for the future. While the unique trend of higher principal per transaction but lower transaction count presents near-term headwinds, the company's underlying retail business remains a highly profitable, cash-generating engine. This financial strength provides the crucial capital needed to accelerate growth in the digital channel, where unit economics have become increasingly attractive and the long-term growth opportunity is significant.

IMXI's proprietary technology is a key differentiator, supporting operational efficiency in both retail and digital and enabling the expansion of new services like wires-as-a-service. The company's strategic initiatives, including targeted digital investments, retail optimization, and value-enhancing acquisitions, are designed to capture market share and build a more balanced, sustainable business. Despite macroeconomic uncertainties and competitive pressures, IMXI's solid financial position and disciplined execution position it to pursue its growth objectives and continue delivering value, making it a compelling story for investors focused on the evolving remittance landscape.