International Money Express, Inc.

Good day and thank you for standing by. Welcome to the International Money Express Inc. First Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Alex Sadowski, Investor Relations Coordinator. Please go ahead.

Good morning, and welcome to the Intermex first quarter 2025 earnings call. I would like to remind everyone that today's call includes forward-looking statements, and actual results may differ materially from expectations. For additional information on International Money Express, which we refer to as Intermex or the company, please see our SEC filings, including the risk factors described therein. All forward-looking statements on this call are based on assumptions and beliefs as of today. You should not rely on our forward-looking statements as predictions of future events. Please refer to slide two of our presentation for a description of certain forward-looking statements. The company undertakes no obligation to update such information except as required by applicable law. On this conference call, we will discuss certain non-GAAP financial measures. Information required by Regulation G under the Securities and Exchange Act for such non-GAAP financial measures is included in our presentation slides, earnings press release, and our quarterly report on Form 10-Q, including reconciliation of certain non-GAAP financial measures to the appropriate GAAP measures. These can be obtained in the investor section of our website at intermexonline.com. Presenting on today's call is our Chairman, Chief Executive Officer, and President, Bob Lissy, and Chief Financial Officer, Anders Bendy. Let me now turn the call over to Bob.

Good morning, everyone. Thanks for joining us today on our first quarter earnings review. The past quarter, brought many changes to the market that were difficult to anticipate. The economic, political, and immigration backdrop presented many challenges to our business model and to the US to Latin America corridor in general. Regardless of this challenging environment, our results reflect the strength of our brand, the excellence of our execution, and our corporate discipline that we continue to bring to our strong and healthy underlying business. The good news is, the overall market for remittances to Latin America remains resilient. The downside is that for the first time in our public history, we have delivered a year-over-year volume growth while experiencing a decline in the number of transactions versus the same period last year. The principal amount per transaction increased, but money transfer fees were lower due to larger send amounts and fewer transactions. This dynamic also had an impact on our foreign exchange profit. While we believe this consumer behavior shift is not in the long term, it is an important dynamic to monitor and one that has impacted our first quarter results. It appears consumers are sending larger principal amounts less often to discern factors about which we can only speculate at this time. Total revenue came in at $144.3 million, net income at $7.8 million, Adjusted EBITDA at $21.6 million. Adjusted diluted EPS was $0.35 per share. While these key metrics were all down year over year, total principal amount sent was up 4%. We believe this is a strong indicator of the underlying strength of our overall business and the resilience of the retail market. Transactions originating at retail remain the foundation of our business in our highly profitable and cash-generating engine. Total volume sent in four out of our five top markets increased significantly with our Intermex brand. Less positive was the fact that four out of the five top markets saw a decrease in transaction sent. Despite that softness, we protected our margins and continued to make smart, targeted investments in our retail business. We focused on the most profitable transactions in state discipline with agent management and continue to optimize at a zip code level, prioritizing our most productive areas. We're also seeing benefits from our operational upgrades. The transaction processing time on our retail platform improved to directly enhance the agent experience. We reduced time from 20 seconds to nine seconds on a typical transaction. We continue to build on the best-in-class system reliability as well, resulting in a total uptime of 99.995%, further supporting our position as the premium retail partner for our highly efficient agent base. We continue to excel in all areas relating to our retail offering, including our best-in-class customer service and banking options for our agent retailers. Now, turning to digital. While our retail platform is the cash engine of our business today, our digital business is the glue of our omnichannel strategy and the most important part of our growth and future. We're growing that business most successfully. In Q1, our digital transactions grew just under 70% year-over-year. Aligned with the digital business strategy, we invested more in the digital marketing than ever before in Q1. We will continue to do so intelligently through daily optimization, and ensuring that every dollar is spent with maximum efficiency. Our customer acquisition costs and LTV projections remain intact as customer acquisition costs are better than projected and our customer retention remains strong. We plan to ramp up our total spend more in the coming quarters as we discussed at our recent Investor Day event. At the same time, engagement across our app, which we believe is the best in class, continues to improve. Our Amigo Paisano brand is now fully integrated and helping us further sharpen our digital acquisition strategies, and our wires-as-a-service pipeline of new partners continues to expand as expected. The infrastructure for robust growth is in place. This includes technology, licenses, and payer relationships, and now it is all about scaling efficiently. We're very encouraged by the performance of our digital business and the long-term opportunity it represents. Our underlying cost performance exhibits the discipline you would expect from Intermix. With salaries and benefits up only 1%, our G&A is up. However, the biggest single driver relative to increasing G&A was our planned digital marketing spend. In February, we completed the shutdown of one of our offshore operation centers supporting La Nationale. We have begun to realize those efficiencies, and we are on track to achieve the approximate $2 million in annual savings we anticipate from those moves. Integration of La Nationale agents onto the Intermex tech platform will continue into the second half of 2025. This places us in a position to further streamline our back office and to ultimately surrender the La Nationale state licenses, further reducing costs while maintaining the look, feel, and integrity of the La Nationale brand. On the balance sheet side, we remain very strong. We ended the quarter with $151.8 million in cash and generated over $10 million in free cash during the quarter. Our net leverage remains low, giving us significant flexibility to invest in growth, continuing to pursue opportunistic share repurchases, and maintain our strong financial foundation. As mentioned, cash generation continues to be the hallmark of this business, and that, again, remains strong, even with the increased investments in digital, retail sales infrastructure, and a challenging macro backdrop. At Intermex, we are focused on what matters most, delivering the best possible service for our customers and doing it with operational excellence. We are a trusted brand for over 6 million customers every year, whether it's through our retail locations or by way of our growing digital channels. Our customers know that they can rely on us to move their hard-earned money quickly securely, and reliably. We have the right foundation in place, including a profitable retail engine, a fast-growing digital platform enhanced by our unique omni-channel strategy, and what we believe the strongest, most well-respected brand in Latin American corridor. We are confident in our ability to continue to deliver value for our shareholders. With that, let me turn the call over to Andrews to walk you through the financials in more detail.

Thanks, Bob. Good morning, everyone. As Bob mentioned, we delivered a disciplined and focused quarter, navigating a unique retail environment of greater send volume but negative transaction growth while maintaining profitability and strong cash flow. Total revenue for the quarter was $144.3 million compared to $150.4 million in the same period last year. Total volume sent was up 3.7% versus 1Q last year, while total transactions sent were down just over 5%, a unique and unprecedented market. As Bob mentioned, for the moment, U.S. to Latin American consumers are sending larger transactions less frequently. For us, we believe this indicates the underlying market remains healthy and resilient. However, at least for a period of time, we will likely continue to observe some shift in send behavior that puts pressure on transaction growth. Fewer transactions result in less fee income. However, the cost to fund and cost to bank consumer transactions go up when volume grows. and that is what transpired this quarter. And while the company remains strong, profitable, and ready to navigate this dynamic, the impacts on the P&L for the moment are notable. In the other part of our book, growth in digital helped offset part of the pressure on transactions in retail, with digital transactions up just under 70% this quarter. We invested more in digital marketing this quarter than any past quarter for Intermax. We'll continue to scale this investment in the quarters ahead. Wire transfer and money order fees net accounted for 120.2 million and were down year-over-year in line with transactions. Foreign exchange income contributed 20.2 million and was down slightly year-over-year, however, in percentage terms, less so than fees. Larger individual send amounts helped drive FX income for the company. It's worth noting, however, that we observed sharpest increase in average send amounts in countries other than Mexico where FX is a much heavier component to transaction unit economics. Service charges from agents and banks were 93.8 million, down from 97.9 million last year. While agency and payer commissions were down in line with transactions, bank fees were up, driven by higher volume sent versus 1Q last year. Salaries and benefits were up only 1% from a year ago, as our cost and efficiency disciplines continue to serve us well. To that end, we also incurred 0.3 million restructuring charges in Q1 in line with our previously announced restructuring of foreign operations. Our selling general administrative expenses were 11 million up year over year. However, as Bob mentioned, the single biggest driver there is the increase in digital marketing spend as we scale that business in line with our long-term plans for Omnichannel. Provision for credit losses was 2.1 million and depreciation amortization came in at 3.6 million. We also recorded 1.2 million in transaction related expenses associated with the previously announced strategic alternatives review. Operating income for the quarter was 14.1 million down from 19.6 million last year. Adjusted EBITDA total 21.6 million with adjusted EBITDA margins at 15%. We've mentioned before that each year Q1 margins are softest due to seasonality. However, the dynamic of transactions down and volumes up that we previously discussed weighed additionally on Q1 margins. For Q1 volumes sent via more normalized send amounts, we estimate revenue would have been stronger by $7 to $10 million and operating income stronger by $2 to $3 million. Net income was $7.8 million and diluted earnings per share was $0.25. Adjusted diluted EPS was $0.35. We ended the quarter with $151.8 million in cash and cash equivalents, up for $130.5 million at year end. Total debt was $147.4 million, down from $156.6 million at year end. We repurchased approximately 368,000 shares during the quarter for $5 million. Our balance sheet remains strong, and our liquidity position gives us continued flexibility to support our strategic growth initiatives. We remain focused on managing costs, protecting margins, and executing with discipline across both retail and digital. Based on our first quarter 2025 financial results and the underlying market dynamic we have observed to date, the company is revising its previously issued full-year guidance. Current levels of uncertainty and volatility affecting market conditions and consumer behavior have increased the difficulty of reliably forecasting short-term results. Moreover, as previously announced, the company is in the process of executing on a long-term strategy of investing in its digital business offerings to increase their contribution to the company's revenue and to increase its profitability. Accordingly, the company is discontinuing for the moment, issuing quarterly guidance. Full year 2025 guidance is as follows. Revenue of $634.9 to $654.2 million. Diluted EPS of $1.53 to $1.65. adjusted diluted EPS of $1.86 to $2.02, and adjusted EBITDA of $103.6 million to $106.8 million. With that, I'll turn it back to Bob for closing remarks.

Thanks, Anders. To wrap it up, we delivered another quarter of discipline execution. We protected profitability, we invested strategically in growth, and we continued to generate strong cash flow. Retail remains critical and profitable part of our business. Digital is scaling with strong economics, and we're confident in the foundation we have built. We will stay focused, stay disciplined, and keep delivering for our customers and our shareholders. Thanks again for joining us. We're now ready to take your questions.

Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. And our first question comes from Chris Zhang of UBS. Your line is open.

Hi, good morning. Thanks for taking our questions. So, the first question is about, I guess, some of the more near-term chances, just given the first quarter weakness and also the unique US to Latin American market dynamic you're seeing. Maybe can you just help us first part through like what's the behavior on the retail side versus the digital side and then how that has been trending probably like in the more recent months of March and April and what you're seeing to date. That'd be helpful. Thank you.

Okay, great. Thank you for the question. So the behavior proportionally is not changing much, right? The digital side of the house for the industry and us as a company has been growing much faster than retail. So digital this quarter grew at 70% year over year. And it's actually so far in April, through April, has increased to about 80% growth. So we're growing the digital very quickly. The retail continues to be more of a struggle. We think the retail market is still really strong, and as you may have heard from our remarks, the total amount of principal amount that we sent to Latin America to our overall business was up 4% year over year, and our business is dominated still by the retail side. The challenge we have today and in the short run, first of all, I'm completely excited about what's going on with our business. I think to grow the digital business 70% in a difficult market where the current administration talks about zero crossings in the border is a very great achievement for us and we think we've only just begun there we think that we're just starting to click in with our advertising we think that our wires as a service is going to get bigger and better so we have a lot of strategic partnership there that will we think will build it the difference between us and some others and maybe sometimes where we separate with some of the marketplace analysts and others is is we think that retail, based on the fact that it grew at 4%, or the overall market for us grew at 4%, dominated by retail, is still a very healthy business with very large profitability, great margins on a unit economics perspective, and very low entry point to acquire customers. And so we'll continue to drive that business. And we would expect in difficult times where the overall market is flat, as it is today, and we're dominated by Mexico, 65% of our gross margin thereabouts comes from Mexico, 80% comes from Mexico, Guatemala. So when the border's tight, it's not like we have a lot of folks that are sending in a big part of our business that are south america and other places where may not be border crossings right so um we think that as we go forward that the retail market will be strong and will recover but it's challenging when the overall market is flat and you see digital as an industry maybe growing 30 it tells you that The retail market is probably growing at a minus 8, a minus 10. So we're beating that, and we're beating the digital side. And we've talked about this many times. We're just heavily weighted on retail, which is not performing well as an industry, and underweight on the digital side. But we're doing a lot to change that, as you can see, with 70% growth in digital and that going to 80% growth in second quarter. And we really have just begun to – advertise and drive customers to our digital site so that that's how i would delineate the two today we expect retail to be softer over time we think that we will get it back into positive year-over-year growth numbers and we expect digital to continue to grow at high levels 60, 70, 80% year-over-year and continue to grow that. And once the balance starts to get better and the market gets better, you'll see us driving much more positive numbers between the two together.

All right, thanks a lot, Bob, for the color. Just have a follow-up on the revised full-year guidance this year. I understand we're no longer providing the quarterly guide, but for the revenue, for the full-year revenue and also the EBITDA margin, you're both seeing some improvement from the Q1 level, I think, in terms of revenue growth and EBITDA margin. And can you maybe give us just a rational sense of the trajectory of the revenue growth and also the margin improvement throughout the year? Sure.

There's two things. Maybe the two lead things I would talk about is we're still ramping up from a revenue perspective all the work we're doing on our digital business. So whereas it won't necessarily improve the margins a lot because we'll be investing in marketing to do that, it's going to drive revenues. We also think that we're going to be able to add a lot of our pipeline for wires as a service is very, very large right now. And we believe that we're going to be adding lots of those folks, which really don't do much to, Degrader cost us money to promote we're basically providing the technology and the licensing and you know various different ways with different different companies were providing for, and so I think those are going to drive that revenue from a digital side. On the retail side we have you know we're doing I think better as we go forward and executing on plans related to retail. More people at the retail level that will be driving more agent retailers in specific areas. Not in any way a haphazard, just throwing retailers out there, but very targeted in the right zip codes, in the right places where we know there's wires. And that's going to have an impact on that second half as those start to accumulate and the waterfall from that happens. The last piece is that we're lapping easier numbers in the second half of the year because the downfall in the Mexico business particularly started to happen for us in the second half of last year in a stronger way than it was in the first half. And so we're lapping a little bit easier numbers. We'll have better plans for retail, and the digital business will be catching on and getting more traction as the investment we put in it and some of the folks in the wires as a service start to come through.

And if you could also comment on margin, that would be awesome. Thank you. Yeah, and Chris, the only thing I would add to Bob's comment is, and I think you know you've followed us for a while, but we do have some seasonality of the business with 1Q just being a softer quarter overall.

Right. I appreciate the comment and just get back to 1Q. Thank you.

Sure. Thank you. And our next question comes from Gus Gala of Monash, Crespi, Hart & Company. Your line is open.

Hey, good morning, guys. Thank you for taking our questions. To start off, I wanted to focus on retention. I was hoping you could kind of walk us through the volume. Maybe it's on a volume basis. Maybe it's on net or a GP basis. Could you talk about what that's looked like historically in detail, so far as that visibility? And then in digital, the core Intermex offering, what you've seen in retention versus what came on with Flamingo Paisano. And just help us think of the levers that you're pushing on to help with the, you know, drive further retention in digital in particular. And I'll have a follow-up.

Okay, so let me, I'll address the retail a bit, and then I'll ask Marcelo Teodoro, who's our Chief Digital Officer, to talk a little bit about the digital side and retention. Even though we do have a personal relationship or a direct relationship with consumers at retail, we think about that more related to the agent network. The acquisition of customers happen through the retailers. So let me just take you through first not to get off track, but that, well, how do we look at how we acquire a new customer or keep a customer? Our acquisition costs in retail are CapEx and OpEx are about $2,500 to start up a retailer. And that retailer, on the average, at the end of year one, on the average, will do about 200 wires, which means that we get a payback at retail from a new retailer in about seven months or so. Those retailers... Will be today we look at three components in retail we look at same store we look at new store and we look at churn today the retail today the retail. churn is i'm sorry the retail same store performance is operating about the same as the retail market. So we think the retail market is about a minus eight to a minus 10. And our retail existing agents, we define them as an agent that's here 366 days or more. They have a year over year number. They're behaving at about a minus nine, minus 10, minus eight, depending, minus seven, somewhere in those high single digits. The way for us to be able to countervail that which by the way is performing the same as the market which makes sense your existing retailers perform about the same is to shorten that churn rate. Those are agents that did wires in last year and do none, and then grow our new agent base. And that's why, as we talk about driving the wires at retail, we talk about additional people in specific markets like California, Texas, Illinois, where we have a lower market penetration rate, where we know that we have zip codes that are unfilled, but where we know, for instance, you know, markets that we do really well, the metric that we would use is we have about 1,000 or 1,200 foreign-borns of a targeted market per agent in markets in the Southeast where we're very dominant, sometimes a 40% market share in a market. In California and Texas, we might have five or six, you know, foreign-borns on the average in big pieces of geography per each agent retailer. So what it tells us in some of those areas, we need three or four times more retailers, and that will be a big part of growing the overall retail business. We would expect that the average retailer will perform like the average market in a year over year. We'll be able to do a little better in some with targeting sort of finding out what the issues are, if there's some shrinkage there related to competitive incursion. But on the average, they're probably going to perform. The issue will be acquiring new real estate in places where we aren't, where we're underdeveloped, and that's really the initiative at retail today. And I know it's not exactly what you asked, but we look at our consumers through the retailer on the retail side. We can tell you how often they use us and all of that, and we do contact them at times with different marketing promotions, but it's mainly driven through the connectivity of the retailer. Marcelo, you want to talk a little bit about digital?

On the digital side, the retention is slightly better than prior quarter, despite the fact that we invested much more in marketing. Bob and Anisha remarks.

Thank you.

Sorry.

You said you had a follow-up? I'm sorry.

Yes, I do. Sorry. I got myself stuck on mute. The other one I wanted to ask, could you maybe give us what the cadence was monthly in the quarter? If possible, you could do it over the channel. That'd be awesome. I know you're not going to give us April, but just kind of, is there any sense of have we maybe hit a trough in the retail foot traffic? Anything that shows that we've hit a trough or that we're nearing stabilization, anything around that would be super helpful. And thanks for all the color on the prior answer on retention. That's all very helpful. Thanks.

Yeah, I think that it's a little bit of a funny quarter in the sense that February, you know, was a 28-day versus 29. So, you know, there is a little bit of a downturn, if you will. It's, you know, 1% naturally baked into this quarter, right? And then February was a bit of a downturn from January by what you might expect. The reason we don't usually talk about month-to-month is because they're not perfect comparisons. We look in four-week segments because what happens is in January you have three what we call stump days, the 29th, the 30th, and the 31st. If last year those days were Friday, Saturday, and Sunday, and this year those days are Saturday, Sunday, Monday, it's going to be a different number. And even worse if last year they were ended on Monday and this year it ends on Tuesday, which Monday still is a strong day and Tuesday is one of the weakest days of the week. So we really don't look at the business on a monthly basis. We look at it when we look at how we grew transactions in principle. We look at it in four-week segments because that's a perfect comparison and And, you know, if we look at it by the month, it kind of, you know, February is the perfect example. Last year it's 29 versus 28. But even in January, the stump days would be different, which will throw that number out. So you can get a sense about, oh, we did better. Oh, wait, we did worse. But really when you look at the four weeks, it's relatively stable. We think that, you know, a lot of whether the trough is there or not, I think there's two things that will react to how we perform at retail going forward. First is the macro environment. And I think once that settles into a new normal, I don't even think there has to be an easing of the current administration's approach to immigration. I mean, if you look, there's been prior administrations, if you play their speeches, President Obama said similar things to Trump. president Trump and said, you know, if you're here illegally, you're, you know, you will be deported. So it's, those things will be gotten used to, if you will hate to say it that way, but a new normal will come in. There are a huge amount of immigrants here working and there's no way easy way to deport them all. Nor is there a way to replace the work they do, particularly in agriculture. So, um, I think that. There probably will be some easing over time, but if there isn't a new normal, we'll kind of set in. I think we have consumers today and talking to our retailers that don't necessarily want to go to retail, but they have to because many, many consumers either don't trust or are not equipped to do digital. It's not because of the technology. It's because of the banking. If you're undocumented, you may not have the banking relationship to to be able to do a digital transaction and we think that group could be 60 70 percent of the you know when you hear the numbers but administration makes sense could be 60 70 percent of the folks that are here i think that's the first piece of it the second piece is is we're we're shifting our approach a bit at retail and whereas we are a value-added high quality provider, we also recognize that at the increment, we will be different and more aggressive for incremental wires. So we'd much rather do 6 million wires a month versus 5 million if that last million wires actually brought down our average margin. We're not going to touch the 5 million that we have in the basket, but we can be aggressive in states like California and Texas and and make a lot more money, deliver a lot more EBITDA, and create even better EBITDA margins we have by being aggressive in a rifle-shot approach. And that's the kind of stuff that I'm talking about that's underway as we speak that the waterfall has not yet been created that will impact that second half. And it will be – I don't want you to think that these high margins we have in places like Tennessee or – or other parts of the east i just gave signals to all the little crap guys out there because they're not on the but to go after our states. But in the southeast, those margins aren't going to be touched because we don't need to because we're doing great. What we need to do is on the margin where we have opportunities, and we're going to be much more nimble at that. And we have a data scientist now that does nothing but work on the pricing. He works with our chief operating officer from the retail side, Andrew Cabay, and working through all of that on a daily basis, and we think we're making huge headway with that.

Great. I appreciate all the great color. I'll jump them back into the queue.

Thank you. And our next question comes from Mike Grondahl of Northland. Your line is open.

Hey, Bob and Andrew. Thanks. Hey, first question. Have you thought at all about pulling back on your incremental investment in digital or

don't know pushing it out a quarter to or is it kind of full systems go there it's full systems go it's we know it's the right thing for the business we think a balanced business portfolio that approaches looking like the market in terms of proportionality it's a moving target so it you know when we get there if we get there but we're going to continue to move that digital business to And we think we're moving it and we'll move it very profitably with the current customer acquisition and the lifetime value of the customer that it will be a profitable business. And I think this is the time to do that. I think it's the right time and it's the right time for that investment for us. And, again, you know, we're not in a position nor is it the style of our company to to go and overinvest and not manage that. We've been very good operators, very good custodians of every nickel in the company. And we'll continue to do that and monitor the response of that. But it is the right time. And I think our wires as a service for us is a positive sleeping giant, right? I think that there's just a lot of business out there that we can get with people that we can process for that may not be millions of wires per, but could be 10,000 here and 20,000 there. These things add up The margins on them are not quite as good as our own business, but what's really great about them is there's the investment. It's just simply things we've already done, our technology, our licenses, our banking relationships, not all needed in every case. It's a cafeteria style, so the wires as a service client may not need all of those, but those are all available for them, and those are going to be a great boost, continue to be a great boost for our digital business overall while we invest specifically into growing our own brand, Intermex, and our other brand now, Amigo Paisano. The thing that I think that we've never yet encountered, and it's because of the strength of retail, when we see that principal amount be almost, you know, 4% growth in the company overall, but our retail principal amount is very flat. So it means this melting ice cube that people speak about is not there. It's not true. We see the retail as highly profitable. But if we started to see a sharper drop there, we can be much more aggressive in providing the digital opportunity for consumers that are leaving retail. And we do some of that today, but we don't believe we're in a catastrophic or anywhere near that situation where we want to risk the very high profitability of retail and the agent relationships we have. to be able to aggressively convert those customers. So we feel we've got a ton of options at our disposal. We're still one of the largest, we are the largest provider in the world to Guatemala, and we are still amongst those to Mexico, the two most profitable, largest markets to Latin America. And we will continue to do that, but continue to do it very carefully so that we're growing that digital side without you know, degrading our overall profitability and value of earnings per share for our shareholders.

Got it. Bob, you've mentioned kind of a strong pipeline for wires as a service. Is much of that embedded in kind of baseline 2025 guidance? Does that represent upside? Or how should we think about that as it comes online?

Yeah, I think we've been really conservative about how we've looked at that because we've, you know, wanted to make sure that we had an engine related to, you know, there's a lot of things with wires as a service that have to be at that front end, our legal side of the business, our accounting side, and our technology. And we've put aside now a team of people that work directly within the departments but are also siloed with Marcelo that are making sure that we're able to push these things through more quickly and get all of the necessary components of the WIRES as a service done faster. And so all of that is an upside because we're continuing to evolve it, and so we want to make sure that, you know, these things are all different. The contractual piece can be put through really quickly, and the accounting piece, because sometimes we're going to have the revenue by regulation. Sometimes they're going to have the revenue. We have to decide on all of those different factors, and then ultimately the technology. Once we have a basic couple of components that you can pick, as a wires as a service, and we're getting to that now, the technology piece will be really easy. It's kind of a plug and play. And we think that there's, we'll be soon in a place where we'll put more people on the street to actually be selling our wires as a service. And we think there's a lot of, you know, right in the marketplace and also adjacent customers for that. And, and we haven't counted that upside in our numbers today.

Got it. And then one last one. The larger principal amounts happening a little bit less often, I'm assuming that was the primary reason for the slightly softer quarter and revised guidance. Are you able to quantify that in one cue? Like that was, hey, a couple million, four or five million. Is that thinking generally correct?

Mike, we commented on it in the script, but I think the answer is yes. I think if the same amount of principal was sent in more normalized amounts, in the quarter and probably 7 to 10 million more in revenue when we went and did the calculation. So that was the real, you know, difficulty for us to navigate in the quarter. It's just that the volume was there. It was just coming in. Right. The mix was different. Exactly. Okay.

Yeah, I mean, I've heard just the unit economics for everyone on the phone that when someone sends $1,800, right, we still get a $10 fee. We make a lot more FX because we make the FX on the $800. But if they send two 400s, we get two $10 fees plus the same FX. So the FX and the margin that we're getting per wire kind of looks good because the principal amount's up and there's more FX. But it reduced, you know, not necessarily, you know, two to one, but maybe five to four or maybe six to five or whatever. And we're not sure as we set script. We don't know what exactly caused this. It could be people want to be out in public less often. It could be that people want to send any extra money they have out. But we do think that if we had sent – but I think it's two things. One, it says where we would have been without that shift. But two, the vibrancy still of the retail market for those people that think this is falling off a cliff, there's no way we can have 91% of our business in retail and grow our principal at 4% in a market that was – you know, crashing. It's just not, especially a market that where the border is sealed, right? That still shows the strength of the overall retail market and particularly our retail business. And again, I want to be careful. I know you didn't ask this, Mike, for those others listening out there, this does not mean that we're, you know, I know people have a real problem with understanding how we can do two profitable things. They think you got to lose a shitload of money. Like some people to just be all digital, right? We just happen to think it'd be really great to return a lot of money to our shareholders on a quarterly basis while we build a great digital business and not go and hawk on our shareholders' backs to do that. And I know there's a lot of analysts out there that think the retail business is dead. Well, they're wrong. It's not. That's why we're in it. I've been at this a long time, and we'll continue to build digital, but we'll build it from these proceeds and profits that we have from the strong retail market, which we excel at.

Sounds good. Hey, good luck this summer, guys. Thank you.

Thank you. And our next question comes from Alex Markgraf of KBCM. Your line is open.

Hey, everyone. Thanks for taking my question. Sort of along the lines of the principal amount and transaction dynamic, Andres, I know you mentioned an expectation that continues into the near future. I guess just maybe level set for us within the guide, what's assumed there? Any sort of worsening assumed in that guide around that dynamic?

Yeah, I think we... expect the trend to continue in Q3 and Q4 where, you know, that year-over-year transaction is down and volume up. Let's speak more broadly. But I think we've modeled in that getting a bit better towards year-end because we do, you know, believe in time there's going to be a reset to the new normal. But I think if you look year-over-year in the guide, we still do have that dynamic of transactions down and volume up year-over-year. So that's what we're anticipating.

Okay. And then if I could just ask one on OPEX and, you know, I'd appreciate any comments just on the agility in the organization, just from your current position, obviously have exhibited quite a bit so far. I'm just sort of curious what sort of agility is left on the table as you think about the OPEX base and some investment priorities.

Yeah. No, in terms of the agility on OPEX, I think, you know, one of the things about the The company is, you know, we're very much built around efficiency, so there's not a lot of fat that sits to cut. We zero base everything every year, so it's not like we have a big slate of, you know, 200 folks' worth of costs we can take out. We're continuing leveling up and leveling down the costs as needed. That's why, from a salaries perspective, you're talking, you know, maybe 1% year over year. You will continue to see G&A grow, and most of that G&A growth is really going to be at the end you to be as stingy as we need elsewhere. So I would expect you're going to see salaries and benefits staying relatively stable, maybe down some as we get some efficiencies. But from a G&A standpoint, that is going to go up because of the marketing and digital.

Okay, that's super helpful. If I could just squeeze in one more on the digital revenue number for this quarter, I think was a little bit lower than the fourth quarter. Is that just seasonality or is there anything else to understand about that?

No, it's mostly related to the volume. The first quarter tends to be a little bit lower than the fourth quarter. But when we look at Q2, we see the trend growing again more than we did in Q1.

Yeah, yeah. Just in the industry, October and December are amongst the biggest months of the year in fourth quarter, obviously. And in first quarter, the weakest month of the year is January, and tied for the second with November is February. So you're sequencing one of the strongest quarters, if not the strongest quarter of the year, with the weakest quarter of the year. So that's why we kind of always in our industry look at a year-over-year number and the year-over-year growth. And so, you know, that's why we focus on the 70% year-over-year growth, not the sequential.

Okay, I appreciate all the answers. Thanks, guys.

Thank you. And our next question comes from Andrew Hart of BTIG. Your line is open.

Hi, team. Thanks. I appreciate the question. Bob, I appreciate the commentary, right? I think you said you can't speculate right now why there's fewer transactions and higher principal per transaction going on. But I think something you did say is longer term, you do not think that it's a long-term shift in the consumer behavior. So I guess, can you just kind of share a little bit of why you have confidence that it will shift back to what it's historically been like? And have you seen any of that shift so far here in the second quarter?

Yeah, I think first I want to be clear there's a lot of land between think and confidence, right? So we said we think it will go back. We're not confident it will go back. We've never suggested that. We don't have that in our plans, in our projection. We're not assuming that. So I think the reason that we would think that is that historically we haven't had sharp increases in like this, unless there is an FX reason for it. Like you might have an election in Mexico, and the peso weakens to 24, and you'll see huge principal amounts go up, because in people's minds, the peso is on sale, and the money is worth more money on the other side of the border at 24 pesos per dollar than it is on the northern side of the border. But we haven't seen these kinds of phenomena, it is a little bit different times, either from a perception perspective or a reality perspective with the border. And I think, you know, however, we don't know, we suspect they're talking to our retailers. It's not an exact science. Our retailers are small business people. But they believe that foot traffic is down, there's less wires, and they feel like the reason is, is that consumers are concerned with being congregating places where many of them might be and having a visit from ice right immigration that might come there and check IDs and deport people right so whether that's we don't know it's unscientific that's the best data we have right now we're not seeing any shift yet in that but um but you know again it's sort of a in a perspective that we have in trying to identify what's happening

That's really helpful, Keller. Thank you. And then on the digital side of the business, I guess two questions here. The first part, with the 70% growth, I think obviously that was aided a bit by Amigo Pisano. So can you just share kind of what digital was like?

No, let me be really clear for everybody listening. It was not aided in any way. Amigo Pisano was in our number before, and it's in our number now. so it was not there's no there's nothing in here that's uh non-organic this is organic growth between our wires of service amigo paisano and our own business and it is a year-over-year growth a real growth of 70 percent in first quarter and that is increased to 80 percent in april okay that's great clarification the second part is the commentary on customer acquisition and digital is better than expected um so you know i guess

Is that giving you confidence or want to actually lean into it even more as opposed to pull back on the other side of the coin?

Here's a third option, just follow our plan, right, is what we're trying to do. So I'll let Marcelo comment more on that, but we're certainly not planning on pulling back. But, you know, we can evaluate, you know, if we're getting a really great return from then, you know, that's certainly something we can take a look at, whether we would invest more. Marcelo, do you want to?

No, perfect, Bob. We are very confident with the results that are achieved in Q1. We keep investing very meaningfully but thoughtfully about... exactly what was in the plan we also are seeing growth in value-added services that we are offering through our digital solutions so now we are offering top-up we are often due payments so while we are still reporting the gross margin per transaction related to remittance there is additional components that is more revenue coming from the same consumer with all the products our vision for the industry that uh we didn't mention yet clearly during this call is to be a financial services provider. So every dollar that we invest in customer acquisition has the potential to become a higher return per consumer than we had in the past. So to confirm your question, yes, we are confident of what we did, and we are going to keep investing as planned. Thank you. I appreciate the question.

Thank you. We have a follow-up from Gus Gala of Monash Crespi Hart and Company. Your line is open.

Hey, Bob. Just wanted to see if I could get you to riff a little bit on what you're seeing in terms of pricing rationality across retail and digital in the industry. Any interesting observations? How are people behaving? I think in the past we've seen people try to take down price when they're struggling. Just talk about rationality in the industry. That would be helpful. Thanks.

Yeah, I think that there's, I won't mention names, but there's one key independent provider that is private equity owned that we think has pulled back a bit because of, you know, just wanting to make money, hopefully, you know, private equity firm sponsoring them. We see that in more cases where we think that pricing, we've taken, you know, again, I've talked about that reporting to Andrew, We have a data scientist, and when we're looking at it, today we're very competitive price-wise at retail. You know, there's places we're better than the competition, places where we're worse, but we do believe we have a superior product, and we think pricing, we're in a really good spot. When we talk about overall and the agents we're in. Now, what I've been talking about, though, is to go out and inquire, another 25% more wires, right? Those wires are in markets that are more competitive, and we may require in those places for us to be more aggressive in price. But from our perspective, if we picked up a million incremental wires and our average margins today are, you know, between $4 and $5, I won't be any more specific than that, and that million wires came in at 375, we're delighted at that. That's going to drive the bottom line dramatically. It's about, you know, that's almost, it's more than $40 million in gross margin annually, which we'd probably bring down 15 to 20 million of that to the very bottom line. So we will use, from our perspective, price as an attacking mechanism to Where we don't have wires, we're getting a margin of 375 on 1,000 wires is a wonderful thing because we have zero wires. But what we don't see is the need for us to degrade the core pricing that we have, which, you know, in March from our all-in business was 4.7 million wires. And, again, that's a mixture of La Nationale and a transfer and all everything together. But we don't see a need to be aggressive in price in that area because we think if anything – pricing has probably been a slight bit of a pullback there's still a couple of guys out there that are really aggressive in price but you have to be really careful because what you hear not that you hear it but what we might hear from our because the sales people are always going to tell you the other guys much better effects but when we have really do the survey and we have independent people even in our company do that with a data scientist we find that pricing is not nearly the issue that we might hear if we're dealing with directly data that comes from our agent retailers, for instance, that are always going to want us to add a few centavos, makes their job easier, right? So that's where I would describe it today.

Thank you for all the helpful progress. Good luck this summer. Thank you. Appreciate it.

Thank you. I'm showing no further questions at this time. I'd like to turn it back to Bob Lissy for any closing remarks.

Thank you all for your time and attention, and I know we'll be speaking to some of you here in the upcoming hours. We look forward to that. Have a great day. Thanks.

This concludes today's conference call. Thank you for participating, and you may now disconnect.