International Money Express, Inc. (IMXI) FY 2022 MD&A

ITEM 7.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The objectives of our Management’s Discussion and Analysis of Financial Condition and Results of Operations are to provide users of our consolidated financial statements with a narrative explanation from the perspective of management of our financial condition, results of operations, cash flows, liquidity and certain other factors that may affect future results. This Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our Consolidated Financial Statements and related Notes included elsewhere in this Annual Report on Form 10-K. This Annual Report on Form 10-K contains forward-looking statements that involve risks and uncertainties. The forward-looking statements are not historical facts, but rather are based on current expectations, estimates, assumptions and projections about our industry, business and future financial results. Our actual results could differ materially from the results contemplated by these forward-looking statements due to a number of factors, including those discussed in other sections of this Annual Report on Form 10-K. See “Special Note Regarding Forward-Looking Statements” for additional factors relating to such statements and see “Risk Factors” included in Item 1A of this Annual Report on Form 10-K. Our past operating results are not necessarily indicative of operating results in any future periods.

Overview

We are a leading omnichannel money remittance services company focused primarily on the United States of America (“United States” or “U.S.”) to Latin America and the Caribbean (“LAC”) corridor, which includes Mexico, Central and South America and the Caribbean. In recent years, we expanded our services to allow remittances to Africa and Asia from the United States and also began offering sending services from Canada to Latin America and Africa. We utilize our proprietary technology to deliver convenient, reliable and value-added services to consumers through a broad network of sending and paying agents. Our remittance services, which include a comprehensive suite of ancillary financial processing solutions and payment services, are available in all 50 states in the U.S., Washington D.C., Puerto Rico and 13 provinces in Canada, where consumers can send money to beneficiaries in 16 LAC countries, eight countries in Africa and two countries in Asia. Our services are accessible in person through over 100,000 independent sending and paying agents and 117 Company-operated stores, as well as online and via Internet-enabled mobile devices. Additionally, our product and service portfolio include online payment options, pre-paid debit cards and direct deposit payroll cards, which may present different cost, demand, regulatory and risk profiles relative to our core money remittance business. In March 2022, we entered into an agreement to acquire La Nacional and LAN Holdings, money remittance companies serving more than 70 countries. In November 2022, we completed the acquisition of La Nacional and we expect to complete the acquisition of LAN Holdings in the second quarter of 2023 subject to the satisfaction of customary closing conditions, including pending regulatory approvals. The acquisition of La Nacional strengthens the Company’s presence in the Dominican Republic and other key markets to Latin America.

Money remittance services to LAC countries, mainly Mexico and Guatemala, are the primary source of our revenue. These services involve the movement of funds on behalf of an originating consumer for receipt by a designated beneficiary at a designated receiving location. Our remittances to LAC countries are primarily generated in the United States by consumers with roots in Latin American and Caribbean countries, many of whom do not have an existing relationship with a traditional full-service financial institution capable of providing the services we offer. We provide these consumers with flexibility and convenience to help them meet their financial needs. We believe many consumers who use our services may have access to traditional banking services, but prefer to use our services based on reliability, convenience and value. We generate money remittance revenue from fees paid by consumers (i.e., the senders of funds), which we share with our sending agents in the originating country and our paying agents in the destination country. Remittances paid in local currencies that are not pegged to the U.S. dollar can also generate revenue if we are successful in our daily management of currency exchange spreads.

Our money remittance services enable consumers to send funds through our broad network of locations in the United States and Canada that are primarily operated by third-party businesses, as well as through our Company-operated stores located in the United States. Transactions are processed and payment is collected by our agent (“sending agent(s)”) and those funds become available for pickup by the beneficiary at the designated destination, usually within minutes, at any Intermex payer location (“paying agent(s)”). We refer to our sending agents and our paying agents collectively as agents. In addition, our services are offered digitally through Intermexonline.com and via Internet-enabled mobile devices. Since January 1, 2022 through December 31, 2022, we have grown our agent network by approximately 27.3% and increased our principal amount sent by more than 21.2% to $21.0 billion. In 2022, we processed approximately 47.8 million remittances, representing over 19.2% growth in transactions as compared to 2021.

COVID-19 Update

The coronavirus (“COVID-19”) pandemic that started in 2020 has had and continues to have a significant effect on economic conditions in the United States of America (“United States” or “U.S.”), and to a certain degree continues to cause, significant uncertainties in the U.S. and global economy. Public health officials and medical professionals have warned that COVID-19 resurgences may continue to occur due to a variety of factors, including the extent of economic activity, social interaction, vaccination rates and the emergence of

27

Index

potent variants. It is unclear if and when resurgences will occur or how long any resurgence will last, how severe it will be, and what safety measures governments and businesses will impose in response.

We continue to prioritize taking appropriate actions to protect the health and safety of our employees. We have adjusted standard operating procedures within our business operations to ensure continued worker safety, and are continually monitoring evolving health guidelines and responding to changes as appropriate.

Although certain measures that restrict the normal course of operations of businesses and consumers were still in place for the year ended December 31, 2022, such measures did not have a material adverse effect on the Company’s financial condition, results of operations and cash flows for the year ended December 31, 2022. Although the Company’s operations continued effectively despite social distancing and other measures taken in response to the pandemic, our financial condition, results of operations and cash flows remain subject to future developments, including the persistence of the pandemic’s effects on economic conditions, particularly the level of unemployment of our customers, inflation (including changes in wages) and governmental efforts to restrain inflation, interest rate levels and foreign exchange volatility, as well as the possibility of resurgences of the pandemic and the severity of any such resurgence, all of which remain uncertain and cannot be predicted at this time.

Further quantification and discussion of these pandemic related effects, to the extent relevant and material, are included in the discussion of results of operations below.

Acquisition of La Nacional and LAN Holdings

On March 16, 2022, the Company entered into a definitive purchase agreement to acquire La Nacional and LAN Holdings, which either directly or indirectly operate as money remittance companies in the United States, Canada and certain countries in Europe. On November 1, 2022, we completed the acquisition of La Nacional and we expect to complete the acquisition of LAN Holdings in the second quarter of 2023 subject to the satisfaction of customary closing conditions, including pending regulatory approvals. See Part II, Item 8, Financial Statements and Supplementary Data, Note 3, “Acquisitions” for additional information regarding the completed acquisition of La Nacional and pending acquisition of LAN Holdings.

The Company expects the integration of La Nacional and LAN Holdings to be completed in the four quarters following the closing of the respective transactions. Once La Nacional and LAN Holdings are fully integrated, the Company expects the combined entities to continue to contribute approximately $80.0 million to $90.0 million a year in revenues with an Adjusted EBITDA margin in the range of 9% to 11%. A quantitative reconciliation of projected Adjusted EBITDA margin to the most comparable GAAP measure is not available without unreasonable efforts because of the inherent difficulty in forecasting and quantifying the amounts necessary under GAAP guidance for operating or other adjusted items including, without limitation, integration costs and expenses, amortization of intangible assets and depreciation, which may be significant and difficult to project with a reasonable degree of accuracy, as well as, tax effects of certain adjustments and other items related to the acquisitions.

The “Results of Operations” section below includes the impact of La Nacional for the period of November 2, 2022 through December 31, 2022. See Part II, Item 8, Financial Statements and Supplementary Data, Note 3, “Acquisitions” for additional financial information regarding La Nacional.

A discussion of changes in our results of operations and cash flows from fiscal 2021 to fiscal 2020 has been omitted from this Annual Report on Form 10-K, but may be found in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the SEC on March 7, 2022, which is available free of charge on the SEC’s website at www.sec.gov and at www.intermexonline.com, by clicking “Investors” located at the bottom of the page.

Key Factors and Trends Affecting our Business

Various trends and other factors have affected and may continue to affect our business, financial condition and operating results, including, but not limited to:

•the Company’s ability to successfully execute, manage, integrate and obtain the anticipated financial benefits of key acquisitions and mergers, including the completed acquisition of La Nacional and pending acquisition of LAN Holdings;

•economic factors such as inflation, the level of economic activity, recession risks and labor market conditions, as well as rising interest rates;

•public health conditions, including the COVID-19 pandemic, responses thereto and the economic and market effects thereof;

•competition in the markets in which we operate;

28

Index

•volatility in foreign exchange rates that could affect the volume of consumer remittance activity and/or affect our foreign exchange related gains and losses;

•our ability to maintain favorable banking and agent relationships necessary to conduct our business;

•credit risks from our agents and the financial institutions with which we do business;

•bank failures, sustained financial illiquidity, or illiquidity at our clearing, cash management or custodial financial institutions;

•new technology or competitors that disrupt the current ecosystem, including the introduction of new digital platforms;

•cyber-attacks or disruptions to our information technology, computer network systems, data centers and phone apps;

•our ability to satisfy our debt obligations and remain in compliance with our credit facility requirements;

•our success in developing and introducing new products, services and infrastructure;

•consumer confidence in our brand and in consumer money transfers generally;

•our ability to maintain compliance with applicable regulatory requirements;

•international political factors, political stability, tariffs, border taxes or restrictions on remittances or transfers out of the United States and Canada;

•currency restrictions and volatility in countries in which we operate or plan to operate;

•consumer fraud and other risks relating to the authenticity of customers’ orders;

•changes in immigration laws and their enforcement;

•our ability to protect our brands and intellectual property rights;

•weakness in U.S. or international economic conditions;

•changes in tax laws; and

•our ability to recruit and retain key personnel.

Worldwide political and economic conditions continue to exhibit instability, as evidenced by high unemployment rates in key Latin American markets, restricted lending activity, higher inflation, volatility in foreign currencies and low consumer confidence, some of which reflect the residual effects of the COVID-19 pandemic, supply chain disruptions, among other economic and market factors. Specifically, continued political and economic unrest in Mexico, Guatemala and some countries in South America contributed to volatility. Our business has generally been resilient during times of economic instability as money remittances are essential to many recipients, with the funds used by the receiving parties for their daily needs; however, long-term sustained appreciation of the Mexican peso or Guatemalan quetzal as compared to the U.S. dollar could negatively affect our revenues and profitability.

Money remittance businesses have continued to be subject to strict legal and regulatory requirements, and we continue to focus on and regularly review our compliance programs. In connection with these reviews, and in light of regulatory complexity and heightened attention of governmental and regulatory authorities related to cybersecurity and compliance activities, we have made, and continue to make, enhancements to our processes and systems designed to detect and prevent cyber-attacks, consumer fraud, money laundering, terrorist financing and other illicit activities, along with enhancements to improve consumer protection, including the Dodd-Frank Act and similar regulations outside the United States. In coming periods, we expect these and future regulatory requirements will continue to result in changes to certain of our business and administrative practices and may result in increased costs.

We maintain a compliance department, the responsibility of which is to monitor transactions, detect and report suspicious activity, maintain appropriate records and train our employees and agents. An independent third-party periodically reviews our policies and procedures and performs independent testing to assess the effectiveness of our anti-money laundering and Bank Secrecy Act compliance program. We also maintain a regulatory affairs and licensing department, under the direction of our Chief Compliance Officer.

The market for money remittance services is very competitive. Our competitors include a small number of large money remittance providers, financial institutions, banks and a large number of small niche money remittance service providers that serve select regions. We compete with larger companies, such as Western Union, MoneyGram, Remitly and Euronet, and a number of other smaller money services business (“MSB”) entities. We generally compete for money remittance agents on the basis of value, service, quality, technical and operational differences, commission structure and marketing efforts. As a philosophy, we sell credible solutions to our sending agents, not discounts or higher commissions, as is typical for the industry. We compete for money remittance customers on the basis of trust, convenience, service, efficiency of outlets, value, enhanced technology and brand recognition.

We have encountered and continue to expect to encounter increasing competition as new electronic platforms emerge that enable consumers to send and receive money through a variety of channels, but we do not expect adoption rates to be as significant in the near

29

Index

term for the consumer segment we serve. Regardless, we continue to innovate in the industry by differentiating our money remittance business through programs to foster loyalty among agents as well as consumers and have expanded our channels through which our services are accessed to include online and mobile offerings which are experiencing consumer adoption.

Effective December 31, 2022, we are no longer considered an emerging growth company, as we reached the fifth anniversary of becoming a publicly-traded company.

How We Assess the Performance of Our Business

In assessing the performance of our business, we consider a variety of performance and financial measures. The key indicators of the financial condition and operating performance of our business are revenues, service charges from agents and banks, salaries and benefits, other selling, general and administrative expenses and net income. To help us assess our performance with these key indicators, we primarily use Adjusted Net Income, Adjusted Earnings per Share and Adjusted EBITDA as non-GAAP financial measures. We believe these non-GAAP measures provide useful information to investors and expanded insight to measure our revenue and cost performance as a supplement to our U.S. GAAP consolidated financial statements. See the “Adjusted Net Income and Adjusted Earnings per Share” and “Adjusted EBITDA” sections below for reconciliations of these non-GAAP financial measures to net income and earnings per share, our closest GAAP measures.

Revenues

Transaction volume is the primary generator of revenue in our business. Revenue on transactions is derived primarily from transaction fees paid by consumers to transfer money. Revenues per transaction vary based upon send and receive locations and the amount sent. In certain transactions involving different send and receive currencies, we generate foreign exchange gains based on the difference between the set exchange rate charged by us to the sender and the rate available to us in the wholesale foreign exchange market.

Operating Expenses

Service Charges from Agents and Banks

Service charges primarily consist of agent commissions and bank fees. Service charges vary based on agent commission percentages and the amount of fees charged by the banks. Sending agents earn a commission on each transaction they process of approximately 50% of the transaction fee. Service charges may increase if banks or payer organizations increase their fee structure or sending agents use higher fee methods to remit funds to us. Service charges also vary based on the method the consumer selects to send the transfer and the payer organization that facilitates the transaction.

Salaries and Benefits

Salaries and benefits include cash and share-based compensation associated with our corporate employees and sales team as well as employees at our Company-operated stores. Corporate employees include management, customer service, compliance, information technology, operations, finance, legal and human resources. Our sales team, located throughout the United States and Canada, is focused on supporting and growing our sending agent network. Share-based compensation is primarily recognized as an expense on a straight-line basis over the requisite service period; unrecognized compensation expense related to stock options, restricted stock units (“RSUs”), restricted stock awards (“RSAs”) and performance stock units (“PSUs”) of approximately $10.2 million is expected to be recognized over a weighted-average period of 1.66 years.

Other Selling, General and Administrative

General and administrative expenses primarily consist of fixed overhead expenses associated with our operations, such as information technology, telecommunications, rent, insurance, professional services, non-income or indirect taxes, facilities maintenance, provision for credit losses and other similar types of operating expenses. A portion of these expenses relate to our Company-operated stores; however, the majority relate to the overall business and compliance requirements of a regulated publicly traded financial services company. Selling expenses include expenses such as advertising and promotion, shipping, supplies and other expenses associated with serving and increasing our network of agents.

Transaction Costs

We incurred transaction costs associated with the acquisitions of La Nacional and LAN Holdings. These costs included all internal and external costs directly related to the transaction, consisting primarily of legal, consulting, accounting and advisory fees and certain incentive bonuses. Due to their significance, they are presented separately in our consolidated statements of income and comprehensive income. See Note 3 to the consolidated financial statements.

30

Index

Depreciation and Amortization

Depreciation and amortization largely consists of depreciation of computer equipment and amortization of software that supports our technology platform. In addition, it includes amortization of intangible assets primarily related to our agent relationships, trade names and developed technology.

Non-Operating Expenses

Interest Expense

Interest expense consists primarily of interest associated with our debt, which consists of a term loan facility and a revolving credit facility. The effective average interest rates for the year ended December 31, 2022 for the term loan facility and revolving credit facility, which related to the Company’s previous credit agreement and Credit Agreement (as defined herein), were 4.87% and 1.04%, respectively.

Income tax provision

Our income tax provision includes the expected benefit of all deferred tax assets, including our net operating loss carryforwards. With few exceptions, our net operating loss carryforwards will expire from 2029 through 2042. After consideration of all evidence, both positive and negative, management has determined that no valuation allowance is required at December 31, 2022 on the Company’s U.S. federal or state deferred tax assets; however, a valuation allowance has been recorded as of December 31, 2022 on deferred tax assets associated with Canadian net operating loss carryforwards. Our income tax provision reflects the effects of state taxes, non-deductible expenses, share-based compensation expense, and foreign tax rates applicable to the Company’s foreign subsidiaries that are higher or lower than the U.S. statutory rate.

Net Income

Net income is determined by subtracting operating and non-operating expenses from revenues.

Earnings per Share

Basic earnings per share is calculated by dividing net income by the weighted-average number of common shares outstanding for each period. Diluted earnings per share is calculated by dividing net income by the weighted-average number of common shares and common share equivalents outstanding for each period. Diluted earnings per share reflects the potential dilution that could occur if outstanding stock options at the presented dates are exercised and shares of RSUs, RSAs and PSUs have vested, using the treasury stock method. Shares of treasury stock are not considered outstanding and therefore are excluded from the weighted average number of common shares outstanding calculation.

Segments

Our business is organized around one reportable segment that provides money transmittal services between the United States and Canada to Mexico, Guatemala and other countries in Latin America, Africa and Asia through a network of authorized agents located in various unaffiliated retail establishments and 117 Company-operated stores throughout the United States and Canada. This is based on the objectives of the business and how our chief operating decision maker, the CEO and President, monitors operating performance and allocates resources.

31

Index

Results of Operations

The following table summarizes key components of our results of operations for the periods indicated:

Year Ended December 31, 2022 Compared to the Year Ended December 31, 2021

Revenues

Revenues for the above periods are presented below:

Wire transfer and money order fees, net of $469.2 million, for the year ended December 31, 2022 increased by $76.0 million, or 19.3%, from $393.2 million for the year ended December 31, 2021. This increase was primarily due to a 19.2% increase in transaction

32

Index

volume compared to the year ended December 31, 2021, largely due to the continued growth in our agent network, which increased by 6.0% from December 2021 to December 2022, excluding the agents added as part of La Nacional acquisition.

Revenues from foreign exchange gain, net of $72.9 million for the year ended December 31, 2022, increased by $10.1 million, or 16.1%, from $62.8 million for the year ended December 31, 2021. This increase was primarily due to higher transaction volume achieved by growth in our agent network and a higher average amount sent by consumers, as well as, increased foreign exchange volatility in the Mexican peso during the year.

Other income of $4.7 million for the year ended December 31, 2022 increased by $1.6 million or 50.8% from $3.1 million for the year ended December 31, 2021, primarily due to higher volume of checks processed by our sending agents as well as higher maintenance fees on money transfers pending to be refunded to consumers.

Operating Expenses

Operating expenses for the above periods are presented below:

NM - Amounts rounds to less than 1%.

Service charges from agents and banks— Service charges from agents and banks were $364.8 million for the year ended December 31, 2022 compared to $307.5 million for the year ended December 31, 2021. The increase of $57.3 million, or 18.7%, was primarily due to the increase in transaction volume described above.

Salaries and benefits— Salaries and benefits were $52.2 million for the year ended December 31, 2022, an increase of $9.1 million, or 21.3%, from $43.1 million for the year ended December 31, 2021. The increase was primarily due to $4.7 million spent in talent acquisition and retention to support the continued growth of our business, increased wages and bonuses to recognize performance, $2.4 million and $0.2 million in wages and commissions expense, respectively, attributed to the La Nacional workforce, and a $2.5 million increase in share-based compensation as a result of new awards granted in 2022 and updated probability of vesting of PSUs, offset by a $0.7 million decrease in commission expense for our sales representatives, other than those added with the acquisition of La Nacional.

Other selling, general and administrative expenses— Other selling, general and administrative expenses of $34.4 million for the year ended December 31, 2022 increased by $4.1 million, or 13.4%, from $30.3 million for the year ended December 31, 2021.

The increase was primarily the result of:

•$2.1 million - higher IT related expenses incurred to sustain our business expansion and to improve our technology environment;

•$1.8 million - higher facilities and rent expenses for scheduled maintenance and contracted lease rate increases to support our business growth as well as related operating expenses in connection with the 80 corporate stores acquired through La Nacional;

•$1.0 million - increase in provision for credit losses due to higher net write-offs of accounts receivable during the year ended December 31, 2022 compared to the same period in 2021, primarily as a result of sending agents that were not able to pay in accordance with the original terms and are, accordingly, subject to our normal collection procedures;

•$1.0 million - higher travel costs, primarily of our sales force, to support or business growth and expansion;

•$0.9 million - higher audit related and professional fees to support our internal audit and compliance functions;

•$0.4 million - higher shipping costs due to deployment of equipment for new and existing agents.

These increases were partially offset by:

•$1.4 million - in lower advertising and promotion expenses, primarily as a result of higher co-branding investment by some of our paying agents during 2022;

33

Index

•$0.8 million - refund of state business and occupancy tax from the state of Washington;

•$0.6 million - lower loss on disposal of assets, as the year ended December 31, 2021 included a $1.0 million impairment charge that did not reoccur in the year ended December 31, 2022; and

•$0.4 million - related to a lower provision recorded on deposits frozen at certain closed financial institutions in Mexico in 2022 compared to fiscal year 2021. The provision amounted to $1.6 million and $2.0 million for the years ended December 31, 2022 and 2021, respectively.

Transaction Costs— Transaction Costs of $3.0 million and $1.0 million for the years ended December 31, 2022 and 2021, respectively, relate primarily to financial advisory fees as well as other professional fees and legal fees incurred in connection with acquisitions. Transaction costs for the year ended December 31, 2022 related to the La Nacional and LAN Holdings acquisitions, while transaction costs for the year ended December 31, 2021 relate to costs incurred in connection with potential acquisitions during that period, including La Nacional and LAN Holdings.

Depreciation and amortization— Depreciation and amortization of $9.5 million for the year ended December 31, 2022 remained consistent with $9.5 million for the year ended December 31, 2021. This is mainly due to $0.9 million less amortization related to trade names, developed technology and agent relationships during the year ended December 31, 2022 as these intangibles are being amortized on an accelerated basis, which declines over time, offset by an increase in depreciation of $0.9 million associated primarily with additional computer equipment to support our growing business and agent network.

Non-Operating Expenses

Interest expense— Interest expense was $5.6 million for the year ended December 31, 2022, an increase of $1.1 million, or 24.1%, from $4.5 million for the year ended December 31, 2021. The increase was primarily due to higher market interest rates paid under our A&R Credit Agreement (as described below), as well as higher drawings under our revolving credit facility primarily during the fourth quarter of 2022.

Income tax provision— Income tax provision was $19.9 million for the year ended December 31, 2022, an increase of $3.4 million, or 21.1%, from an income tax provision of $16.5 million for the year ended December 31, 2021. The increase in the income tax provision was mainly attributable to higher taxable income resulting from our growth described above, partially offset by a tax benefit from deductible stock-compensation as a result of stock option exercises.

Net Income

We reported net income of $57.3 million for the year ended December 31, 2022 compared to net income of $46.8 million for the year ended December 31, 2021, which resulted in an increase of $10.5 million due to the same factors discussed above.

Earnings Per Share

Earnings per Share - Basic for the year ended December 31, 2022 was $1.52, representing an increase of $0.30, or 24.6%, compared to $1.22 for the year ended December 31, 2021.

Earnings per Share - Diluted for the year ended December 31, 2022 was $1.48, representing an increase of $0.28, or 23.3%, compared to $1.20 for the year ended December 31, 2021.

The increase in both basic and diluted EPS largely reflect the increased net income discussed above and the effect of a reduced share count.

Non-GAAP Financial Measures

We use Adjusted Net Income, Adjusted Earnings per Share and Adjusted EBITDA to evaluate our performance, both internally and as compared with our peers, because these measures exclude certain items that may not be indicative of our core operating results, as well as items that can vary widely among companies within our industry. For example, non-cash compensation costs can be subject to volatility from changes in the market price per share of our common stock or variations in the value and number of shares granted, and amortization of intangible assets is subject to business acquisition activities, which varies from period to period.

We present these non-GAAP financial measures because we believe they are frequently used by analysts, investors and other interested parties to evaluate companies in our industry. Furthermore, we believe they are helpful in highlighting trends in our operating results by focusing on our core operating results and are useful to evaluate our performance in conjunction with our GAAP financial measures. Adjusted Net Income, Adjusted Earnings per Share and Adjusted EBITDA are non-GAAP financial measures and should not be considered as an alternative to operating income, net income or earnings per share as a measure of operating performance or cash flows or

34

Index

as a measure of liquidity. Non-GAAP financial measures are not necessarily calculated the same way by different companies and should not be considered a substitute for or superior to GAAP measures.

Adjusted EBITDA is one of the primary metrics used by management to evaluate the financial performance of our business because it excludes, among other things, the effects of certain transactions that are outside the control of management, while other measures can differ significantly depending on long-term strategic decisions regarding capital structure, the jurisdictions in which we operate and capital investments.

In particular, Adjusted EBITDA is subject to certain limitations, including the following:

•Adjusted EBITDA does not reflect interest expense, or the amounts necessary to service interest or principal payments on our debt;

•Adjusted EBITDA does not reflect income tax provision (benefit), and because the payment of taxes is part of our operations, tax provision is a necessary element of our costs and ability to operate;

•Although depreciation and amortization are eliminated in the calculation of Adjusted EBITDA, the assets being depreciated and amortized will often have to be replaced in the future, and Adjusted EBITDA does not reflect any costs of such replacements;

•Adjusted EBITDA does not reflect the noncash component of share-based compensation;

•Adjusted EBITDA does not reflect the impact of earnings or charges resulting from matters we consider not to be reflective, on a recurring basis, of our ongoing operations; and

•other companies in our industry may calculate Adjusted EBITDA or similarly titled measures differently than we do, limiting its usefulness as a comparative measure.

We adjust for these limitations by relying primarily on our GAAP results and using Adjusted EBITDA, as well as our other non-GAAP financial measures, only as supplemental information.

Adjusted Net Income and Adjusted Earnings per Share

Adjusted Net Income is defined as net income adjusted to add back certain charges and expenses, such as non-cash amortization of intangible assets resulting from business acquisition transactions, which will recur in future periods until these assets have been fully amortized, non-cash compensation costs, litigation settlements and other items set forth in the table below, as these charges and expenses are not considered a part of our core business operations and are not an indicator of ongoing, future company performance.

Adjusted Earnings per Share - Basic and Diluted is calculated by dividing Adjusted Net Income by GAAP weighted-average common shares outstanding (basic and diluted).

Adjusted Net Income for the year ended December 31, 2022 was $69.9 million, representing an increase of $12.4 million, or 21.6%, from Adjusted Net Income of $57.5 million for the year ended December 31, 2021. The increase in Adjusted Net Income was primarily due to the increase in net income discussed above and the impact of certain adjusting items detailed in the table below.

The following table presents the reconciliation of Net Income, our closest GAAP measure, to Adjusted Net Income:

35

Index

(a)Represents share-based compensation relating to equity awards granted to employees and independent directors of the Company.

(b)Represents losses related to the closure of a financial institution in Mexico during 2021.

(c)Represents primarily, financial advisory fees and other professional fees and legal fees related to business acquisition transactions.

(d)Represents primarily loss on disposal of fixed assets, including a write-off of software development expenditures in an amount of $1.0 million during the year ended December 31, 2021 (none in 2022) and foreign currency (gains) losses.

(e)Represents the amortization of intangible assets resulting from business acquisition transactions.

(f)Represents the current and deferred tax impact of the taxable adjustments to Net Income using the Company’s blended federal and state tax rate for each period. Relevant tax-deductible adjustments include all adjustments to Net Income.

Adjusted Earnings per Share - Basic (previously defined and used as described above) for the year ended December 31, 2022 was $1.85, representing an increase of $0.36, or 24.2%, compared to $1.49 for the year ended December 31, 2021.

Adjusted Earnings per Share - Diluted (previously defined and used as described above) for the year ended December 31, 2022 was $1.81, representing an increase of $0.34, or 23.1%, compared to $1.47 for the year ended December 31, 2021.

The following table presents the reconciliation of GAAP Earnings per Share, our closest GAAP measure, to Adjusted Earnings per Share:

36

Index

The table above may contain slight summation differences due to rounding.

Adjusted EBITDA

Adjusted EBITDA is defined as net income before depreciation and amortization, interest expense, income taxes, and also adjusted to add back certain charges and expenses, such as non-cash compensation costs and other items set forth in the table below, as these charges and expenses are not considered a part of our core business operations and may not be indicative of ongoing, future company performance.

Adjusted EBITDA for the year ended December 31, 2022 was $105.2 million, representing an increase of $18.5 million, or 21.4%, from $86.7 million for the year ended December 31, 2021. The increase in Adjusted EBITDA was primarily due to the increase in net income discussed above and the impact of certain adjusting items detailed in the table below.

The following table presents the reconciliation of Net Income, our closest GAAP measure, to Adjusted EBITDA:

37

Index

(a)Represents share-based compensation relating to equity awards granted to employees and independent directors of the Company.

(b)Represents losses related to the closure of a financial institution in Mexico during 2021.

(c)Represents primarily financial advisory fees and other professional fees and legal fees related to business acquisition transactions.

(d)Represents primarily loss on disposal of fixed assets, including a write-off of software development expenditures in an amount of $1.0 million during the year ended December 31, 2021 (none in 2022) and foreign currency (gains) losses.

Liquidity and Capital Resources

We consider liquidity in terms of cash position, cash flows from operations and their sufficiency to fund business operations, including working capital needs, debt service, acquisitions, capital expenditures, contractual obligations and other commitments. In particular, to meet our payment service obligations at all times, we must have sufficient highly liquid assets and be able to move funds on a timely basis.

Our principal sources of liquidity are our cash generated by operating activities supplemented with borrowings under our revolving credit facility. Our primary cash needs are for day-to-day operations, to pay interest and principal on our indebtedness, to fund working capital requirements and to make capital expenditures.

We have funded and still expect to continue funding our liquidity requirements through internally generated funds, supplemented in the ordinary course, with borrowings under our revolving credit facility. We maintain a strong cash balance position and have access to committed funding sources, which we have used only on a limited and ordinary course basis during the year ended December 31, 2022. Therefore, we believe that our projected cash flows generated from operations, together with borrowings under our revolving credit facility are sufficient to fund our principal debt payments, interest expense, our working capital needs and our expected capital expenditures for at least the next twelve months.

Credit Agreement

We have an Amended and Restated Credit Agreement (as amended as described below, the “Credit Agreement”) with a group of banking institutions. The Credit Agreement provides for a $150.0 million revolving credit facility, an $87.5 million term loan facility and an uncommitted incremental facility, which may be utilized for additional revolving or term loans, of up to $70.0 million. The Credit Agreement also provides for the issuance of letters of credit, which would reduce availability under the revolving credit facility. The proceeds of the term loan were used to refinance the existing term loan under the Company’s previous credit agreement, and the revolving credit facility is available for working capital, general corporate purposes and to pay fees and expenses in connection with this transaction. The maturity date of the Credit Agreement is June 24, 2026. Included in the lender group under the Credit Agreement is Silicon Valley Bank (“SVB”), which holds 13% of the revolving credit facility commitments. Due to recent events regarding SVB and its control by federal banking authorities, it is unclear whether SVB would be in a position to continue to fund its pro rata portion of draws under the revolving credit facility. Pending a resolution of SVB's participation in the Credit Agreement, which resolution may include seeking a replacement lender and/or a request to utilize the uncommitted incremental facility, the Company believes that the availability of the remaining revolving credit facility commitments should be sufficient to allow the Company to meet its foreseeable working capital needs in the event SVB does not fund its portion of any draw request.

In November 2022, the Credit Agreement was amended to replace the London Inter-bank Offered Rate (“LIBOR”) as a benchmark interest rate for loans with the secured overnight financing rate as administered by the Federal Reserve Bank of New York (“SOFR”).

38

Index

As of December 31, 2022, we had $80.9 million of borrowings under the term loan facility excluding debt origination costs of $1.7 million. As of December 31, 2022 there were $76.0 million of outstanding amounts drawn on the revolving credit facility. There were $144.0 million of additional borrowings available under these facilities as of December 31, 2022.

At the election of the Company, interest on the term loan facility and revolving loans under the Credit Agreement may be determined by reference to SOFR plus an index adjustment of 0.10% and an applicable margin ranging between 2.50% and 3.00% based upon the Company’s consolidated leverage ratio, as calculated pursuant to the terms of the Credit Agreement. Loans (other than Term Loans, as defined in the Credit Agreement), may also bear interest at the base rate plus an applicable margin ranging between 1.50% and 2.00% based upon the Company’s consolidated leverage ratio, as so calculated. The Company is also required to pay a fee on the unused portion of the revolving credit facility equal to 0.35% per annum.

The effective interest rates for the year ended December 31, 2022 for the term loan facility and revolving credit facility were 4.87% and 1.04%, respectively. Interest is payable (x)(i) generally on the last day of each interest period selected for SOFR loans, but in any event, not less frequently than every three months, and (ii) on the last business day of each quarter for base rate loans and (y) at final maturity.

The principal amount of the term loan facility under the Credit Agreement must be repaid in consecutive quarterly installments of 5.0% in years 1 and 2, 7.5% in year 3, and 10.0% in years 4 and 5, in each case on the last day of each quarter, commencing in September 2021 with a final balloon payment at maturity. The term loans under the Credit Agreement may be prepaid at any time without premium or penalty. Revolving loans may be borrowed, repaid and reborrowed from time to time in accordance with the terms and conditions of the Credit Agreement. The Company is also required to repay the loans upon receipt of net proceeds from certain casualty events, upon the disposition of certain property and upon incurrence of indebtedness not permitted by the Credit Agreement. In addition, the Company is required to make mandatory prepayments annually from excess cash flow if the Company’s consolidated leverage ratio (as calculated under the Credit Agreement) is greater than or equal to 3.0, and the remainder of any such excess cash flow is contributed to the available amount which may be used for a variety of purposes, including investments and distributions.

The Credit Agreement contains financial covenants that require the Company to maintain a quarterly minimum fixed charge coverage ratio of 1.25:1.00 and a quarterly maximum consolidated leverage ratio of 3.25:1.00. As of December 31, 2022, we were in compliance with the covenants of the Credit Agreement. The Credit Agreement also contains covenants that limit the Company’s and its subsidiaries’ ability to, among other things, grant liens, incur additional indebtedness, make acquisitions or investments, dispose of certain assets, change the nature of their businesses, enter into certain transactions with affiliates or amend the terms of material indebtedness. The Credit Agreement generally restricts the ability of the Company to make certain restricted payments, including the repurchase of shares of its common stock, provided that the Company may make restricted payments, among others, (i) without limitation so long as the Consolidated Leverage Ratio (as defined in the Credit Agreement), as of the then most recently completed four fiscal quarters of the Company, after giving pro forma effect to such restricted payments, is 2.25 to 1.00 or less, (ii) that do not exceed, in the aggregate during any fiscal year, the greater of (x) $23.8 million and (y) 25.0% of Consolidated EBITDA (as defined in the Credit Agreement) for the then most recently completed four fiscal quarters of the Company, and (iii) to repurchase Company common stock from current or former employees in an aggregate amount of up to $10.0 million per calendar year.

Our indebtedness could adversely affect our ability to raise additional capital, limit our ability to react to changes in the economy or our industry, expose us to interest rate risk and prevent us from meeting our obligations. See “Risk Factors—Risks Relating to Our Indebtedness—The Company's indebtedness may limit our operating flexibility and could adversely affect our business, financial condition and results of operations.”

Repurchase Program

In August 2021, the Company’s Board of Directors approved a stock repurchase program (the “Repurchase Program”) that authorizes the Company to purchase up to $40.0 million of its outstanding shares of the Company’s common stock. Under the Repurchase Program, the Company is authorized to repurchase shares from time to time in accordance with applicable laws, both on the open market and in privately negotiated transactions and may include the use of derivative contracts or structured share repurchase agreements. The timing and amount of repurchases depends on several factors, including market and business conditions, the trading price of the Company’s common stock and the nature of other investment opportunities. The Repurchase Program may be limited, suspended or discontinued at any time without prior notice. The Repurchase Program does not have an expiration date. Under the terms of the Credit Agreement, the Company has restrictions that limit the maximum amount of repurchases as described in the “Credit Agreement” section above.

During the year ended December 31, 2022, the Company purchased 1,308,259 shares under the Repurchase Program for an aggregate purchase price totaling $26.2 million. As of December 31, 2022, there were $8.3 million remaining amount available for future share repurchases under the Repurchase Program. During the first quarter of 2023 to date, the Company repurchased 317 thousand shares for $7.6 million, resulting in $0.7 million available for future share repurchases under the Repurchase Program.

39

Index

On March 3, 2023 the Board of Directors approved an increase to the Repurchase Program that authorizes the Company to purchase an additional $100.0 million of its outstanding shares.

Privately-Negotiated Share Repurchase Transaction

On August 9, 2022, the Company entered into an agreement with SPC Intermex, LP for the purchase of 1,172,485 shares of the Company’s common stock for a total purchase price of $27.6 million, or a per share price of $23.50, in a privately-negotiated transaction.

Operating Leases

We are party to operating leases for office space, warehouses and Company-operated store locations, which we use as part of our day-to-day operations. Operating lease expenses were $3.1 million for the year ended December 31, 2022. We have not entered into finance lease commitments. For additional information on operating lease obligations, refer to Part II, Item 8, Financial Statements and Supplementary Data, Note 8, “Leases”.

In December 2022, we entered into a lease agreement, which expires in 2033, for our new headquarters to accommodate our growing workforce. We expect to complete the move to the new office space in the second half of 2023 following the completion of leasehold improvements. The new lease agreement provides for the Company to receive a tenant allowance amounting to approximately $3.8 million through the third quarter of 2023 and the Company will commence making monthly lease payments on November 1, 2024.

Cash Flows

The following table summarizes the changes to our cash flows for the periods presented:

Operating Activities

Net cash provided by operating activities was $15.2 million for the year ended December 31, 2022, a decrease of $62.9 million from net cash provided by operating activities of $78.1 million for the year ended December 31, 2021. The decrease of $62.9 million is primarily a result of $78.3 million related to changes in working capital, which varies due to timing of money transmissions and payments, offset by additional cash generated by our improved operating results for the year ended December 31, 2022, which reflected the further growth of our business.

Investing Activities

Net cash used in investing activities was $12.5 million for the year ended December 31, 2022, an increase of $1.8 million from $10.8 million for the year ended December 31, 2021. This increase in cash used was due to the acquisition of La Nacional through a cash transaction which resulted in $0.1 million of cash used, net of cash acquired. In addition, the Company invested funds in higher purchases of property and equipment as a result of our continued growth of sending agents, as well as, upgrading equipment of existing agents during the year ended December 31, 2022.

Financing Activities

Net cash provided by financing activities was $14.1 million for the year ended December 31, 2022, which primarily consisted of $4.4 million in scheduled quarterly payments due on the term loan facility, $53.7 million of repurchases of common stock and $5.4 million of payments for stock-based awards for shares withheld in connection with stock-based compensation arrangements and related payments to taxing authorities, offset by $76.0 million of borrowings, net under the revolving credit facility and $1.7 million in proceeds from issuance of stock as a result of the exercise of options.

40

Index

Net cash used in financing activities was $9.6 million for the year ended December 31, 2021, which primarily consisted of a $44.2 million debt repayment, including $4.1.million in scheduled quarterly payments due on the term loan facility, and $2.9 million of debt origination costs in connection with the refinancing of the existing debt under the Company’s previous credit agreement, $5.6 million of repurchases of common stock and $0.8 million of payments for stock-based awards for shares withheld in connection with stock-based compensation arrangements and related payments to taxing authorities, offset by $40.2 million borrowings in connection with the refinancing of the Company’s previous credit agreement and $3.8 million in proceeds from issuance of stock as a result of the exercise of options.

Critical Accounting Estimates

The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions about future events that affect amounts reported in our consolidated financial statements and related notes, as well as the related disclosure of contingent assets and liabilities at the date of the financial statements. Management evaluates its accounting policies, estimates and judgments on an on-going basis. Management bases its estimates and judgments on historical experience and various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions and conditions. Our significant accounting policies are discussed in Part II, Item 8, Financial Statements and Supplementary Data, Note 2, “Summary of Significant Accounting Policies.”

Allowance for Credit Losses

Accounts receivable and agent advances receivable are recorded at their net realizable value, which is net of an allowance for credit losses. Accounts receivable are recorded upon initiation of the wire transfer and are typically due to the Company within five days. The Company maintains an allowance for credit losses for estimated losses resulting from the inability of its sending agents to make required payments.

The Company adopted ASU 2016-13, Financial Instruments - Credit Losses, on December 31, 2022, which was retroactively applied as of the first day of fiscal year 2022. This accounting standard requires companies to measure expected credit losses on financial instruments based on the total estimated amount to be collected over the lifetime of the instrument. Prior to the adoption of this accounting standard, the Company recorded incurred loss reserves against receivable balances based on current and historical information.

Expected credit losses for uncollectible receivable balances consider both current conditions and reasonable and supportable forecasts of future conditions. Current conditions considered include pre-defined aging criteria, as well as specified events that indicate the balance due is not collectible. Reasonable and supportable forecasts used in determining the probability of future collection consider publicly available macroeconomic data and whether future credit losses are expected to differ from historical losses. Accounts receivable that are more than 90 days past due are charged off against the allowance for credit losses.

The Company is not party to any off-balance sheet arrangements that would require an allowance for credit losses in accordance with this accounting standard.

Goodwill and Intangible Assets

Goodwill and intangible assets result primarily from business combination acquisitions. Intangible assets include agent relationships, trade names, developed technology and other intangibles, all with finite lives. Our agent relationships, trade names and developed technology are currently amortized utilizing an accelerated method over their estimated useful lives. Other intangible assets are amortized straight-line over a useful life of 10 years. Upon the acquisition, the purchase price is first allocated to identifiable assets and liabilities, including the trade name and other intangibles, with any remaining purchase price recorded as goodwill.

Goodwill is not amortized; however, it is assessed for impairment at least annually, at the beginning of the fourth quarter, or more frequently if triggering events occur. For purposes of the annual impairment test, management initially performs a qualitative assessment, which includes consideration of the economic, industry and market conditions in addition to our overall financial performance and the performance of these assets. If our qualitative assessment does not conclude that it is more likely than not that the estimated fair value of the reporting unit is greater than the carrying value, we perform a quantitative analysis. In a quantitative test, the fair value of a reporting unit is determined based on a discounted cash flow analysis. A discounted cash flow analysis requires us to make various assumptions, including assumptions about future cash flows, growth rates and discount rates. The assumptions about future cash flows and growth rates are based on our long-term projections. Assumptions used in our impairment testing are consistent with our internal forecasts and operating plans. If the fair value of the reporting unit exceeds its carrying amount, there is no impairment. If not, we recognize an impairment equal to the difference between the carrying amount of the reporting unit and its fair value, not to exceed the carrying amount of goodwill.

The Company continuously monitors for events and circumstances that could negatively impact the key assumptions in determining fair value. While the Company believes the judgments and assumptions used in the goodwill impairment tests are reasonable, different

41

Index

assumptions or changes in general industry, market and macro-economic conditions, including the effect of health crises, could change the estimated fair values and, therefore, future impairment charges could be required, which could be material to the consolidated financial statements.

The Company evaluates amortizable intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Upon such an occurrence, recoverability of assets to be held and used is measured by comparing the carrying amount of an asset to forecasted undiscounted future net cash flows expected to be generated by the asset. If the carrying amount of the asset exceeds its estimated future cash flows, an impairment charge is recognized for the amount by which the carrying amount of the asset exceeds the fair value of the asset. Fair value is determined based on discounted cash flows, appraised values or management’s estimates, depending upon the nature of the assets.

Income Taxes

The Company is subject to income taxes in the U.S. federal jurisdiction and various state jurisdictions and our foreign subsidiaries are subject to taxes by local tax authorities. As required by the uncertain tax position guidance, we recognize the financial statement benefit of a position only after determining that the relevant tax authority would more likely than not sustain the positions following an audit. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply. We apply the uncertain tax position guidance to all tax positions for which the statute of limitations remains open. Resolution of these uncertainties in a manner inconsistent with management’s expectations could have a material impact on the Company’s financial condition and operating results.

Recent Accounting Pronouncements

Refer to Part II, Item 8, Financial Statements and Supplementary Data, Note 2, “Summary of Significant Accounting Policies”, for further discussion.