SEC Filing | International Money Express

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imxi-20200630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2020 OR


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File No. 001-37986


INTERNATIONAL MONEY EXPRESS, INC.
(Exact name of registrant as specified in its charter)


Delaware						47-4219082
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

9480 South Dixie Highway Miami, Florida						33156
(Address of Principal Executive Offices)						(Zip Code)


(305) 671-8000
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock ($0.0001 par value)	IMXI	Nasdaq Capital Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

☐

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☒

Smaller reporting company

☒

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes ☐ No ☒

As of July 31, 2020, there were 38,048,562 shares of the registrant’s common stock, $0.0001 par value per share, outstanding. The registrant has no other class of common stock outstanding.

INTERNATIONAL MONEY EXPRESS, INC.

INDEX TO FINANCIAL STATEMENTS


		Page

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS			3

PART 1 - FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)	4

	Condensed Consolidated Balance Sheets as of June 30 , 2020 and December 31, 2019	4

	Condensed Consolidated Statements of Operations and Comprehensive Income for the Three and Six Months Ended June 30, 2020 and 2019	5

	Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Three an d Six Months Ended June 30 , 2020 and 2019	6

	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2020 and 2019	8

	Notes to Condensed Consolidated Financial Statements (unaudited)	10

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	35

Item 4.	Controls and Procedures	37

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	38

Item 1A.	Risk Factors	38

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	39

Item 3.	Defaults Upon Senior Securities	39

Item 4.	Mine Safety Disclosures	39

Item 5.	Other Information	39

Item 6.	Exhibits	40

SIGNATURES			41

Index

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q may contain certain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which reflect our current views with respect to certain events that could have an effect on our future performance, including but without limitation, statements regarding our plans, objectives, financial performance, business strategies, expectations for our business and the business of the Company.

These statements relate to expectations concerning matters that are not historical fact and may include the words or phrases such as “would,” “will,” “should,” “expects,” “believes,” “anticipates,” “continues,” “could,” “may,” “might,” “plans,” “possible,” “potential,” “predicts,” “projects,” “forecasts,” “intends,” “assumes,” “estimates,” “approximately,” “shall,” “our planning assumptions,” “future outlook” and similar expressions, but the absence of these words does not mean that a statement is not forward-looking. Except for historical information, matters discussed in this Form 10-Q are forward-looking statements. These forward-looking statements are based largely on information currently available to our management and on our current expectations, assumptions, plans, estimates, judgments and projections about our business and our industry, as well as macroeconomic conditions, and are subject to various risks and uncertainties that could cause actual results to differ materially from historical results or those currently anticipated. Although we believe our expectations are based on reasonable estimates and assumptions, they are not guarantees of performance and there are a number of known and unknown risks, uncertainties, contingencies and other factors (many of which are outside our control) that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. Accordingly, there is no assurance that our expectations will, in fact, occur or that our estimates or assumptions will be correct, and we caution investors and all others not to place undue reliance on such forward-looking statements. Some factors that could cause actual results to differ and could materially adversely affect our business, financial condition, results of operations, cash flows and liquidity include, but are not limited to:

•the ability to maintain the listing of our common stock on Nasdaq;

•changes in applicable laws or regulations;

•the possibility that we may be adversely affected by other economic, business and/or competitive factors;

•factors relating to our business, operations and financial performance, including:

◦the COVID-19 pandemic, responses thereto and the economic and market effects thereof, including unemployment levels and increased capital markets volatility;

◦competition in the markets in which we operate;

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

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

◦our ability to maintain agent relationships on terms consistent with those currently in place;

◦our ability to maintain banking relationships necessary for us 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 by introducing digital platforms;

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

◦interest rate risk from elimination of the London Inter-bank Offered Rate (“LIBOR”) as a benchmark interest rate;

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

◦customer confidence in our brand and in consumer money transfers generally;

◦our ability to maintain compliance with the regulatory requirements of the jurisdictions in which we operate or plan to operate;

◦international political factors or implementation of tariffs, border taxes or restrictions on remittances or transfers of money out of the United States;

◦changes in tax laws and unfavorable outcomes of tax positions we take;

◦political instability, currency restrictions and volatility in countries in which we operate or plan to operate;

◦consumer fraud and other risks relating to customers’ authentication;

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

◦change or disruption in international migration patterns;

◦our ability to protect our brand and intellectual property rights;

◦our ability to retain key personnel; and

•other economic, business and/or competitive factors, risks and uncertainties, including those described in the section entitled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2019.

We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

Index

PART 1 – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

INTERNATIONAL MONEY EXPRESS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except for share data)


	June 30, 2020		December 31, 2019
ASSETS	(unaudited)
Current assets:
Cash	$	101,985	$	86,117
Accounts receivable, net of allowance of $808 and $759, respectively	60,023		39,754
Prepaid wires, net	5,460		18,201
Prepaid expenses and other current assets	2,536		4,155
Total current assets	170,004		148,227

Property and equipment, net	12,735		13,282
Goodwill	36,260		36,260
Intangible assets, net	23,905		27,381
Deferred tax asset, net	83		741
Other assets	1,954		1,415
Total assets	$	244,941	$	227,306

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt, net	$	7,044	$	7,044
Accounts payable	9,560		13,401
Wire transfers and money orders payable, net	47,712		40,197
Accrued and other liabilities	24,628		23,074
Total current liabilities	88,944		83,716
Long-term liabilities:
Debt, net	84,101		87,623
Total long-term liabilities	84,101		87,623

Commitments and contingencies, see Note 13

Stockholders' equity:
Common stock $0.0001 par value; 230,000,000 shares authorized, 38,035,279 and 38,034,389 shares issued and outstanding as of June 30, 2020 and December 31, 2019, respectively.	4		4
Additional paid-in capital	56,098		54,694
Retained earnings	15,842		1,176
Accumulated other comprehensive (loss) income	(48)		93
Total stockholders' equity	71,896		55,967
Total liabilities and stockholders' equity	$	244,941	$	227,306

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Index

INTERNATIONAL MONEY EXPRESS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND

COMPREHENSIVE INCOME

(in thousands, except for share data, unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
Revenues:
Wire transfer and money order fees, net	$	72,793	$	70,490	$	139,888	$	128,941
Foreign exchange gain, net	11,660		11,623		21,214		21,025
Other income	609		562		1,211		1,058
Total revenues	85,062		82,675		162,313		151,024

Operating expenses:
Service charges from agents and banks	56,271		54,622		108,498		100,191
Salaries and benefits	7,069		7,597		14,428		15,194
Other selling, general and administrative expenses	5,155		5,337		10,492		11,061
Depreciation and amortization	2,691		3,155		5,381		6,307
Total operating expenses	71,186		70,711		138,799		132,753

Operating income	13,876		11,964		23,514		18,271

Interest expense	1,633		2,288		3,503		4,358

Income before income taxes	12,243		9,676		20,011		13,913

Income tax provision	3,265		2,602		5,345		3,683

Net income	8,978		7,074		14,666		10,230

Other comprehensive income (loss)	3		35		(141)		43

Comprehensive income	$	8,981	$	7,109	$	14,525	$	10,273

Earnings per common share:
Basic and diluted	$	0.24	$	0.19	$	0.39	$	0.28

Weighted-average common shares outstanding:
Basic	38,035,279		37,505,598		38,035,146		36,847,845
Diluted	38,047,792		37,594,151		38,043,233		36,898,462

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Index

INTERNATIONAL MONEY EXPRESS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(in thousands, except for share data, unaudited)


	Three Months Ended
	Common Stock					Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total Stockholders' Equity
	Shares	Amount
Balance, March 31, 2020	38,035,279	$	4	$	55,412	$	6,864	$	(51)	$	62,229
Net income	—	—		—		8,978		—		8,978
Share-based compensation	—	—		686		—		—		686
Adjustment from foreign currency translation, net	—	—		—		—		3		3
Balance, June 30, 2020	38,035,279	$	4	$	56,098	$	15,842	$	(48)	$	71,896


	Three Months Ended
	Common Stock					Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Income		Total Stockholders' Equity
	Shares	Amount
Balance, March 31, 2019	36,182,783	$	4	$	62,515	$	(15,277)	$	6	$	47,248
Warrant exchange	1,800,065	—		(10,031)		—		—		(10,031)
Net income	—	—		—		7,074		—		7,074
Share-based compensation	—	—		634		—		—		634
Adjustment from foreign currency translation, net	—	—		—		—		35		35
Balance, June 30, 2019	37,982,848	$	4	$	53,118	$	(8,203)	$	41	$	44,960

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Index

INTERNATIONAL MONEY EXPRESS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(in thousands, except for share data, unaudited)


	Six Months Ended
	Common Stock					Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive (Loss) Income		Total Stockholders' Equity
	Shares	Amount
Balance, December 31, 2019	38,034,389	$	4	$	54,694	$	1,176	$	93	$	55,967
Net income	—	—		—		14,666		—		14,666
Issuance of common stock:
Exercise of stock options	890	—		(4)		—		—		(4)
Share-based compensation	—	—		1,408		—		—		1,408
Adjustment from foreign currency translation, net	—	—		—		—		(141)		(141)
Balance, June 30, 2020	38,035,279	$	4	$	56,098	$	15,842	$	(48)	$	71,896


	Six Months Ended
	Common Stock					Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Income (Loss)		Total Stockholders' Equity
	Shares	Amount
Balance, December 31, 2018	36,182,783	$	4	$	61,889	$	(17,418)	$	(2)	$	44,473
Adoption of revenue recognition accounting pronouncement	—	—		—		(1,015)		—		(1,015)
Warrant exchange	1,800,065	—		(10,031)		—		—		(10,031)
Net income	—	—		—		10,230		—		10,230
Share-based compensation	—	—		1,260		—		—		1,260
Adjustment from foreign currency translation, net	—	—		—		—		43		43
Balance, June 30, 2019	37,982,848	$	4	$	53,118	$	(8,203)	$	41	$	44,960

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Index

INTERNATIONAL MONEY EXPRESS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands, unaudited)


	Six Months Ended June 30,
	2020		2019
Cash flows from operating activities:
Net income	$	14,666	$	10,230
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	5,381		6,307
Share-based compensation	1,408		1,260
Provision for bad debt	1,101		552
Debt origination costs amortization	376		358
Deferred income tax provision, net	658		672
Loss on disposal of property and equipment	131		113
Total adjustments	9,055		9,262
Changes in operating assets and liabilities:
Accounts receivable	(21,485)		(57,861)
Prepaid wires, net	11,635		17,954
Prepaid expenses and other assets	1,008		726
Wire transfers and money orders payable, net	8,648		47,222
Accounts payable and accrued other liabilities	(2,054)		4,553
Net cash provided by operating activities	21,473		32,086

Cash flows from investing activities:
Purchases of property and equipment	(1,591)		(2,413)
Acquisition of agent locations	—		(250)
Net cash used in investing activities	(1,591)		(2,663)

Cash flows from financing activities:
Borrowings under term loan	—		12,000
Repayments of term loan	(3,830)		(2,402)
Borrowings under revolving loan, net	—		5,000
Debt origination costs	—		(240)
Cash paid in warrant exchange	—		(10,031)
Net cash (used in) provided by financing activities	(3,830)		4,327

Effect of exchange rate changes on cash	(184)		105

Net increase in cash	15,868		33,855

Cash, beginning of period	86,117		73,029

Cash, end of period	$	101,985	$	106,884

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Index

INTERNATIONAL MONEY EXPRESS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

(in thousands, unaudited)


	Six Months Ended June 30,
	2020		2019
Supplemental disclosure of cash flow information:
Cash paid for interest	$	3,133	$	3,783
Cash paid for income taxes	$	2,403	$	1,060

Supplemental disclosure of non-cash investing activity:
Agent business acquired in exchange for receivables	$	—	$	85

Supplemental disclosure of non-cash financing activity:
Issuance of common stock for cashless exercise of options	$	4	$	—

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Index

INTERNATIONAL MONEY EXPRESS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 – BUSINESS AND ACCOUNTING POLICIES

International Money Express, Inc. (the “Company” or “us” or “we”) operates as a money transmitter between the United States of America (“U.S.”) 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 33 Company-operated stores throughout the U.S. and Canada.

The condensed consolidated financial statements of the Company include Intermex, its wholly-owned indirect subsidiary, Intermex Wire Transfer, LLC (“LLC”), Intermex Wire Transfers de Guatemala, S.A. (“Intermex Guatemala”) - 99.8% owned by LLC, Intermex Wire Transfer de Mexico, S.A. and Intermex Transfers de Mexico, S.A. (“Intermex Mexico”) - 98% owned by LLC, Intermex Wire Transfer Corp. - 100% owned by LLC, Intermex Wire Transfer II, LLC - 100% owned by LLC and Canada International Transfers Corp. - 100% owned by LLC. Non-controlling interest in the results of operations of consolidated subsidiaries represents the minority stockholders’ share of the profit or loss of Intermex Mexico and Intermex Guatemala. The non-controlling interest asset and non-controlling interest in the portion of the profit or loss from operations of these subsidiaries were not recorded by the Company as they are considered immaterial.

The condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”). All significant inter-company balances and transactions have been eliminated from the condensed consolidated financial statements.

The Company’s interim condensed consolidated financial statements and related notes are unaudited. In the opinion of management, all adjustments (including normal recurring adjustments) and disclosures necessary for a fair presentation of these interim financial statements have been included. The results reported in these interim financial statements are not necessarily indicative of the results that may be reported for the entire year. Certain information and footnote disclosures required by GAAP have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

Risks and Uncertainties

On January 30, 2020, the World Health Organization (“WHO”) announced a global health emergency because of the outbreak of a new strain of coronavirus (“COVID-19”) and the risks to the international community as the virus spreads globally beyond its point of origin. In March 2020, the WHO classified the COVID-19 outbreak as a pandemic, based on the rapid increase in exposure globally and national, state and local governments in the jurisdictions where we operate and serve our customers imposed emergency restrictions to mitigate the spread of the virus.

Starting in March 2020, governmental authorities took measures that restricted the normal course of operations of businesses and consumers. Although those restrictions were in place for most of the second quarter and affected the Company, sending and paying agents as well as consumers and their beneficiaries, those measures did not have a material adverse effect on the Company’s financial condition, results of operations and cash flows for the three and six month periods ended June 30, 2020.

The Company and our sending agents are considered essential businesses under current federal guidance; however, the Company’s business is dependent upon the willingness and ability of its employees, network of agents and consumers to conduct money transfer services and the ultimate effects of the economic disruption caused by the pandemic and responses thereto. Although the Company’s operations continued effectively despite social distancing and other measures taken in response to the pandemic, the ultimate impact of the COVID-19 pandemic on our results of operations and financial condition is dependent on future developments, including the duration of the pandemic and the related extent of its severity, as well as its impact on the economic conditions, particularly the level of unemployment of our customers, all of which remain uncertain and cannot be predicted at this time. If the global response to contain the COVID-19 pandemic escalates further or is unsuccessful, or if governmental decisions to ease pandemic related restrictions are ineffective, premature, counterproductive or reversed, the Company could experience a material adverse effect on its business, financial condition, results of operations and cash flows.

Accounting Pronouncements

The Financial Accounting Standards Board (“FASB”) issued guidance, Leases (Topic 842), to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet for those leases classified as operating leases under previous GAAP. The guidance requires that a lessee recognizes a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term on the balance sheet. This guidance is required to be adopted by the Company on January 1, 2022 and may be applied using either the earliest period adjustment method or the modified retrospective approach. The adoption of this guidance is not expected to have a material impact on the condensed consolidated financial statements.

Index

The FASB issued amended guidance, Intangibles – Goodwill and other (Topic 350): Simplifying the Test for Goodwill Impairment. The amended standard simplifies how an entity tests goodwill by eliminating Step 2 of the goodwill impairment test related to measuring an impairment charge. Instead, impairment will be recorded for the amount that the carrying amount of a reporting unit exceeds its fair value. This new guidance is effective for the Company on January 1, 2021. The adoption of this guidance is not expected to have a material impact on the condensed consolidated financial statements.

The FASB issued amended guidance, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. The amended standard requires implementation costs incurred by customers in cloud computing arrangements to be deferred and recognized over the term of the arrangement, if those costs would be capitalized by the customers in a software licensing arrangement. This new guidance is effective for the Company on January 1, 2021. The Company is currently evaluating the impact this guidance will have on the condensed consolidated financial statements.

The FASB issued guidance, Simplifying the Accounting for Income Taxes (Topic 740), which removes certain exceptions to the general principles in Topic 740 and improves consistent application of and simplifies GAAP for other areas of Topic 740 by clarifying and amending existing guidance. This new guidance is effective for the Company on January 1, 2021. The adoption of this guidance is not expected to have a material impact on the condensed consolidated financial statements.

The FASB issued guidance, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, regarding the measurement of credit losses for certain financial instruments. The new standard replaces the incurred loss model with a current expected credit loss (“CECL”) model. The CECL model is based on historical experience, adjusted for current conditions and reasonable and supportable forecasts. The Company is currently required to adopt the new standard on January 1, 2023. The Company is currently evaluating the impact this guidance will have on the condensed consolidated financial statements.

The FASB issued guidance, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedient and exceptions for applying generally accepted accounting principles to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. In response to the concerns about structural risks of interbank offered rates (“IBORs”) and, particularly, the risk of cessation of the LIBOR, regulators in several jurisdictions around the world have undertaken reference rate reform initiatives to identify alternative reference rates that are more observable or transaction based and less susceptible to manipulation. This accounting standards update provides companies with optional guidance to ease the potential accounting burden associated with transitioning away from reference rates that are expected to be discontinued. This new guidance can be adopted by the Company no later than December 1, 2022, with early adoption permitted. The adoption of this guidance is not expected to have a material impact on the condensed consolidated financial statements.

NOTE 2 – REVENUES

The Company recognized revenues from contracts with customers for the three and six months ended June 30, 2020 and 2019, as follows (in thousands):


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
Wire transfer and money order fees	$	72,965	$	70,833	$	140,281	$	129,491
Discounts and promotions	(172)		(343)		(393)		(550)
Wire transfer and money order fees, net	72,793		70,490		139,888		128,941
Foreign exchange gain, net	11,660		11,623		21,214		21,025
Other income	609		562		1,211		1,058
Total revenues	$	85,062	$	82,675	$	162,313	$	151,024

There are no significant initial costs incurred to obtain contracts with customers, although the Company has a loyalty program under which customers earn one point for each wire transfer completed. Points can be redeemed for a discounted wire transaction fee or foreign exchange rate. The discounts vary by country, and the earned points expire if the customer has not initiated and completed an eligible wire transfer transaction within the immediately preceding 180 day period. In addition, earned points will expire 30 days after the end of the program. Therefore, because the loyalty program benefits represent a future performance obligation, a portion of the initial consideration is recorded as deferred revenue (see Note 7) and a corresponding loyalty program expense is recorded as contra revenue. Revenue from this performance obligation is recognized upon customers redeeming points or upon expiration of any points outstanding.

Except for the loyalty program discussed above, our revenues include only one performance obligation, which is to collect the customer’s money and make funds available for payment, generally on the same day, to a designated recipient in the currency requested.

Index

The Company also offers several other services, including money orders and check cashing, for which revenue is derived from a fee per transaction. For substantially all of the Company’s revenues, the Company acts as principal in the transactions and reports revenue on a gross basis, because the Company controls the service at all times prior to transfer to the customer, is primarily responsible for fulfilling the customer contracts, has the risk of loss and has the ability to establish transaction prices.

NOTE 3 – ACCOUNTS RECEIVABLE, NET OF ALLOWANCE

Accounts receivable represent outstanding balances from sending agents for pending wire transfers or money orders from our customers. The outstanding balance consists of the following (in thousands):


	June 30, 2020		December 31, 2019
Accounts receivable	$	60,831	$	40,513
Allowance for credit losses	(808)		(759)
Accounts receivable, net	$	60,023	$	39,754

The changes in the allowance for credit losses is as follows (in thousands):


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
Beginning balance	$	1,477	$	1,242	$	1,236	$	1,290
Provision	364		192		1,101		552
Charge-offs	(589)		(272)		(1,186)		(728)
Recoveries	98		74		199		122
Ending Balance	$	1,350	$	1,236	$	1,350	$	1,236

The allowance for credit losses allocated by financial instrument category is as follows (in thousands):


	June 30, 2020		December 31, 2019
Accounts receivable	$	808	$	759
Notes receivable ⁽¹⁾	542		477
Allowance for credit losses	$	1,350	$	1,236

(1) This allowance relates to $1.5 million and $1.3 million in notes receivable from sending agents as of June 30, 2020 and December 31, 2019, respectively. The current portion of these notes amounted to $1.1 million and $1.0 million as of June 30, 2020 and December 31, 2019, respectively, The net current portion is included in prepaid expenses and other current assets (see Note 4) and the net long-term portion is included in other assets in the condensed consolidated balance sheets.

NOTE 4 – PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets consisted of the following (in thousands):


	June 30, 2020		December 31, 2019
Prepaid insurance	$	188	$	404
Prepaid fees	786		1,211
Notes receivable, net of allowance	675		648
Prepaid taxes	—		1,025
Other prepaid expenses and current assets	887		867
	$	2,536	$	4,155

NOTE 5 – GOODWILL AND INTANGIBLE ASSETS

Intangible assets on the condensed consolidated balance sheets of the Company consist of goodwill, agent relationships, trade name, developed technology and other intangible assets. Agent relationships, trade name and developed technology are all amortized over 15 years using an accelerated method that correlates with the projected realization of the benefit. The agent relationships intangible represents the network of independent sending agents; trade name refers to the Intermex name, branded on all agent locations and well recognized in the market; and developed technology includes the state-of-the-art system that the Company has continued to develop and improve upon over the past 20 years. Other intangible assets primarily relate to the acquisition of certain agent locations or Company-operated stores, which are amortized on a straight line basis over 10 years. The determination of our intangible fair values includes several assumptions that

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are subject to various risks and uncertainties. Management believes it has made reasonable estimates and judgments concerning these risks and uncertainties. See below for further discussion on impairment.

The following table presents the changes in goodwill and intangible assets (in thousands):


	Goodwill		Intangibles
Balance at December 31, 2019	$	36,260	$	27,381
Amortization expense	—		(3,476)
Balance at June 30, 2020	$	36,260	$	23,905

Amortization expense related to intangible assets for the next five years and thereafter is as follows (in thousands):


2020	$	3,475
2021	5,161
2022	3,997
2023	2,989
2024	2,270
Thereafter	6,013
	$	23,905

Due to the COVID-19 pandemic that has resulted in a deterioration in macro-economic conditions and increased stock market volatility, the Company performed a qualitative assessment of goodwill during the second quarter of 2020 to determine whether a quantitative test was necessary. Although our fair value measurements include some significant inputs, such as the Company’s forecasted revenues and assumed turnover of agent locations, that may have or will be affected by the pandemic, we believe that as of June 30, 2020, the effects of the pandemic have not had a material negative effect on the Company’s financial condition, results of operations and cash flows. As a result, there are currently no indicators that the fair value of the Company’s goodwill is below its carrying amount based on our qualitative assessment. Therefore, we determined that a quantitative test was not necessary as of June 30, 2020.

For our finite-lived intangibles, we also assessed during the second quarter of 2020 whether there were events or changes in circumstances that indicated that the carrying amounts of our intangible assets may not be recoverable. Similar to our goodwill assessment above, we believe that as of June 30, 2020, the effects of the COVID-19 pandemic have not had a material negative effect on the company’s financial condition, results of operations and cash flows. As a result, there are currently no indicators that could require an impairment test. Therefore, we determined that the carrying amounts of our intangibles are recoverable as of June 30, 2020.

We will continue to monitor this evolving pandemic to determine the need, if any, to further evaluate for impairment our goodwill and intangible assets.

NOTE 6 – WIRE TRANSFERS AND MONEY ORDERS PAYABLE, NET

Wire transfers and money orders payable, net consisted of the following (in thousands):


	June 30, 2020		December 31, 2019
Wire transfers payable, net	$	19,762	$	16,058
Customer voided wires payable	13,114		10,937
Money orders payable	14,836		13,202
	$	47,712	$	40,197

Customer voided wires payable consist of wire transfers that were not completed because the recipient did not collect the funds within 30 days and the sender has not claimed the funds and, therefore, are considered unclaimed property. Unclaimed property laws of each state in the United States in which we operate, the District of Columbia, and Puerto Rico require us to track certain information for all of our money remittances and payment instruments and, if the funds underlying such remittances and instruments are unclaimed at the end of an applicable statutory abandonment period, require us to remit the proceeds of the unclaimed property to the appropriate jurisdiction. Applicable statutory abandonment periods range from three to seven years.

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NOTE 7 – ACCRUED AND OTHER LIABILITIES

Accrued and other liabilities consisted of the following (in thousands):


	June 30, 2020		December 31, 2019
Commissions payable to sending agents	$	11,163	$	10,124
Accrued legal settlement (see Note 13)	2,925		3,250
Accrued salaries and benefits	2,008		2,374
Accrued bank charges	1,137		976
Accrued interest	12		17
Accrued legal fees	5		120
Accrued other professional fees	700		655
Accrued taxes	3,423		2,345
Deferred revenue loyalty program	2,494		2,495
Other	761		718
	$	24,628	$	23,074

The following table shows the changes in the deferred revenue loyalty program liability (in thousands):


Balance, December 31, 2019	$	2,495
Revenue deferred during the period	852
Revenue recognized during the period	(853)
Balance, June 30, 2020	$	2,494

NOTE 8 – DEBT

Debt consisted of the following (in thousands):


	June 30, 2020		December 31, 2019

Term loan	$	93,214	$	97,044

Less: Current portion of long-term debt ⁽¹⁾	(7,044)		(7,044)
Less: Debt origination costs	(2,069)		(2,377)
	$	84,101	$	87,623

(1)Current portion of long-term debt is net of debt origination costs of approximately $0.6 million both at June 30, 2020 and December 31, 2019.

The Company and certain of its domestic subsidiaries as borrowers (the “Loan Parties”) have a financing agreement (as amended, the “Credit Agreement”) with a group of banking institutions. The Credit Agreement provides for a $35 million revolving credit facility, a $90 million term loan facility and an up to $30 million incremental facility of which $12 million was utilized in the second quarter of 2019. The Credit Agreement also provides for the issuance of letters of credit, which would reduce availability under the revolving credit facility. The maturity date of the Credit Agreement is November 7, 2023. As of June 30, 2020 and December 31, 2019, there were no outstanding amounts drawn on the revolving credit facility.

Interest on the term loan facility and revolving credit facility under the Credit Agreement is determined by reference to either LIBOR or a “base rate”, in each case plus an applicable margin of 4.50% per annum for LIBOR loans or 3.50% per annum for base rate loans. 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 six months ended June 30, 2020 for the term loan and revolving credit facility were 6.23% and 1.09%, respectively.

The principal amount of the term loan facility under the Credit Agreement must be repaid in consecutive quarterly installments of 5.0% in year 1, 7.5% in years 2 and 3, 10.0% in years 4 and 5, in each case on the last day of each quarter, which commenced in March 2019 with a final payment at maturity. The loans under the Credit Agreement may be prepaid at any time without premium or penalty.

The Credit Agreement 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, make dividends and distributions, change the nature of their businesses, enter into certain transactions with affiliates or amend the terms of material indebtedness.

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The Credit Agreement also 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