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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
     ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: December 31, 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)

Delaware47-4219082
(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 classTrading symbol(s)Name of each exchange on which registered
Common stock ($0.0001 par value)IMXI
Nasdaq Capital Market

Securities registered pursuant to Section 12(g) of the Act
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes ☐ No ☒

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 filerAccelerated filer
Non-accelerated filerSmaller 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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.

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

As of June 30, 2020, the aggregate market value of the voting stock held by non-affiliates was $307,492,116 based on the closing sale price of $12.46 of the common stock as reported on the Nasdaq Capital Market.

As of March 5, 2021, 38,218,156 shares of the registrants common stock, par value $0.0001 per share, were outstanding. The registrant has no other class of common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

None.



INTERNATIONAL MONEY EXPRESS, INC.
INDEX
Page
PART I
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
PART II
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
PART III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
PART IV
Item 15.
Item 16.



Index
PART I
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K 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-K 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. Factors that could cause or contribute to such differences include, but are not limited to, those described in Item 1A, “Risk Factors” in this Annual Report on Form 10-K and the following:
changes in applicable laws or regulations;
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;
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 and Canada;
changes in U.S. tax laws;
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;
changes in immigration laws and their enforcement;
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 “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of this Annual Report on Form 10-K, as well as any additional risk factors that may be described in our other filings with the SEC from time to time.
All forward-looking statements that are made or attributable to us are expressly qualified in their entirety by this cautionary notice. The forward-looking statements included herein are only made as of the date of this Annual Report on Form 10-K. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
1

Index
ITEM 1.    BUSINESS
Overview
On July 26, 2018, International Money Express, Inc. (formerly a special purpose acquisition company called FinTech Acquisition Corp. II) consummated a merger transaction (the “Merger”) by which it acquired Intermex Holdings II, Inc. (“Intermex”) and its subsidiaries that comprise our operations. In connection with the closing of the Merger, we changed our name to International Money Express, Inc. (the “Company”). Unless the context herein otherwise provides, the “Company” refers to the combined company following the Merger and, together with their respective subsidiaries, “FinTech” refers to the registrant prior to the closing of the Merger and “Intermex” refers to Intermex Holdings II, Inc. prior to the closing of the Merger. Reference to the Company and its business operations and financial information as it existed pre-Merger refers to Intermex.
We conduct our business primarily through our operating subsidiary, Intermex Wire Transfer, LLC.
Intermex is a rapidly growing and leading money remittance services company focused primarily on the United States to Latin America and the Caribbean (“LAC”) corridor, which includes Mexico, Central and South America and the Caribbean. In 2019, we expanded our services to allow remittances to Africa 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 our customers 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 customers can send money to beneficiaries in 17 LAC countries, seven countries in Africa and two countries in Asia. Our services are accessible in person through over 100,000 sending and paying agents and Company-operated stores, as well as online and via Internet-enabled mobile devices. Additionally, we have expanded our product and service portfolio to 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 remittance business.
Money remittance services to LAC countries, primarily Mexico and Guatemala, are the primary source of our revenue. These services involve the movement of funds on behalf of an originating customer for receipt by a designated beneficiary at a designated receiving location. Our remittances to LAC countries are primarily generated in the United States by customers 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 customers with flexibility and convenience to help them meet their financial needs. We believe many of our customers 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 our customers (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 also earn revenue through our daily management of currency exchange spreads.
Our money remittance services enable our customers 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 34 Company-operated stores. Transactions are processed and payments are 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 2018 through December 31, 2020, we have grown our agent network by approximately 40% and increased our remittance transactions volume by more than 33%. In 2020, we processed approximately 32 million remittances, representing over 12% growth in transactions as compared to 2019.
Our Competitive Strengths
Primary focus on the LAC corridor. Unlike many of our competitors, who we believe prioritize global reach over growth and profitability, we are focused on one or two geographical regions. We believe the LAC corridor provides an attractive operating environment with significant opportunity for future growth. According to latest available data published by the World Bank, the LAC corridor continues to be the most rapidly growing remittance corridor in the world.
Highly scalable, proprietary software platform. We provide our money remittance services utilizing our internally developed proprietary software systems, which we believe enhance the productivity of our network of agents, enabling them to quickly, reliably and cost-effectively process remittance transactions. Our proprietary software systems were designed to incorporate real-time compliance functionality, which improves our regulatory compliance and helps to minimize fraud. We have developed a platform that has the capacity to handle traffic well in excess of the number of transactions we currently process. Our money remittance platform has proven reliable, with our 2020 downtime being less than 0.05%.
Highly selective agent recruitment process designed to identify productive long-term partners. We strategically target agents for our network only after a metric-based analysis of potential productivity and a thorough vetting process. In our agent selection process, we
2

Index
focus on geographic locations that we believe are likely to have high customer volume and demand for our services. By closely monitoring individual agent performance and money remittance trends, we can offer our agents real-time technical support and marketing assistance to help increase their productivity and remittance volume.
Strong relationships with major banks and financial institutions. Our relationships with clearing, check processing, trading and exchange rate and cash management banks are critical to an efficient and reliable remittance network. We benefit from our strong and long-term relationships with a number of large banks and financial institutions. We maintain strong relationships with a number of other national and regional banking and financial institutions in the United States and Latin America. For example, we have maintained a long-term relationship with Wells Fargo, Bank of America and US Bank, among others. Due to increasing regulatory scrutiny of banks and financial institutions, we believe that new banking relationships may be difficult to develop for new, start-up competitors in the industry, hence creating a barrier to entry to new competition and making our existing relationships a competitive advantage.
Powerful brand with strong consumer awareness and loyalty in the LAC corridor. We believe we are a leading money remittance provider from the United States to the LAC corridor, processing 18.5% of the aggregate volume of remittances to Mexico according to the latest available data published by the Central Bank of Mexico in 2020 and 27.1% of the aggregate volume of remittances to Guatemala according to the latest available data published by the Central Bank of Guatemala in 2020. We believe that our customers associate the Intermex brand with reliability, strong customer service and the ability to safely and efficiently remit their funds. The information contained in this paragraph is based on “Revenues by Workers’ Remittances” published in the Central Bank of Mexico’s website and “Income from family remittance” published in the Central Bank of Guatemala’s website.
Strong compliance processes and procedures. We operate in a highly-regulated environment and are reviewed by regulators and external auditors periodically. We maintain a comprehensive and rigorous compliance process with policies, procedures and internal controls designed to exceed current regulatory requirements. Our software also includes embedded compliance systems that provide real-time transaction alerts and Office of Foreign Assets Control (“OFAC”) screening. Our risk and compliance management tools include programs by Equifax, Experian, LexisNexis and TransUnion, among others.
Experienced and proven management team. Our management team consists of industry veterans with a track record of achieving profitable growth. Our team is led by our Chief Executive Officer, Robert Lisy, with a successful 30-year track record in the retail financial services and electronic payment processing industry.
Our Growth Strategy
We believe we are well positioned to drive continued growth by executing on the following core strategies:
Expand our market share in our largest corridors. The two largest remittance corridors we serve are the United States to Mexico and United States to Guatemala. According to the latest available data in the World Bank Remittance Matrix, the United States to Mexico remittance continues to be one of the largest in the world. We aim to continue to expand our market share in those states where we are currently well-established and poised for continued profitable growth within those markets via targeted regional penetration. We believe that we can leverage our current customer data to increase repeat customer usage, track and effectively recapture one-time users of our service and improve sending agent productivity to drive growth in these states. We are also staging a targeted marketing effort to realize significantly increased market share growth in large states where we are underrepresented.
Expand our services into new corridors. We believe that there is significant room to grow our business in underserved geographic regions in the LAC corridor where there is demand from customers and agents for our value-added approach to money remittances. Specifically, we are targeting future growth opportunities via new corridors from the United States to other non-Spanish speaking regions, including the Caribbean and other continents. In 2019, we expanded our services to allow remittances to Africa from the United States and also began offering sending services from Canada to Latin America and Africa. In 2020, we achieved strong 5.3% and 13.2% growth in remittance volume to our emerging markets of El Salvador and Honduras, respectively, compared to 2019.
Leverage our technology in the business-to-business market. We believe that our money remittance platform has significant excess capacity. We believe we can leverage this capacity to sell business-to-business solutions to third parties, such as banks and major retailers.

Continue to grow online and mobile remittance channels. Our money remittance platform currently enables our customers to send funds from the United States to the LAC corridor and Africa through the Internet via Intermexonline.com and on their Internet-enabled mobile devices. We believe these channels not only expand our potential customer base as digital transaction capabilities become more relevant to LAC consumers but also benefit from secular and demographic trends as consumers continue to migrate to conducting financial transactions online.
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Segments
Our business is organized around one reportable segment that provides money transmittal services primarily between the 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 34 Company-operated stores throughout the U.S. 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.

Operations and Services
Money remittance services to LAC countries, primarily Mexico and Guatemala, are the primary source of our revenue. These services involve the movement of funds on behalf of an originating customer for receipt by a designated beneficiary at a designated receiving location. Our remittances to LAC countries are primarily generated in the United States by customers 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 customers with flexibility and convenience to help them meet their financial needs. We believe many of our customers 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 our customers (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 also earn revenue through our daily management of currency exchange spreads.
The majority of our money remittance transactions are generated through our agent network of retail locations and Company-operated stores where the transaction is processed and payment is collected by our sending agent. Those funds become available for pickup by the beneficiary at the designated receiving destination, usually within minutes, at any Intermex payer location. In select countries, the designated recipient may also receive the remitted funds via a deposit directly to the recipient’s bank account, mobile phone account or prepaid card. Our locations in the United States and Canada, also referred to as our sending agents, tend to be individual establishments, such as multi-service stores, grocery stores, convenience stores, bodegas and other retail locations. Our payers in LAC countries are referred to as paying agents, and generally consist of large banks and financial institutions or large retail chains. Grupo Elektra, S.A.B. de C.V. (“Elektra”) is our largest paying agent and processes a significant portion of remittances in the LAC corridor. Each of our sending agents and our paying agents are primarily operated by third-party businesses where our money remittance services are offered. Additionally, we operate a small number of retail locations in the United States, which we refer to as Company-operated stores and where our money remittance services are available. We also operate subsidiary payer networks in Mexico under the Pago Express brand and in Guatemala under the Intermex brand. These networks contribute payer locations that reach some of the most remote areas in those countries, providing increased convenience to our customers in the United States, Canada, Mexico and Guatemala.
At our agent sending locations, our customers may initiate a transaction directly with an agent, or through a direct-dialed telephone conversation from our agent location to our call centers. Many of our sending agents operate in locations that are open outside of traditional banking hours, including nights and weekends. Our sending agents understand the markets that they serve and coordinate with our sales and marketing teams to develop business plans for those markets. We hold promotional events for our sending agents to help familiarize them with the Intermex brand and to incent the agents to promote our services to customers.
Our money remittance services are also available on the Internet via Intermexonline.com, enabling customers to send money twenty-four hours a day conveniently from their computer or Internet-enabled mobile device. Those funds can be sent to any of our paying agent locations or to a recipient’s bank account, funding the transaction using debit card, credit card, or through electronic funds transfer processed through the automated clearing house (“ACH”) payment system. Internet-based money transmission services do not comprise a material percentage of the Company’s overall business.
We maintain call centers in Mexico and Guatemala, providing call center services 365 days per year and customer service in both English and Spanish, as well as the possibility of service in many of the regional dialects that our customers speak. Our call centers are able to provide customer service for inbound customer calls and have technology available for direct calls from customers at our agent locations in processing remittance transactions.
Cash Management Bank Relationships
We buy and sell a number of global currencies and maintain a network of settlement accounts to facilitate the timely funding of money remittances and foreign exchange trades. Our relationships with clearing, check processing, trading and exchange rate and cash management banks are critical to an efficient and reliable remittance network. We benefit from our strong and long-term relationships with a number of large banks and financial institutions. We maintain strong relationships with a number of other national and regional banking and financial institutions in the United States, Canada and Latin America. In addition, we have benefited from our 15-year relationship with US Bank, which manages our main operating account, and from strong relationships with Bancomer, Wells Fargo, Bank of America and KeyBank as our primary banks for exchange rate management with respect to the foreign currencies.
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Information Technology
Currently, all of our money processing software is proprietary and has been developed primarily by our internal software development team. Our money processing software acts as a point of sale for our money remittance transactions and incorporates real-time compliance functionality, which improves our regulatory compliance and helps to minimize fraud. Our money processing software is critical to our operations while our back-office software is critical for settling our transactions.
In addition to our money remittance software, we continue to develop programs and defenses against cyber-attacks. We are fully aligned with the cybersecurity framework, which is a voluntary framework that most companies in the financial services industry follow. We utilize a number of third-party vendors that monitor our systems and inform us of any attempted attacks. Our Chief Information Security Officer delivers an annual report to our board of directors regarding our cybersecurity policies and practices at least once during the fiscal year.
In addition to our proprietary and internally developed software systems, we have analytical data which enables us to analyze market trends, performance of market territories, agents’ performance and consumers’ habits in real time.
We continually invest in our technology platform that has the capacity to handle traffic well in excess of the number of transactions we currently process. A load balancing configuration between tier-1 datacenters, in addition to failover redundancy, provide uptime performance. Our technology platform has experienced limited downtime, with our 2020 downtime being less than 0.05%.
Our Transaction Processing Engine (“TPE”), developed through a combination of databases, web services and applications, allows us to process money remittances reliably and quickly by leveraging a proprietary rules engine to apply granular-level product feature customization. The TPE also leverages real-time risk management algorithms to improve our regulatory compliance and helps to minimize fraud.
Our internally developed and proprietary payer Application Programming Interface platform securely and efficiently integrates our TPE directly with the platforms of our paying agents, so that we can deliver money remittances quickly to our paying agents while optimizing the efficiency/speed of adding new payers to our network and integrating payers’ software and systems with our software and systems.
Intellectual Property
The Intermex brand is critical to our business. In the markets in which we compete, we derive benefit from our brand, as we believe the Intermex brand is recognized for its speed, cost effectiveness and reliability for money remittances throughout the United States, the LAC corridor, Canada and Africa. We use various trademarks and service marks in our business, including, but not limited, to Intermex, International Money Express, CheckDirect and Pago Express, some of which are registered in the United States and other countries. In addition, we rely on trade secret protection to protect certain proprietary rights in our information technology. See the section entitled “Information Technology” for more information.
We rely on a combination of patent, trademark and copyright laws and trade secret protection and invention assignment, confidentiality or license agreements to protect our intellectual property rights in products, services, expertise, and information. We believe the intellectual property rights in processing equipment, computer systems, software and business processes held by us and our subsidiaries provide us with a competitive advantage. We take appropriate measures to protect our intellectual property to the extent such intellectual property can be protected.
Sales and Marketing
The majority of our money remittance transactions are generated through our agent network of retail locations and Company-operated stores where the transaction is processed and payment is collected by our sending agent. Our agent locations include multi-service stores, grocery stores, convenience stores, bodegas and other retail locations. The vast majority of our agents are provided access to our proprietary money remittance software systems, while others have access to our combination telephone and fax/tablet set up, which we call telewire, enabling direct access to our call centers for money remittance services. In all of our independent sending agent locations the agent provides the physical infrastructure and staff required to complete the remittances, while we provide the central operating functions, such as transaction processing, settlement, marketing support, compliance training and support, and customer relationship management. We also maintain 34 Company-operated stores in the United States. We retain customer data, which enables us to increase repeat customer usage, track and effectively recapture one-time users of our service and improve sending agent productivity.
We market our services to customers in a number of ways, directly and indirectly through our sending agents and paying agents, promotional activities, traditional media and digital advertising, and our loyalty program, which we call “Interpuntos.” This loyalty program offers customers faster service at our sending agent locations and the ability to earn points with each transaction that are redeemable for rewards, such as reduced transaction fees or more favorable foreign exchange rates.
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Our Industry
We are a rapidly growing and leading money remittance services company primarily focused on the United States to the LAC corridor. We utilize our proprietary technology to deliver convenient, reliable and value-added services to our customers through a broad network of sending and paying agents. The two largest remittance corridors we serve are United States to Mexico and United States to Guatemala. According to the latest information available from the World Bank Remittance Matrix, the United States to Mexico remittance corridor was the largest in the world in 2020.
Trends in the cross-border money remittance business tend to correlate to immigration trends, global economic opportunity and related employment levels in certain industries such as construction, information, manufacturing, agriculture and certain service industries.
Throughout 2020, Latin American political and economic conditions remained unstable, as evidenced by high unemployment rates in key markets, currency reserves, currency controls, restricted lending activity, weak currencies and low consumer confidence, among other factors, in addition to the effects of the ongoing COVID pandemic. Specifically, continued political and economic unrest in parts of Mexico 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 party 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.
Another significant trend impacting the money remittance industry is increasing regulation on banks, making it difficult for money remittance companies to have strong banking relationships. Regulations in the United States and elsewhere focus, in part, on cybersecurity and consumer protection. Regulations require money remittance providers, banks and other financial institutions to develop systems to prevent, detect, monitor and report certain transactions.
Government Regulation
As a non-bank financial institution in the United States, we are regulated by the Department of Treasury, the Internal Revenue Service, the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”), the Consumer Financial Protection Bureau (“CFPB”), the Department of Banking and Finance of the State of Florida and additionally by the various regulatory institutions of those states in which we hold an operating license. We are duly registered as a Money Service Business (“MSB”) with FinCEN, the financial intelligence unit of the U.S. Department of the Treasury. We are also subject to a wide range of regulations in the United States and other countries, including anti-money laundering laws and regulations; financial services regulations; currency control regulations; anti-bribery laws; money transfer and payment instrument licensing laws; escheatment laws; privacy, data protection and information security laws, such as the Graham-Leach-Bliley Act (“GLBA”); and consumer disclosure and consumer protection laws, such as the California Consumer Privacy Act (“CCPA”).

Regulators worldwide are exercising heightened supervision of money remittance providers and requiring increased efforts to ensure compliance. Failure to comply with any applicable laws and regulations could result in restrictions on our ability to provide our products and services, as well as the potential imposition of civil fines and possibly criminal penalties. We continually monitor and enhance our compliance programs in light of the most recent legal and regulatory changes.
Anti-Money Laundering Compliance. Our money remittance services are subject to anti-money laundering laws and regulations of the United States, including the Bank Secrecy Act (“BSA”), as amended by the USA PATRIOT Act of 2001, as well as state laws and regulations and the anti-money laundering laws and regulations in many of the countries in which we operate. The countries in which we operate may require one or more of the following:
reporting of large cash transactions and suspicious activity;
transaction screening against government watch-lists, including the watch-list maintained by OFAC;
prohibition of transactions in, to or from certain countries, governments, individuals and entities;
limitations on amounts that may be transferred by a customer or from a jurisdiction at any one time or over specified periods of time, which require aggregation over multiple transactions;
customer information gathering and reporting requirements;
customer disclosure requirements, including language requirements and foreign currency restrictions;
notification requirements as to the identity of contracting agents, governmental approval of contracting agents or requirements and limitations on contract terms with our agents;
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registration or licensing of us or our agents with a state or federal agency in the United States or with the central bank or other proper authority in a foreign country; and
minimum capital or capital adequacy requirements.
Anti-money laundering regulations are constantly evolving and vary from country to country. We continuously monitor our compliance with anti-money laundering regulations and implement policies and procedures in light of the most current legal requirements. Our money remittance services are primarily offered through third-party agents under contract with us, but we do not directly control these agents. As a MSB, we and our agents are required to establish anti-money laundering compliance programs that include internal policies and controls; a designated compliance officer; employee training and an independent review function. We have developed an anti-money laundering training manual and a program to assist with the education of our agents and employees on the applicable rules and regulations. We also offer in-person and online training as part of our agent compliance training program, engage in various activities to enable agent oversight and have adopted compliance policies that outline key principles of our compliance program to our agents. We have developed a regulatory compliance department, under the direction of our Chief Compliance Officer, whose foremost responsibility is to monitor transactions, detect suspicious activity, maintain financial records and train our employees and agents. An independent third-party consulting firm periodically reviews our policies and procedures to ensure the efficacy of our anti-money laundering and regulatory compliance program. Our key milestones in the compliance process include (1) the entry of the transaction by the sending agent requires completion of mandatory fields and identification requirements, (2) the sender and receiver are screened against government required lists (for OFAC and other purposes), (3) the transaction, before sent to the paying agent, is screened and any flagged exceptions are sent to the compliance unit for investigation and release or rejection and (4) the transaction is screened for limit restrictions, velocity levels, structuring and identification requirements.
In connection with and when required by regulatory requirements we make information available to certain U.S. federal and state, as well as certain foreign, government agencies to assist in the prevention of money laundering, terrorist financing and other illegal activities and pursuant to legal obligations and authorizations. In certain circumstances, we may be required by government agencies to deny transactions that may be related to persons suspected of money laundering, terrorist financing or other illegal activities, and it is possible that we may inadvertently deny transactions from customers who are making legal money transfers.
Licensing. In most countries, either we or our agents are required to obtain licenses or to register with a government authority in order to offer money transfer services. Almost all states in the United States, the District of Columbia and Puerto Rico, as well as certain provinces in Canada, require us to be licensed to conduct business within their jurisdictions. Licensing requirements may include requirements related to net worth, providing surety bonds and letters of credit, operational procedures, agent oversight and maintenance of reserves to cover outstanding payment obligations. Acceptable forms of such reserves will vary based on jurisdiction and the applicable regulator, but generally include cash and cash equivalents, U.S. government securities and other highly rated debt instruments. Many regulators require us to file reports on a quarterly or more frequent basis to verify our compliance with their requirements. We are also subject to periodic examinations by the governmental agencies with regulatory authority over our business.
Escheatment. 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. Certain foreign jurisdictions also have unclaimed property laws. These laws are evolving and are often unclear and inconsistent among jurisdictions, making compliance challenging. We have an ongoing program designed to comply with escheatment laws as they apply to our business.
Data Privacy and Cybersecurity. We are subject to federal, state and international laws and regulations relating to the collection, use, retention, security, transfer, storage and disposal of personally identifiable information of our customers, agents and employees. In the United States, we are subject to various federal privacy laws, including the Gramm-Leach-Bliley Act, which requires that financial institutions provide consumers with privacy notices and have in place policies and procedures regarding the safeguarding of personal information. We are also subject to privacy and data breach laws of various states. Outside the United States, we are subject to privacy laws of numerous countries and jurisdictions, which may be more restrictive than the U.S. laws and impose more stringent duties on companies or penalties for non-compliance. Government surveillance laws and data localization laws are evolving to address increased and changing threats and risks and as these laws evolve, they may be, or become, inconsistent from jurisdiction to jurisdiction.
Consumer Protection. The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) imposes additional regulatory requirements and creates additional regulatory oversight over us. The Dodd-Frank Act created the CFPB which issues and enforces consumer protection initiatives governing financial products and services, including money remittance services, in the United States through the CFPB’s Remittance Transfer Rule. Its requirements include: a disclosure requirement to provide consumers sending funds internationally from the United States enhanced pre-transaction written disclosures, an obligation to resolve certain errors, including errors that may be outside our control, and an obligation to cancel transactions that have not been completed at a customer’s request. As a “larger participant” in the market for international money transfers, we are subject to direct examination and supervision by the CFPB. We
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have modified our systems and consumer disclosures in light of the requirements of the Remittance Transfer Rule. In addition, under the Dodd-Frank Act, it is unlawful for any provider of consumer financial products or services to engage in unfair, deceptive, or abusive acts or practices. The CFPB has substantial rule making and enforcement authority to prevent unfair, deceptive, or abusive acts or practices in connection with any transaction with a consumer for a financial product or service. In addition, each state of the United States from time to time, may enact new laws and regulations, such as the CCPA, which creates new consumer rights relating to the access to, deletion of, and sharing of personal information that is collected by businesses. We have taken the necessary steps to review, modify and implement, as needed, policies and procedures designed to comply with the CFPB’s Remittance Transfer Rule. The Company’s communications, advertising and sales practices and that of its agent network are subject to regulation by, among other things, state and federal consumer protection laws including the Telephone Consumer Protection Act (“TCPA”). The FTC and the Federal Communications Commission have issued regulations under the TCPA that place restrictions on, among other things, unsolicited automated telephone calls or text messages to residential and wireless telephone subscribers by means of automatic telephone dialing systems and the use of prerecorded or artificial voice messages. The Company has taken steps to insulate itself from any such wrongful conduct, including conduct engaged in by its agents, by, among other things, requiring its agents to comply with the TCPA and such regulations.
Anti-Bribery Regulation. We are subject to regulations imposed by the Foreign Corrupt Practices Act (the “FCPA”) in the United States and similar anti-bribery laws in other jurisdictions. These laws may impose recordkeeping and other requirements on us. We maintain a compliance program designed to comply with anti-bribery laws and regulations applicable to our business.
Risk Management
At times, we are exposed to credit risk related to receivable balances from sending agents in the money remittance process if agents do not timely make payments to us.
Through our online and electronic platforms, we also are exposed to credit risk directly from transactions that are originated through means other than cash, such as credit, debit and “ACH” cards, and therefore are subject to “chargebacks” for insufficient funds or other collection impediments, such as fraud.
Given the nature of our business, we are also subject to liquidity risk as the timing of the funds to be remitted by our sending agents may extend in comparison with the timing when we make the funds available to the money transfer beneficiary in the destination country. Our current liquidity sources as well as our ability to generate free cash are mitigating factors in our liquidity management strategy.
We continually monitor fraud risk, perform credit reviews before adding agents to our network and conduct periodic credit risk analyses of agents and certain other parties that we transact with directly. For the fiscal year ended December 31, 2020, our provision for bad debt was equal to 0.5% of our total revenues.
Seasonality
We do not experience meaningful seasonality in our business. We may experience, however, increased transaction volume around certain holidays, such as Mother’s Day and the December holidays.
Competition
The market for money remittance services is very competitive. Our competitors include a small number of large money remittance providers, financial institutions, banks as well as a large number of small niche money remittance service providers that serve select regions. We compete with larger companies, such as The Western Union Company (“Western Union”), MoneyGram International, Inc. (“MoneyGram”) and Euronet Worldwide Inc. (“Euronet”) and a number of other smaller competitors. We generally compete for money remittance agents on the basis of value, service, quality, technical and operational differences, commission, and marketing efforts. As a philosophy, we sell credible solutions to 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, technology and brand recognition. We believe that our ongoing investments in new products and services will help us to remain competitive in our evolving business environment, given the increasing competition from digital platform providers.
We expect to encounter increasing competition as new technologies emerge that enable customers to send and receive money through a variety of channels, but we do not expect adoption rates to be as significant in the near term for the customer 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 customers and have expanded our channels through which our services are accessed to include online and mobile offerings in preparation for customer adoption.
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Human Capital
As of December 31, 2020, we had 262 employees in the United States, of whom 258 are full-time. We also have 449 employees in Mexico, of whom 217 are full-time, and 58 employees in Guatemala, all of whom are full time. As of December 31, 2020, 417 of the employees in Mexico were represented by a labor union.
We recruit employees with the skills and training relevant to functional responsibilities. Depending on the position, our recruitment reach can be national as well as local. New employees receive an orientation on the policies and practices of the Company. Also, they are provided industry-relevant compliance training and are introduced to our Code of Conduct and Ethics.
We invest in our workforce by offering competitive salaries, incentives, and benefits that are determined based on the preferences and needs of our employees. Our incentives are objective-based and we have a strong pay for performance culture that we believe drives superior results. All of our non-sale employees are eligible to participate in our incentive bonus plan, which is based on the achievement of certain personal objectives and our financial results.
During 2020 and due to the COVID-19 pandemic, we made the well-being and health of our employees a top priority. We adjusted standard operating procedures within our business operations to ensure continued worker safety. These procedures included reconfiguring facilities to reduce employee density, expanded and more frequent cleaning within facilities, implementation of appropriate and mandated distancing programs, employee temperature monitoring and requiring use of certain personal protective equipment at our U.S. headquarters and call centers in Mexico and Guatemala.
Available Information
The Company was incorporated as a Delaware corporation on May 28, 2015. Our principal executive office is located at 9480 South Dixie Highway, Miami, Florida 33156, and our telephone number at that address is (305) 671-8000. The Company’s Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports are available free of charge through the “Investor Relations” section of the Company’s website, www.intermexonline.com, as soon as reasonably practical after they are filed with the Securities and Exchange Commission (“SEC”). The SEC maintains a website, www.sec.gov, which contains reports, proxy and information statements, and other information filed electronically with the SEC by the Company. In addition, you may automatically receive email alerts and other information when you enroll your email address by visiting the “Investor Relations” section of our website. The content of any website referred to in this document is not incorporated by reference into this document.
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ITEM 1A.     RISK FACTORS
RISK FACTORS
An investment in our securities involves certain risks. The risks and uncertainties described below are not the only risks that may have a material and adverse effect on the Company, and the risks described herein are not listed in order of the potential occurrence or severity. There is no assurance that we have identified, assessed and appropriately addressed all risks affecting our business operations. Additional risks and uncertainties could adversely affect our business and our results. If any of the following risks actually occur, our business, consolidated financial condition or results of operations could be negatively affected, and the market price for our shares could decline. Further, to the extent that any of the information contained in this Annual Report on Form 10-K constitutes forward-looking statements, the risk factors set forth below are cautionary statements, identifying important factors that could cause the Company’s actual results to differ materially from those expressed in or implied by any forward-looking statements made by or on behalf of the Company. There can also be no assurance that the actual future results, performance, benefits or achievements that we expect from our strategies, systems, initiatives or products will occur.
Risks Relating to Our Business and Industry
Our financial condition, results of operations, business and cash flow may be negatively affected by a public health crises, such as the recent coronavirus (COVID-19) pandemic.
We may face risks related to health epidemics and pandemics or other outbreaks of communicable diseases such as the global COVID-19 pandemic. The global spread of COVID-19 has created significant volatility, uncertainty and economic disruption, including significant volatility in the capital markets. The extent to which the COVID-19 pandemic affects our business, operations, financial results and the trading price of our common stock depends on numerous evolving factors that we may not be able to accurately predict, including: the duration and scope and possible resurgence of the pandemic; governmental and business actions that have been and continue to be taken in response to the pandemic (including mitigation efforts such as stay at home and other social distancing orders) and the impact of the pandemic on economic activity and actions taken in response (including stimulus efforts such as the Families First Coronavirus Act and the CARES Act).
A public health epidemic or pandemic, such as the COVID-19 pandemic, can have a material adverse effect on the demand for our money remittance services to the extent it impacts the markets in which we operate, and poses the risk that we or our employees, network of agents and consumers and their beneficiaries may be prevented from conducting business activities for an indefinite period of time, including due to shutdowns requested or mandated by governmental authorities, or that such epidemic may otherwise interrupt or impair business activities. Since the pandemic began, we have been subject, on a limited basis, to such shutdowns. We have adjusted standard operating procedures within our business operations to ensure the continued safety of our workers, continue to take further actions to mitigate the impact of the pandemic on our business, and are continually monitoring evolving health guidelines, as well as market conditions, and responding to changes as appropriate.
Adjustments to our operating procedures as a result of the COVID-19 pandemic only had a limited effect on the Company’s financial condition, results of operations and cash flows for the year ended December 31, 2020, however, we will continue to monitor this evolving pandemic and its potential effects on the Company’s operations. 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. 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, which remain uncertain and cannot be predicted at this time. If the global response to contain the COVID-19 pandemic is unsuccessful, or if governmental decisions to ease pandemic related restrictions are ineffective, premature or counterproductive, the Company could experience a material adverse effect on the Company’s financial condition, results of operations and cash flows.
In addition, to protect our workers, we are utilizing work from home measures. There is no guarantee that the data security and privacy safeguards we have put in place will be completely effective or that we will not encounter some of the common risks associated with employees accessing Company data and systems remotely.
If we lose key sending agents, our business with key sending agents is reduced or we are unable to maintain our sending agent network under terms consistent with those currently in place, our business, financial condition and results of operations could be adversely affected.
Most of our revenue is earned through our sending agent network. Sending agents are the persons who generate our customers and provide them with our money remittance services. If sending agents decide to leave our network, our revenue and profits could be adversely affected. The loss of sending agents may occur for a number of reasons, including competition from other money remittance
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providers, a sending agent’s dissatisfaction with its relationship with us or the revenue earned from the relationship, or a sending agent’s unwillingness or inability to comply with our standards or legal requirements, including those related to compliance with anti-money laundering regulations, anti-fraud measures or agent monitoring. Sending agents also may generate fewer transactions or reduce locations for reasons unrelated to our relationship with them, including increased competition in their business, general economic conditions, regulatory costs or other reasons. In addition, larger sending agents may demand additional financial concessions, which could increase competitive pressure.
We face intense competition, and if we are unable to continue to compete effectively, our business, financial condition and results of operations could be adversely affected.
The markets in which we operate are highly competitive, and we face a variety of competitors across our businesses, some of which have larger and more established customer bases and substantially greater financial, marketing and other resources than we have. We compete in a concentrated industry, with a small number of large competitors and a large number of small, niche competitors, including consumer money remittance companies, banks, card associations, web-based services, payment processors, informal remittance systems and others. We believe our services are differentiated by features and functionalities, including trust, convenience, service, efficiency of outlets, value, technology and brand recognition. Distribution channels and digital platforms such as online, account based and mobile solutions continue to evolve and impact the competitive environment for money remittances.
Our future growth depends on our ability to compete effectively. For example, if our services do not offer competitive features and functionalities, we may lose customers to our competitors, which could adversely affect our business, financial condition and results of operations. In addition, if we fail to price our services appropriately relative to our competitors, consumers may not use our services, which could adversely affect our business and financial results. For example, transaction volume where we face intense competition could be adversely affected by increasing pricing pressures between our money remittance services and those of some of our competitors, which could reduce margins and adversely affect our financial results. We have historically implemented and may continue implementing price adjustments from time to time in response to competition and other factors. If we reduce prices in order to mitigate the actions of competitors, such reductions could adversely affect our financial results in the short term and may also adversely affect our financial results in the long term if transaction volumes do not increase sufficiently or we do not implement other pricing strategies.
If customer confidence in our business or in consumer money remittance providers generally deteriorates, our business, financial condition and results of operations could be adversely affected.
Our business is built on customer confidence in our brand and our ability to provide convenient, reliable and value-added money remittance services. Erosion in customer confidence in our business, or in consumer money remittance service providers as a means to transfer money more generally, could adversely impact transaction volumes which would in turn adversely impact our business, financial condition and results of operations.
A number of factors could adversely affect customer confidence in our business, or in consumer money remittance providers more generally, many of which are beyond our control, and could have an adverse impact on our business, financial condition and results of operations. These factors include:
the quality of our services and our customer experience, and our ability to meet evolving customer needs and preferences;
failure of our agents to deliver services in accordance with our requirements;
reputational concerns resulting from actual or perceived events, including those related to fraud, consumer protection, money laundering, corruption or other matters;
changes or proposed changes in laws or regulations, or regulator or judicial interpretation thereof, that have the effect of making it more difficult or less desirable to transfer money using consumer money remittance service providers, including additional customer due diligence, identification, reporting, and recordkeeping requirements;
actions by federal, state or foreign regulators that interfere with our ability to remit customers’ money reliably; for example, attempts to seize money remittance funds, imposition of tariffs or limits on our ability to, or that prohibit us from, remitting money in the corridors in which we operate;
federal, state or foreign legal requirements, including those that require us to provide customer or transaction data, and other requirements or to a greater extent than is currently required;
any interruption or downtime in our systems, including those caused by fire, natural disaster, power loss, telecommunications failure, terrorism, vendor failure, unauthorized entry and computer viruses or disruptions in our workforce; and
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any attack or breach of our computer systems or other data storage facilities resulting in a compromise of personal data.
A significant portion of our customers are migrants. Consumer advocacy groups or governmental agencies could consider migrants to be disadvantaged and entitled to protection, enhanced consumer disclosure, or other different treatment. If consumer advocacy groups are able to generate widespread support for actions that are detrimental to our business, then our business, financial condition and results of operations could be adversely affected.
Our profit margins may be adversely affected by expansion into new geographic or product markets, which we may enter by acquisition or otherwise, that do not have the same profitability as our core markets.
Although expansion of our business into new geographic or product markets may increase our aggregate revenues, such new geographic or product markets may be more expensive to operate in and may require us to receive lower payment per wire or remittance than that which we currently experience in our core geographic markets of Mexico and Guatemala or other more established product markets due to, among other things:
increased compliance and regulatory costs requiring us to dedicate more expense, time and resources to comply with such regulatory requirements;
potentially higher operational expenses, such as higher agent fees, taxes, fees, technology costs, support costs or other charges and expense associated with engaging in the money transfer business in different jurisdictions or as a result of new product offerings;
reduced pricing models due to more intense competition with entities that may have more experience and resources as well as more established relationships with relevant customers, regulators and industry participants;
potentially reduced demand for remittance services; and
difficulty building and maintaining a network of sending and paying agents in a particular geographic area or with respect to a particular product offering.
We process remittances to Africa and Asia from the United States and also recently began offering sending services from Canada to Latin America and Africa. Additionally, we have expanded our product and service portfolio to 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 remittance business. If we are unable to capitalize on these markets, or if we spend significant time and resources on expansion plans that fail or are delayed, our business will be adversely affected. Even if we are successful, we will be exposed to additional risks in these markets that we do not face in the United States or in our core remittance business, which could have an adverse effect on our business, financial condition and results of operations.
Current and proposed data privacy and cybersecurity laws and regulations could adversely affect our business, financial condition and results of operations.
We are subject to requirements relating to data privacy and cybersecurity under U.S. federal, state and foreign laws. For example, in the U.S. the FTC routinely investigates the privacy practices of companies and has commenced enforcement actions against many, resulting in multi-million dollar settlements and multi-year agreements governing the settling companies’ privacy practices. If we are unable to meet such requirements, we may be subject to significant fines or penalties. Furthermore, certain industry groups require us to adhere to privacy requirements in addition to federal, state and foreign laws, and certain of our business relationships depend upon our compliance with these requirements.
As the number of jurisdictions enacting privacy and related laws increases and the scope of these laws and enforcement efforts expands, we will increasingly become subject to new and varying requirements. For example, California enacted the CCPA, which became effective in January 2020. The CCPA requires covered companies to provide California consumers with new disclosures and expands the rights afforded to consumers regarding their data. The costs of compliance with, and other burdens imposed by, the CCPA and similar laws may limit the use and adoption of our products and services and/or require us to incur substantial compliance costs, which could have an adverse impact on our business. Failure to comply with existing or future data privacy and cybersecurity laws, regulations and requirements, including by reason of inadvertent disclosure of personal information, could result in significant adverse consequences, including reputational harm, civil litigation, regulatory enforcement, costs of remediation, increased expenses for security systems and personnel, harm to our consumers and harm to our agents.
In addition, in connection with regulatory requirements to assist in the prevention of money laundering and terrorist financing and pursuant to legal obligations and authorizations, we make information available to certain U.S. federal and state, as well as certain foreign, government agencies. In recent years, we have experienced increasing data sharing requests by these agencies, particularly in connection with efforts to prevent terrorist financing or reduce the risk of identity theft. During the same period, there has also been increased public
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attention to the corporate use and disclosure of personal information, accompanied by legislation and regulations intended to strengthen data protection, information security and consumer privacy. These regulatory goals may conflict, and the law in these areas is not consistent or settled. While we believe that we are compliant with our regulatory responsibilities, the legal, political and business environments in these areas are rapidly changing, and subsequent legislation, regulation, litigation, court rulings or other events could expose us to increased program costs, liability and reputational damage that could have a material and adverse effect on our business, financial condition and results of operations.
Our current risk management and compliance systems may not be able to exhaustively assess or mitigate all risks to which we are exposed from a transaction monitoring perspective.
We are engaged in ongoing efforts to enhance our risk management and compliance policies, procedures and systems to assure compliance with anti-money laundering laws and economic sanctions regulations. We have implemented, and are continuing to implement, policies, procedures and systems designed to address these laws and regulations, including monitoring on an automated and manual basis, the transactions processed through our systems and restricting business involving certain countries. However, the implementation of such policies, procedures and systems may be subject to human error. Further, we may be exposed to fraud or other misconduct committed by our employees, or other third parties, including but not limited to our customers and agents, or other events that are out of our control. Additionally, our risk management policies, procedures and systems are based upon our experience in the industry, and may not be adequate or effective in managing our future risk exposures or protecting us against unidentified or unanticipated risks, which could be significantly greater than those indicated by our past experience. As a result, we can offer no assurances that these policies, procedures and systems will be adequate to detect or prevent money laundering activity or OFAC violations. If any of these policies, procedures or systems do not operate properly, or are disabled, or are subject to intentional manipulation or inadvertent human error, we could suffer financial loss, a disruption of our business, regulatory intervention or reputational damage.
Our services might be used for illegal or improper purposes, such as consumer fraud or money laundering, which could expose us to additional liability.
Our services remain susceptible to potentially illegal or improper uses as criminals are using increasingly sophisticated methods to engage in illegal activities involving internet services and payment services, such as identity theft, fraud and paper instrument counterfeiting. As we make more of our services available online and via Internet-enabled mobile devices, we subject ourselves to new types of consumer fraud risk because requirements relating to consumer authentication are more complex with internet services and such other technologies. Additionally, it is possible that our agents could engage in fraud against consumers. We use a variety of tools to protect against fraud; however, these tools may not always be successful. Allegations of fraud may result in fines, settlements, litigation expenses and reputational damage.
Other illegal or improper uses of our services may include money laundering, terrorist financing, drug trafficking, human trafficking, illegal online gaming, romance and other online scams, illegal sexually-oriented services, prohibited sales of pharmaceuticals, fraudulent sale of goods or services, piracy of software, movies, music and other copyrighted or trademarked goods, unauthorized uses of credit and debit cards or bank accounts and similar misconduct. Users of our services also may encourage, promote, facilitate or instruct others to engage in illegal activities. If the measures we have taken are too restrictive and inadvertently screen proper transactions, this could diminish our customer experience which could harm our business. There is no assurance that the measures we have taken to detect and reduce the risk of this kind of conduct will stop all illegal or improper uses of our services. Our business could be harmed if customers use our system for illegal or improper purposes.
A breach of security in the systems on which we rely could adversely affect our reputation, business, financial condition and results of operations.
We rely on a variety of technologies to provide security for our systems. Advances in computer capabilities, new discoveries in the field of cryptography or other events or developments, including improper acts by third parties, may result in a compromise or breach of the security measures we use to protect our systems. We obtain, transmit and store confidential consumer, employer and agent information in connection with some of our services. These activities are subject to laws and regulations in the United States and other jurisdictions. The requirements imposed by these laws and regulations, which often differ materially among the many jurisdictions, are designed to protect the privacy of personal information and to prevent that information from being inappropriately disclosed. Any security breaches in our computer networks, databases or facilities could lead to the inappropriate use or disclosure of personal information, which could harm our business and reputation, adversely affect consumers’ confidence in our or our agents’ business, result in inquiries and fines or penalties from regulatory or governmental authorities, cause a loss of consumers, damage our reputation and subject us to lawsuits and subject us to potential financial losses. In addition, we may be required to expend significant capital and other resources to protect against these security breaches or to alleviate problems caused by these breaches. Our agents and third-party independent contractors may also experience security breaches involving the storage and transmission of our data as well as the ability to initiate unauthorized transactions. If users gain improper access to our, our agents’ or our third-party independent contractors’ computer networks or databases, they may be able to steal, publish, delete or modify confidential customer information or generate unauthorized money remittances. Such a breach could expose us to
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monetary liability, losses and legal proceedings, lead to reputational harm, cause a disruption in our operations, or make our consumers and agents less confident in our services.
Our business is particularly dependent on the efficient and uninterrupted operation of our information technology, computer network systems and data centers. Disruptions to these systems and data centers could adversely affect our business, financial condition and results of operations.
Our ability to provide reliable services largely depends on the efficient and uninterrupted operation of our computer network systems and data centers. Our business involves the movement of large sums of money and the management of data necessary to do so. The success of our business particularly depends upon the efficient and error-free handling of transactions and data. We rely on the ability of our employees and our internal systems and procedures to process these transactions in an efficient, uninterrupted and error-free manner.
In the event of a breakdown, catastrophic event (such as fire, natural disaster, power loss, telecommunications failure or physical break-in), security breach, computer virus, improper operation, improper action by our employees, agents, consumers, financial institutions or third-party vendors or any other event impacting our systems or processes or our agents’ or vendors’ systems or processes, we could suffer financial loss, loss of consumers, regulatory sanctions, lawsuits and damage to our reputation or consumers’ confidence in our business. The measures we have enacted, such as the implementation of disaster recovery plans and redundant computer systems, may not be successful. We may also experience problems other than system failures, including software defects, development delays and installation difficulties, which would harm our business and reputation and expose us to potential liability and increased operating expenses. In addition, any work stoppages or other labor actions by employees who support our systems or perform any of our major functions could adversely affect our business.
In addition, our ability to continue to provide our services to a growing number of agents and consumers in a growing number of countries, as well as to enhance our existing services and offer new services across new distribution platforms, is dependent on our information technology systems. If we are unable to effectively manage the technology associated with our business, we could experience increased costs, reductions in system availability and loss of agents or consumers.
Weakness in economic conditions, in both the U.S. and international markets, could adversely affect our business, financial condition and results of operations. We are subject to business cycles and other outside factors that may negatively affect our business.
Our money remittance business relies in part on the overall strength of economic conditions. Consumer money remittance transactions are affected by, among other things, employment opportunities and overall economic conditions. Additionally, consumers tend to be employed in industries such as construction, information, manufacturing, agriculture and certain service industries that tend to be cyclical and more significantly impacted by weak economic conditions than other industries. This may result in reduced job opportunities for our customers in the United States or other countries that are important to our business, which could adversely affect our business, financial condition and results of operations. In addition, increases in employment opportunities may lag other elements of any economic recovery.
If general market conditions in the United States or other countries important to our business were to deteriorate, our business, financial condition and results of operations could be adversely impacted. Our agents may have reduced sales or business as a result of weak economic conditions. As a result, our agents may reduce their number of locations, hours of operation, or cease doing business altogether. If our consumer transactions decline due to deteriorating economic conditions, we may be unable to timely and effectively reduce our operating costs or take other actions in response, which could adversely affect our business, financial condition and results of operations. Additionally, economic or political instability, wars, civil unrest, terrorism and natural disasters may make money transfers to, from or within a particular country more difficult. The inability to timely complete money transfers could adversely affect our business.
If we fail to successfully develop and timely introduce new and enhanced services or if we make substantial investments in an unsuccessful new service or infrastructure change, our business, financial condition and results of operations could be adversely affected.
Our future growth will depend, in part, on our ability to continue to develop and successfully introduce new and enhanced methods of providing money remittance services that keep pace with competitive introductions, technological changes, and the demands and preferences of our agents, consumers and the financial institutions with which we conduct our business. Distribution channels such as online, account based, and mobile solutions continue to evolve and impact the competitive environment for money remittances. If alternative payment mechanisms become widely accepted as substitutes for our current services, and we do not develop and offer similar alternative payment mechanisms successfully and on a timely basis, our business, financial condition and results of operations could be adversely affected. We may make future acquisitions and investments or enter into strategic alliances to develop new technologies and services or to implement infrastructure changes to further our strategic objectives, strengthen our existing businesses and remain competitive. Such acquisitions, investments and strategic alliances, however, are inherently risky, and we cannot guarantee that such investments or strategic alliances will be successful.
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A significant percentage of our banking relationships are concentrated in a few banks.
A substantial portion of the transactions that we conduct with and through banks are concentrated in a few banks, notably Wells Fargo, Bank of America and US Bank. Because of the current concentration of our major banking relationships, if we lose such a banking relationship, which could be the result of many factors including, but not limited to, changes in regulation, our business, financial condition and results of operations could be adversely affected.
A significant portion of our paying agents are concentrated in a few large banks and financial institutions or large retail chains.
A substantial portion of our paying agents are concentrated in a few large banks and financial institutions and large retail chains. Because of the current concentration, if we lose an institution as a paying agent, which could be the result of many factors including, but not limited to, changes in regulation, our business, financial condition and results of operations could be adversely affected. Elektra, our largest paying agent by volume, accounted for approximately 18% of Intermex’s total remittance volume in fiscal year 2020. The loss of Elektra as one of our paying agents could have a material adverse impact on our business and results of operations.
Major bank failure or sustained financial market illiquidity, or illiquidity at our clearing, cash management and custodial financial institutions, could adversely affect our business, financial condition and results of operations.
We face certain risks in the event of a sustained deterioration of domestic or international financial market liquidity, as well as in the event of sustained deterioration in the liquidity, or failure, of our clearing, cash management and custodial financial institutions. In particular:
We may be unable to access funds in our deposit accounts and clearing accounts on a timely basis to pay money remittances and make related settlements to agents. Any resulting need to access other sources of liquidity or short-term borrowing would increase our costs. Any delay or inability to pay money remittances or make related settlements with our agents could adversely impact our business, financial condition and results of operations.
In the event of a major bank failure, we could face major risks to the recovery of our bank deposits used for the purpose of settling with our agents. A substantial portion of our cash and cash equivalents held at U.S. banks are not subject to federal deposit insurance protection against loss as they exceed the federal deposit insurance limit. Similarly, we hold cash and cash equivalents at foreign banks, which may not enjoy benefits such as the United States’ federal deposit insurance protection.
We may be unable to borrow from financial institutions or institutional investors on favorable terms, or at all, which could adversely impact our ability to pursue our growth strategy and fund key strategic initiatives.
If financial liquidity deteriorates, there can be no assurance we will not experience an adverse effect, which may be material, on our ability to access capital or contingent liquidity sources.
Changes in banking industry regulation and practice could make it more difficult for us and our sending agents to maintain depository accounts with banks, which would harm our business.
The banking industry, in light of increased regulatory oversight, is continually examining its business relationships with companies that offer money remittance services and with retail agents that collect and remit cash collected from end consumers. Certain major national and international banks have withdrawn from providing service to money remittance services businesses. Should our existing relationship banks decide to not offer depository services to companies engaged in processing money remittance transactions, or to retail agents that collect and remit cash from end customers, our ability to complete money remittances, and to administer and collect fees from money remittance transactions, could be adversely affected.
Our regulatory status and the regulatory status of our agents as MSBs could affect our ability to offer our services. We also rely on bank accounts to provide our payment services. We and some of our agents may in the future have difficulty establishing or maintaining banking relationships due to the banks’ policies, including policies with respect to anti-money laundering. If we or a significant number of our agents are unable to maintain existing or establish new banking relationships, or if we or these agents face higher fees and other costs to maintain or establish new bank accounts, our ability and the ability of our agents to continue to offer our services may be adversely impacted.
We face credit risks from our sending agents and financial institutions with which we do business.
The majority of our business is conducted through independent sending agents that provide our services to consumers at their business locations. Our sending agents receive the proceeds from the sale of our money remittances, and we must then collect these funds from the sending agents. If a sending agent becomes insolvent, files for bankruptcy, commits fraud or otherwise fails to remit money remittance proceeds to us, we must nonetheless complete the money remittance on behalf of the consumer.
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We monitor the creditworthiness of our sending agents and the financial institutions with which we do business on an ongoing basis. There can be no assurance that the models and approaches we use to assess and monitor the creditworthiness of our sending agents and these financial institutions will be sufficiently predictive, and we may be unable to detect and take steps to timely mitigate an increased credit risk.
In the event of a sending agent bankruptcy, we would generally be in the position of creditor, possibly with limited security or financial guarantees of performance, and we would therefore be at risk of a reduced recovery. We are not insured against credit losses, except in circumstances of agent theft or fraud. Significant credit losses could have a material and adverse effect on our business, financial condition and results of operations.
Retaining our chief executive officer and other key executives and finding and retaining qualified personnel is important to our continued success, and any inability to attract and retain such personnel could harm our operations.
Our ability to successfully operate our business will depend upon the efforts of certain key personnel. The development and implementation of our strategy has depended in large part on our Chief Executive Officer, President and Chairman of the Board of Directors, Robert Lisy. The retention of Mr. Lisy is important to our continued success, and we expect him to remain with the Company for the foreseeable future.
In addition to Mr. Lisy, we have a number of key executives who have a significant impact on our business. The unexpected loss of key personnel may adversely affect the operations and profitability of the Company. Our success also depends to a large extent upon our ability to attract and retain key employees. Qualified individuals with experience in our industry are in high demand. Our IT personnel have designed and implemented key portions of our proprietary software and are crucial to the success of our business. In addition, legal or enforcement actions against compliance and other personnel in the money remittance industry may affect our ability to attract and retain key employees and directors. The lack of management continuity or the loss of one or more members of our executive management team could harm our business and future development. A failure to attract and retain key personnel including operating, marketing, financial and technical personnel, could also have a material and adverse impact on our business, financial condition and results of operations.
We and our agents are subject to numerous U.S. and international laws and regulations. Failure to comply with these laws and regulations could result in material settlements, fines or penalties and reputational harm, and changes in these laws or regulations could result in increased operating costs or reduced demand for our services, all of which may adversely affect our business, financial condition and results of operations.
We operate in a highly regulated environment, and our business is subject to a wide range of laws and regulations that vary from jurisdiction to jurisdiction. We are also subject to oversight by various governmental agencies, both in the United States and abroad. Lawmakers and regulators in the United States in particular have increased their focus on the regulation of the financial services industry. New or modified regulations and increased oversight may have unforeseen or unintended adverse effects on the financial services industry, which could affect our business, financial condition and results of operations.
The money transfer business is subject to a variety of regulations aimed at preventing money laundering and terrorism. We are subject to U.S. federal anti-money laundering laws, including the BSA and the requirements of the U.S. Treasury Department’s OFAC, which prohibit us from transmitting money to specified countries or to or from prohibited individuals. Additionally, we are subject to anti-money laundering laws in the other countries in which we operate. We are also subject to financial services regulations, money transfer licensing regulations, consumer protection laws, currency control regulations, escheat laws, privacy and data protection laws and anti-bribery laws. Many of these laws are constantly evolving, unclear and inconsistent across various jurisdictions, making compliance challenging. Subsequent legislation, regulation, litigation, court rulings or other events could expose us to increased program costs, liability and reputational damage.
As a MSB, we are subject to reporting, recordkeeping and anti-money laundering provisions in the United States as well as many other jurisdictions. In the past few years there have been significant regulatory reviews and actions taken by U.S. and other regulators and law enforcement agencies against banks, MSBs and other financial institutions related to money laundering, and the trend appears to be greater scrutiny by regulators of potential money laundering activity through financial institutions. We are also subject to regulatory oversight and enforcement by FinCEN. Any determination that we have violated the anti-money-laundering laws could have an adverse effect on our business, financial condition and results of operations.
The Dodd-Frank Act increases the regulation and oversight of the financial services industry. The Dodd-Frank Act requires enforcement by various governmental agencies, including the CFPB. We could be subject to fines or other penalties if we are found to have violated the Dodd-Frank Act’s prohibition against unfair, deceptive or abusive acts or practices. The CFPB’s authority to change regulations adopted in the past by other regulators could increase our compliance costs and litigation exposure. Our litigation exposure may also be increased by the CFPB’s authority to limit or ban pre-dispute arbitration clauses. We may also be liable for failure of our agents to comply with the Dodd-Frank Act. The legislation and implementation of regulations associated with the Dodd-Frank Act have increased our costs of compliance and required changes in the way we and our agents conduct business. In addition, we are subject to
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periodic examination by the CFPB. These examinations may require us to change the way we conduct business or increase the costs of compliance.
In addition, we are subject to escheatment laws in the United States and certain foreign jurisdictions in which we conduct business. We are subject to the laws of various states in the United States which from time to time take inconsistent or conflicting positions regarding the requirements to escheat property to a particular state, making compliance challenging. In some instances, we escheat items to states pursuant to statutory requirements and then subsequently pay those items to consumers. For such amounts, we must file claims for reimbursement from the states.
Any violation by us of the laws and regulations set forth above could lead to significant settlements, fines or penalties and could limit our ability to conduct business in some jurisdictions. Our systems, employees and processes may not be sufficient to detect and prevent violations of the laws and regulations set forth above by our agents, which could also lead to us being subject to significant settlements, fines or penalties. In addition to these fines and penalties, a failure by us or our agents to comply with applicable laws and regulations also could seriously damage our reputation, result in diminished revenue and profit and increase our operating costs and could result in, among other things, revocation of required licenses or registrations, loss of approved status, termination of contracts with banks or retail representatives, administrative enforcement actions and fines, class action lawsuits, cease and desist or consent orders and civil and criminal liability. The occurrence of one or more of these events could have a material and adverse effect on our business, financial condition and results of operations.
In certain cases, regulations may provide administrative discretion regarding enforcement. As a result, regulations may be applied inconsistently across the industry, which could result in additional costs for us that may not be required to be incurred by our competitors. If we were required to maintain a price higher than most of our competitors to reflect our regulatory costs, this could harm our ability to compete effectively, which could adversely affect our business, financial condition and results of operations. In addition, changes in laws, regulations or other industry practices and standards, or interpretations of legal or regulatory requirements, may reduce the market for or value of our services or render our services less profitable or obsolete. Changes in the laws affecting the kinds of entities that are permitted to act as money remittance agents (such as changes in requirements for capitalization or ownership) could adversely affect our ability to distribute our services and the cost of providing such services. Many of our sending agents are in the check cashing industry. Any regulatory action that negatively impacts check cashers could also cause this portion of our agent base to decline. If onerous regulatory requirements were imposed on our agents, the requirements could lead to a loss of agents, which, in turn, could adversely affect our business, financial condition or results of operations.
Regulators around the world compare approaches to the regulation of the payments and other industries. Consequently, a development in any one country, state or region may influence regulatory approaches in other jurisdictions. Similarly, new laws and regulations in a country, state or region involving one service may cause lawmakers there to extend the regulations to another service. As a result, the risks created by any new laws or regulations are magnified by the potential that they may be replicated, affecting our business in another market or involving another service. Conversely, if widely varying regulations come into existence worldwide, we may have difficulty adjusting our services, fees, foreign exchange spreads and other important aspects of our business, with the same effect.
Litigation or investigations involving us or our agents could result in material settlements, fines or penalties.
We have been, and in the future may be, subject to allegations and complaints that individuals or entities have used our money remittance services for fraud-induced money transfers, as well as certain money laundering activities, which may result in fines, penalties, judgments, settlements and litigation expenses. We also are the subject from time to time of litigation related to our business.
Regulatory and judicial proceedings and potential adverse developments in connection with ongoing litigation may adversely affect our business, financial condition and results of operations. There also may be adverse publicity associated with lawsuits and investigations that could decrease agent and consumer acceptance of our services. Additionally, our business has been in the past, and may be in the future, the subject of class action lawsuits, regulatory actions and investigations and other general litigation. The outcome of class action lawsuits, regulatory actions and investigations and other litigation is difficult to assess or quantify but may include substantial fines and expenses, as well as the revocation of required licenses or registrations or the loss of approved status, which could have a material and adverse effect on our business, financial position and results of operations or consumers’ confidence in our business. Plaintiffs or regulatory agencies in these lawsuits, actions or investigations may seek recovery of very large or indeterminate amounts, and the magnitude of these actions may remain unknown for substantial periods of time. The cost to defend or settle future lawsuits or investigations may be significant. In addition, improper activities, lawsuits or investigations involving our agents may adversely impact our business, financial condition and results of operations or reputation even if we are not directly involved.
We could be adversely affected by violations of the U.S. Foreign Corrupt Practices Act or other similar anti-corruption laws.
Our operations around the world, particularly in LAC countries and Africa are subject to anti-corruption laws and regulations, including restrictions imposed by the U.S. FCPA. The FCPA and similar anti-corruption laws in other jurisdictions generally prohibit companies and their intermediaries from making improper payments to government officials or employees of commercial enterprises for
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the purpose of obtaining or retaining business, a business advantage or a governmental approval. We operate in parts of the world that are perceived as having higher incidence of corruption and, in certain circumstances, strict compliance with anti-corruption laws may conflict with local customs and practices. Because of the scope and nature of our operations, we experience a higher risk associated with compliance with the FCPA and similar anti-corruption laws than many other companies.
Our employees and agents interact with government officials on our behalf, including as necessary to obtain licenses and other regulatory approvals necessary to operate our business, employ expatriates and resolve tax disputes. We also have a number of contracts with third-party paying agents that are owned or controlled by non-U.S. governments. These interactions and contracts create a risk of payments or offers of payments by one of our employees or agents that could be in violation of the FCPA or other similar anti-corruption laws. Under the FCPA and other similar anti-corruption laws, we may be held liable for actions taken by our employees or agents.
In recent years, there have been significant regulatory reviews and actions taken by the United States and other governments related to anti-corruption laws, and the trend appears to be greater scrutiny on payments to, and relationships with, foreign entities and individuals.
There can be no assurance that all of our employees and agents will abide by the policies and procedures we have implemented to promote compliance with local laws and regulations as well as U.S. laws and regulations, including FCPA and similar anti-corruption laws. If we are found to be liable for violations of the FCPA or similar anti-corruption laws in other jurisdictions, either due to our own or others’ acts or inadvertence, we could suffer, among other consequences, substantial civil and criminal penalties, including fines, incarceration, prohibitions or limitations on the conduct of our business, the loss of our financing facilities and significant reputational damage, any of which could have a material and adverse effect on our results of business, financial condition or results of operations.
Government or regulatory investigations into potential violations of the FCPA or other similar anti-corruption laws by U.S. agencies or other governments could also have a material and adverse effect on our results of business, financial condition and results of operations. Furthermore, detecting, investigating and resolving actual or alleged violations of the FCPA and other similar anti-corruption laws is expensive and can consume significant time and attention of our senior management.
We conduct money remittance transactions through agents in regions that are politically volatile or, in a limited number of cases, may be subject to certain OFAC restrictions.
We conduct money remittance transactions through agents in regions that are politically volatile or, in a limited number of cases, may be subject to certain OFAC restrictions. It is possible that our money remittance services or other services could be used in contravention of applicable law or regulations. Such circumstances could result in increased compliance costs, regulatory inquiries, suspension or revocation of required licenses or registrations, seizure or forfeiture of assets and the imposition of civil and criminal fines and penalties. In addition to monetary fines or penalties that we could incur, we could be subject to reputational harm that could have an adverse effect on our business, financial condition and results of operations.
New business initiatives, such as modifications to our current product offerings or the introduction of new products, may modify our risk profile from a regulatory perspective.
A number of our recent and planned business initiatives and expansions of existing businesses may bring us into contact, directly or indirectly, with information, individuals and entities that are not within our traditional customer and agent network and that could expose us to new or enhanced regulatory scrutiny. For example, we are starting to offer services across new distribution platforms, which could expose us to increased anti-money laundering, anti-terrorist financing and consumer protection regulations and compliance requirements. Any change in our risk profile stemming from this or any of our other business initiatives could result in increased compliance costs and litigation exposure, which could adversely impact our business, financial condition and results of operations.
Changes in U.S. tax laws could adversely affect our results of operations.
Changes in tax legislation by U.S. federal, state and local governments could impact our effective tax rates. If statutory tax rates are increased, our results of operations and cash flows could be adversely affected.
Our business and results of operations may be adversely affected by foreign political, economic and social instability risks, foreign currency restrictions and devaluation, and various local laws associated with doing business primarily in LAC countries.
We derive a substantial portion of our revenue from our money remittance transactions from the United States to the LAC corridor, particularly Mexico and Guatemala, and we are exposed to certain political, economic and other uncertainties not encountered in U.S. operations. LAC countries, in particular, have historically experienced uneven periods of economic growth, as well as recession, periods of high inflation and general economic and political instability. Additionally, as events in the LAC region have demonstrated, negative economic or political developments in one country in the region can lead to or exacerbate economic or political instability elsewhere in the region. Consequently, actions or events in LAC countries that are beyond our control could restrict our ability to operate there or otherwise adversely affect the profitability of those operations. Furthermore, changes in the business, regulatory or political climate in any of those
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countries, or significant fluctuations in currency exchange rates, could affect our ability to expand or continue our operations there, which could have a material and adverse impact on our business, financial condition and results of operations. In addition, we began offering remittances to Africa during 2019 and are now exposed to new political, economic and other uncertainties as a result of this geographic expansion, any of which could adversely impact our business, financial condition and results of operations.
The countries in which we operate may impose or tighten foreign currency exchange control restrictions, taxes or limitations with regard to repatriation of earnings and investments from these countries. If exchange control restrictions, taxes or limitations are imposed or tightened, our ability to receive dividends or other payments from affected jurisdictions could be reduced, which could have an adverse effect on our business, financial condition and results of operations.
In addition, corporate, contract, property, insolvency, competition, securities and other laws and regulations in many of the countries in which we operate have been, and continue to be, substantially revised. Therefore, the interpretation and procedural safeguards of the new legal and regulatory systems are in the process of being developed and defined, and existing laws and regulations may be applied inconsistently. Also, in some circumstances, it may not be possible to obtain the legal remedies provided for under these laws and regulations in a reasonably timely manner, if at all.
Our ability to grow in international markets and our future results could be adversely affected by a number of factors, including:
changes in political and economic conditions and potential instability in certain regions;
restrictions on money transfers to, from and between certain countries;
inability to recruit and retain paying agents and customers for new corridors;
currency exchange controls, new currency adoptions and repatriation issues;
changes in regulatory requirements or in foreign policy, including the adoption of domestic or foreign laws, regulations and interpretations detrimental to our business;
possible increased costs and additional regulatory burdens imposed on our business;
the implementation of U.S. sanctions, resulting in bank closures in certain countries and the ultimate freezing of our assets;
burdens of complying with a wide variety of laws and regulations;
possible fraud or theft losses, and lack of compliance by international representatives in foreign legal jurisdictions where collection and legal enforcement may be difficult or costly;
inability to maintain or improve our software and technology systems;
reduced protection of our intellectual property rights;
unfavorable tax rules or trade barriers; and
inability to secure, train or monitor international agents.
If we are unable to adequately protect our brand and the intellectual property rights related to our existing and any new or enhanced services, or if we infringe on the rights of others, our business, financial condition and results of operations could be adversely affected.
The Intermex brand is critical to our business. We utilize trademark registrations and other tools to protect our brand. We have not applied for trademark registrations for our name and logo in all geographic markets where we provide services. In those markets where we have applied for trademark registrations, failure to secure those registrations could adversely affect our ability to enforce and defend our trademark rights. Our business would be harmed if we were unable to adequately protect our brand and the value of our brand was to decrease as a result.
We rely on a combination of patent, trademark and copyright laws and trade secret protection and invention assignment, confidentiality or license agreements to protect the intellectual property rights related to our services, all of which only offer limited protection. We may be subject to third-party claims alleging that we infringe their intellectual property rights or have misappropriated other proprietary rights. We may be required to spend resources to defend such claims or to protect and police our own rights. Some of our legal rights in information or technology that we deem proprietary may not be protected by intellectual property laws, particularly in foreign jurisdictions. The loss of our intellectual property protection, the inability to secure or enforce intellectual property protection or to successfully defend against claims of intellectual property infringement or misappropriation could have an adverse effect on our business, financial condition and results of operation.
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The processes and systems we employ may be subject to patent protection by other parties, and any claims could adversely affect our business and results of operations.
In certain countries, including the United States, patent laws permit the protection of processes and systems. We employ processes and systems in various markets that have been used in the industry by other parties for many years. We or other companies that use these processes and systems consider many of them to be in the public domain. If a person were to assert that it holds a patent covering any of the processes or systems we use, we would be required to defend ourselves against such claim. If unsuccessful, we may be required to pay damages for past infringement, which could be trebled if the infringement was found to be willful. We also may be required to seek a license to continue to use the processes or systems. Such a license may require either a single payment or an ongoing license fee. No assurance can be given that we will be able to obtain a license which is reasonable in fee and scope. If a patent owner is unwilling to grant such a license, or we decide not to obtain such a license, we may be required to modify our processes and systems to avoid future infringement.
Risks Relating to Our Indebtedness
We have a substantial amount of indebtedness, which may limit our operating flexibility and could adversely affect our business, financial condition and results of operations.
We had approximately $89.4 million of indebtedness as of December 31, 2020, consisting of borrowings under the term loan facility. Our indebtedness could have important consequences to our investors, including, but not limited to:
increasing our vulnerability to, and reducing our flexibility to respond to, general adverse economic and industry conditions;
requiring the dedication of a substantial portion of our cash flow from operations to servicing debt;
limiting our flexibility in planning for, or reacting to, changes in our business and the competitive environment; and
limiting our ability to borrow additional funds and increasing the cost of any such borrowing.
The interest rates in our Credit Agreement (“Credit Agreement”) vary at stated margins above either the London Interbank Offered Rate, Eurodollar Rate or a base rate established by the administrative agent of the facility, all of which are subject to fluctuation. If interest rates increase, our debt service obligations on such variable rate indebtedness would increase even though the amount borrowed remained the same. Accordingly, an increase in interest rates would adversely affect our profitability. See the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Intermex—Liquidity and Capital Resources” for more information.

We also are subject to capital requirements imposed by various regulatory bodies in the jurisdictions in which we operate. We may need access to external capital to support these regulatory requirements in order to maintain our licenses and our ability to earn revenue in these jurisdictions. An interruption of our access to capital could impair our ability to conduct business if our regulatory capital falls below requirements.
In July 2017, the Financial Conduct Authority in the United Kingdom, which regulates the London Inter-bank Offered Rate (“LIBOR”), publicly announced that it will no longer compel or persuade banks to make LIBOR submissions after 2021. Recently, the date for certain LIBOR tenors has been extended to June 2023. These announcements are expected to practically end LIBOR rates beginning in 2022. While other alternatives have been proposed, it is unclear which, if any, alternative to LIBOR will be available and widely accepted in major financial markets. We currently have borrowings that are subject to LIBOR-based interest rates, including borrowings under our credit facility. Any alternative to replace LIBOR after 2021 may increase the costs associated with our credit facility.
Our Credit Agreement contains restrictive covenants that may impair our ability to conduct business.
The Credit Agreement contains operating covenants and financial covenants that may in each case limit management’s discretion with respect to certain business matters. Among other things, these covenants restrict our and our subsidiaries’ ability to grant additional liens, consolidate or merge with other entities, purchase or sell assets, declare dividends, incur additional debt, make advances, investments and loans, transact with affiliates, issue equity interests, modify organizational documents and engage in other business. We are required to comply with a minimum fixed charge coverage ratio and a maximum consolidated leverage ratio. As a result of these covenants and restrictions, we may be limited in how we conduct our business and we may be unable to raise additional debt or other financing to compete effectively or to take advantage of new business opportunities. The terms of any future indebtedness we may incur could include more restrictive covenants. Failure to comply with such restrictive covenants may lead to default and acceleration under our Credit Agreement and may impair our ability to conduct business. We may not be able to maintain compliance with these covenants in the future and, if we fail to do so, that we will be able to obtain waivers from the lenders and/or amend the covenants, which may result in foreclosure of our assets. See the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Intermex—Liquidity and Capital Resources” for more information.
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Under our Credit Agreement, upon the occurrence of an event of default, the lenders will be able to elect to declare all amounts outstanding under the Credit Agreement to be immediately due and payable and terminate all commitments to lend additional funds. If we are unable to repay those amounts, the lenders under the Credit Agreement could proceed to foreclose against our collateral that secures that indebtedness. We have granted the lenders a security interest in substantially all of our assets, including the assets of certain subsidiaries.
Risks Relating to Our Securities
As an “emerging growth company,” we cannot be certain if the reduced disclosure requirements applicable to “emerging growth companies” will make our common stock less attractive to investors.
For as long as we remain an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), we take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies”, including not being required to obtain an assessment of the effectiveness of our internal controls over financial reporting from our independent registered public accounting firm pursuant to Section 404 of the Sarbanes-Oxley Act (“Section 404”), reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. In addition, the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards, which we have elected to do.
We will remain an “emerging growth company” until the earlier of (1) the earliest of the last day of the fiscal year (a) following January 19, 2022, the fifth anniversary of us becoming a publicly-traded company, (b) in which we have total annual gross revenue of at least $1.07 billion or (c) in which we are deemed to be a large accelerated filer, which means the market value of our common stock that is held by non-affiliates exceeds $700.0 million as of the last business day of our prior second fiscal quarter, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.
We cannot predict if investors will find our common stock less attractive because we will rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active market for our common stock, our share price may be more volatile and the price at which our securities trade could be less than if we did not use these exemptions.
Because we have no current plans to pay cash dividends on our common stock for the foreseeable future, you may not receive any return on investment unless you sell your common stock for a price greater than that which you paid for it.
We have no current plans to pay any cash dividends for the foreseeable future. The declaration, amount, and payment of any future dividends on shares of common stock will be at the sole discretion of our board of directors. Our board of directors may take into account general and economic conditions, our financial condition, and results of operations, our available cash and current and anticipated cash needs, capital requirements, contractual, legal, tax, and regulatory restrictions, implications on the payment of dividends by us to our stockholders or by our subsidiaries to us, and such other factors as our board of directors may deem relevant. In addition, our ability to pay dividends is limited by covenants of our existing and outstanding indebtedness and may be limited by covenants of any future indebtedness we or our subsidiaries incur. As a result, you may not receive any return on an investment in our common stock unless you sell our common stock for a price greater than that which you paid for it.
Our ability to meet expectations and projections in any research or reports published by securities or industry analysts, or a lack of coverage by securities or industry analysts, could result in a depressed market price and limited liquidity for our common stock.
The trading market for our common stock will be influenced by the research and reports that industry or securities analysts may publish about us, our business, our market, or our competitors. If no or few securities or industry analysts commence coverage of the Company, our stock price would likely be less than that which we would obtain if we had such coverage and the liquidity, or trading volume of our common stock may be limited, making it more difficult for a stockholder to sell shares at an acceptable price or amount. If any analysts do cover the Company, their projections may vary widely and may not accurately predict the results we actually achieve. Our share price may decline if our actual results do not match the projections of research analysts covering us. Similarly, if one or more of the analysts who write reports on us downgrades our stock or publishes inaccurate or unfavorable research about our business, our share price could decline. If one or more of these analysts ceases coverage of us or fails to publish reports on us regularly, our share price or trading volume could decline.
Provisions in our charter and Delaware law may inhibit a takeover of us, which could limit the price investors might be willing to pay in the future for our common stock and could entrench management.
Our charter contains provisions that opt out of Section 203 of the Delaware General Corporation Law (the “DGCL”). These provisions include the ability of the board of directors to designate the terms of and issue new series of preferred shares, which may make more
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difficult the removal of management and may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our securities.
In addition, while we have opted out of Section 203 of the DGCL, our charter contains similar provisions providing that we may not engage in certain “business combinations” with any “interested stockholder” for a three-year period following the time that the stockholder became an interested stockholder, unless:
prior to such time, our board of directors approved either the business combination or the transaction that resulted in the stockholder becoming an interested stockholder;
upon consummation of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of our voting stock outstanding at the time the transaction commenced, excluding certain shares; or
at or subsequent to that time, the business combination is approved by our board of directors and by the affirmative vote of holders of at least two-thirds of our outstanding voting stock that is not owned by the interested stockholder.
These anti-takeover defenses could discourage, delay or prevent a transaction involving a change in control of us. These provisions could also discourage proxy contests and make it more difficult for you and other stockholders to elect directors of your choosing and cause us to take corporate actions other than those you desire.
Our charter designates the Court of Chancery of the State of Delaware as the exclusive forum for certain litigation that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us.
Our charter provides that the Court of Chancery of the State of Delaware will be the sole and exclusive forum for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed to us or our stockholders by any of our directors, officers, employees or agents, (iii) any action asserting a claim against us arising under the DGCL or (iv) any action asserting a claim against us that is governed by the internal affairs doctrine. The exclusive forum provision of our bylaws does not establish exclusive jurisdiction in the Court of Chancery of the State of Delaware for claims that arise under the Securities Act, the Exchange Act or other federal securities laws if there is exclusive or concurrent jurisdiction in the federal courts. By becoming our stockholder, you will be deemed to have notice of and have consented to the provisions of our charter related to choice of forum. The choice of forum provision in our charter may limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us.
Because Stella Point controls a significant percentage of our common stock, it may influence our major corporate decisions and its interests may conflict with the interests of other holders of our common stock.
SPC Intermex, an affiliate of Stella Point, beneficially owns and has voting power over approximately 8.4% of our outstanding common stock as of December 31, 2020. Pursuant to the Shareholders Agreement, SPC Intermex has the right to designate eight of our directors until all the parties to the Shareholders Agreement hold, in aggregate, less than 10% of our outstanding common stock. SPC Intermex continues to be able to exert a significant degree of influence over the Company’s management and affairs and over matters requiring stockholder approval, including the election of directors and the approval of business combinations or dispositions and other extraordinary transactions. SPC Intermex also may have interests that differ from the interests of other holders of our common stock and may vote in a way with which you disagree and which may be adverse to your interests. The concentration of ownership may have the effect of delaying, preventing or deterring a change of control of the Company and may materially and adversely affect the market price of our common stock. In addition, Stella Point may in the future own businesses that directly compete with the business of the Company.
Certain of our directors have relationships with Stella Point, which may cause conflicts of interest with respect to our business.
As of the filing date of this Annual Report on Form 10-K, two of our eight directors are affiliated with Stella Point. Stella Point affiliated directors have fiduciary duties to us and, in addition, have duties to their respective funds. As a result, these directors may face real or apparent conflicts of interest with respect to matters affecting both us and their funds, whose interests may be adverse to ours in some circumstances.
We may be subject to securities litigation, which is expensive and could divert management’s attention.
Our share price may be volatile and, in the past, companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation. We may be the target of this type of litigation in the future. Litigation of this type could result in substantial costs and diversion of management’s attention and resources, which could have a material and adverse effect on our business, financial condition and results of operations. Any adverse determination in litigation could also subject us to significant liabilities.
ITEM 1B.    UNRESOLVED STAFF COMMENTS
None.
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ITEM 2.    PROPERTIES
Our leased corporate offices are located in Miami, Florida. In addition, we lease three other facilities in Miami, Florida. As of December 31, 2020, we lease 34 Company-operated stores all located in the United States. We have two international customer service centers located in Guatemala City, Guatemala and Puebla, Mexico where our employees answer operational questions from agents and customers. Our owned and leased facilities are used for operational, sales and administrative purposes in support of our business, and are all currently being utilized as intended.
We believe that our properties are sufficient to meet our current and projected business needs. We periodically review our facility requirements and may acquire new facilities, or modify, update, consolidate, dispose of or sublet existing facilities, based on evolving business needs.
ITEM 3.    LEGAL PROCEEDINGS
From time to time, we are subject to various claims, charges and litigation matters that arise in the ordinary course of business. We believe these actions are a normal incident of the nature and kind of business in which we are engaged. While it is not feasible to predict the outcome of these matters with certainty, we do not believe that any asserted or unasserted legal claims or proceedings, individually or in the aggregate, will have a material and adverse effect on our business, financial condition and results of operations.
Reference is made to Note 17 – Commitments and Contingencies in the Consolidated Financial Statements of International Money Express, Inc. contained elsewhere in this Annual Report on Form 10–K for information regarding certain legal proceedings to which we are a party, which information is incorporated by reference herein.
ITEM 4.    MINE SAFETY DISCLOSURES
Not Applicable.
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PART II
ITEM 5.     MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market for the Company’s Common Stock
Our common stock trades on the Nasdaq Capital Market under the symbol “IMXI”.
As of March 5, 2021, there were 151 holders of record of our common stock.
Following the Merger, we have not declared or paid, and do not anticipate declaring or paying in the foreseeable future, any cash dividends on our common stock. In addition, the terms of our credit facility include restrictions on our ability to issue dividends. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources” for a discussion of our credit facilities’ restrictions on our subsidiaries’ ability to pay dividends or other payments to us. Any payment of future dividends will be at the discretion of the Company’s Board of Directors and will depend upon, among other factors, the Company’s earnings, financial condition, current and anticipated capital requirements, plans for expansion, level of indebtedness and contractual restrictions. The payment of future cash dividends, if any, would be made only from assets legally available.
Equity Compensation Plan Information
The information required by Item 5 with respect to securities authorized for issuance under equity compensation plans is incorporated herein by reference to Part III, Item 12 of this Form 10-K.
Performance Graph
The Company’s peer group (“Peer Group”) consists of publicly-traded companies that are in the money remittance and payment industries and is comprised of the following: MoneyGram, Euronet, and Western Union.
The following graph shows a comparison of cumulative total shareholder return, calculated on a dividends reinvested basis, for (1) the Company’s common stock, (2) the Total Return Index for U.S. Companies traded on the Nasdaq Global Select Market (“CRSP NASDAQ Stock Market (US Companies)”) and (3) our Peer Group, for the period from July 27, 2018 (the first day our common stock was separately traded) through December 31, 2020. The graph assumes the value of the investment in our common stock and each index was $100 on July 27, 2018 and that all dividends were reinvested. We have not paid any cash dividends and, therefore, the cumulative total return calculation for us is based solely upon stock price appreciation and not upon reinvestment of cash dividends. Historic stock price performance is not necessarily indicative of future stock price performance.
COMPARISON OF CUMULATIVE TOTAL RETURN
AMONG INTERNATIONAL MONEY EXPRESS, INC.,
NASDAQ INDEX AND PEER GROUP INDEX

https://cdn.kscope.io/02cf4bfd1544d25ad869586e4bdea158-imxi-20201231_g1.gif

The following table is a summary of the monthly cumulative total return for the day our stock began trading on the Nasdaq through each of the dates shown below:
7/27/20189/30/201812/31/20183/31/20196/30/20199/30/201912/31/20193/31/20206/30/20209/30/202012/31/2020
IMXI100120.20119.60116.60141.00137.40120.4091.30124.60143.65155.20
NASDAQ Stock Market (US Companies)100104.5086.94100.98105.35105.68118.33102.60133.26148.15170.32
Peer Group10098.7692.46112.47127.38130.10145.3190.61107.00105.02130.19

NOTE: Index Data: Calculated (or Derived) based from CRSP NASDAQ Stock Market (US Companies), Center for Research in Security Prices (CRSP®), Graduate School of Business, The University of Chicago. Copyright 2021. Used with permission. All rights reserved.
NOTE: Corporate Performance Graph with peer group uses peer group only performance (excludes only company).
The graph is furnished and shall not be deemed “filed” with the SEC or subject to Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.
Recent Sales of Unregistered Securities
None.
Repurchases of Equity Securities of the Issuer
During the quarter ended December 31, 2020, we did not repurchase any of our outstanding securities.
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ITEM 6.    SELECTED FINANCIAL DATA
Reserved.
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ITEM 7.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) 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. Past operating results are not necessarily indicative of operating results in any future periods.
COVID-19 Update
During March 2020, a global pandemic was declared by the World Health Organization related to the rapidly growing outbreak of a novel strain of coronavirus (“COVID-19”). The pandemic has had and continues to have a significant effect on economic conditions in the United States of America (“United States” or “U.S.”), as the efforts of federal, state, local and foreign governments to react to the public health crisis with mitigation measures have created and continue to cause significant uncertainties in the U.S. and global economy. The extent to which the COVID-19 pandemic affects our business, operations and financial results depends, and will continue to depend, on numerous evolving factors that we may not be able to accurately predict such as further government and health authorities restrictions, progress in and effectiveness of vaccination efforts in the United States or in the countries in which we operate and conduct business.
In response to the pandemic, our top priority has been to take 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. These procedures include reconfiguring facilities to reduce employee density, expanded and more frequent cleaning within facilities, implementation of appropriate and mandated distancing programs, employee temperature monitoring and requiring use of certain personal protective equipment at our U.S. headquarters and call centers in Mexico and Guatemala. As of December 31, 2020, all of our facilities are open and operating with adjustments to ensure social distancing and facial covering requirements established by state and local regulations.
Notwithstanding the operational challenges created by these measures, our business continues to function and, to date, our customer service has not been adversely affected in any material respect. Despite these efforts, the COVID-19 pandemic continues to pose the risk that we or our employees, sending and paying agents, as well as consumers and their beneficiaries, are or may become further restricted from conducting business activities, partially or completely, for an indefinite period of time, including due to shutdowns requested or mandated by governmental authorities or imposed by our management, or that the pandemic may otherwise interrupt or impair business activities. These risks could be magnified if the recent resurgence of COVID-19 illnesses continues or is not adequately contained and governmental authorities once again impose restrictions on commercial and social activities or businesses that employ our customers take actions that adversely affect the incomes of those employees.
The operational changes noted above had only a limited effect on the Company’s financial results. Although we saw a slight year-over-year decrease in our volume of transactions at the beginning of the pandemic, the year ended December 31, 2020 has shown a year-over-year increase in both dollar volume and transactions, including all-time highs for one-month sales in August and again in October, as well as a quarterly record for sales in the fourth quarter of 2020. The economic effects of the pandemic caused increased foreign exchange volatility, particularly with respect to the Mexican peso, which has created additional operational challenges; however, the overall effect on our results of operations to date has been positive. Despite positive trends during the second half of the year, we continue to monitor this evolving pandemic and its potential effects on the Company’s operations.
Although governmental authorities took measures that restricted the normal course of operations of businesses and consumers that were in place for much of the year ended December 31, 2020, the Company and our sending agents are considered essential businesses under current governmental guidance and 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, 2020. Notwithstanding the foregoing, 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 financial condition, results of operations and cash flows is subject to 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, which remain uncertain and cannot be predicted at this time. If the global response to contain and remedy the COVID-19 pandemic escalates further or is unsuccessful, or if governmental decisions to ease pandemic related restrictions are ineffective, premature or counterproductive, the Company could experience a material adverse effect on its financial condition, results of operations and cash flows.
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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.
Overview
We are a rapidly growing and leading money remittance services company focused primarily on the United States to Latin America and the Caribbean (“LAC”) corridor, which includes Mexico, Central and South America and the Caribbean. In 2019, we expanded our services to allow remittances to Africa 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 our customers 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 customers can send money to beneficiaries in 17 LAC countries, seven countries in Africa and two countries in Asia. Our services are accessible in person through over 100,000 independent sending and paying agents and 34 Company-operated stores, as well as online and via Internet-enabled mobile devices. Additionally, we have expanded our product and service portfolio to 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 remittance business.
Money remittance services to LAC countries, primarily Mexico and Guatemala, are the primary source of our revenue. These services involve the movement of funds on behalf of an originating customer for receipt by a designated beneficiary at a designated receiving location. Our remittances to LAC countries are primarily generated in the United States by customers 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 customers with flexibility and convenience to help them meet their financial needs. We believe many of our customers 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 our customers (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 through if we are successful in our daily management of currency exchange spreads.
Our money remittance services enable our customers 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. 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. During the three years ended December 31, 2020, we have grown our agent network by approximately 40% and increased our remittance transactions volume by more than 33%. In 2020, we processed approximately 32 million remittances, representing over 12% growth in transactions as compared to 2019.
As a non-bank financial institution in the United States, we are regulated by the Department of Treasury, the Internal Revenue Service, FinCEN, the Consumer Financial Protection Bureau (“CFPB”), the Department of Banking and Finance of the State of Florida and additionally by the various regulatory institutions of those states in which we hold an operating license. We are duly registered as a Money Service Business (“MSB”) with FinCEN, the financial intelligence unit of the U.S. Department of the Treasury. We are also subject to a wide range of regulations in the United States and other countries, including anti-money laundering laws and regulations; financial services regulations; currency control regulations; anti-bribery laws; money transfer and payment instrument licensing laws; escheatment laws; privacy, data protection and information security laws, such as the Graham-Leach-Bliley Act (“GLBA”); and consumer disclosure and consumer protection laws, such as the California Consumer Privacy Act (“CCPA”).
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 COVID-19 pandemic, responses thereto and the economic and market effects thereof, including unemployment levels and increased capital market 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 banking relationships necessary for us to conduct our business;
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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 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 and Canada;
changes in U.S. tax laws;
political instability, currency restrictions and volatility in countries in which we operate or plan to operate;
consumer fraud and other risks relating to customer authentication;
weakness in U.S. or international economic conditions;
changes in immigration laws and their enforcement;
our ability to protect our brand and intellectual property rights; and
our ability to retain key personnel.
Throughout 2020, Latin American political and economic conditions have remained unstable, as evidenced by high unemployment rates in key markets, currency reserves, currency controls, restricted lending activity, weak currencies, low consumer confidence, some of which reflect the impact of the COVID-19 pandemic, among other factors. Specifically, continued political and economic unrest in parts of Mexico 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 Wall Street Reform and Consumer Protection Act and similar regulations outside the United States. In coming periods, we expect these enhancements will continue to result in changes to certain of our business practices and may result in increased costs.
We maintain a regulatory compliance department, under the direction of our Chief Compliance Officer, whose responsibility is to monitor transactions, detect suspicious activity, maintain financial records and train our employees and agents. An independent third-party consulting firm periodically reviews our policies and procedures to ensure the efficacy of our anti-money laundering and regulatory compliance program.
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 and Euronet, and a number of other smaller 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, technology and brand recognition.
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We have encountered and continue to expect to encounter increasing competition as new electronic platforms emerge that enable customers to send and receive money through a variety of channels, but we do not expect adoption rates to be as significant in the near term for the customer 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 customers and have expanded our channels through which our services are accessed to include online and mobile offerings which are experiencing customer adoption.
We qualify as an “emerging growth company” pursuant to the provisions of the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), enacted on April 5, 2012. An “emerging growth company” can take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies.” These provisions include:
an exemption from the auditor attestation requirement of Section 404 of the Sarbanes-Oxley Act in the assessment of the emerging growth company’s internal control over financial reporting;
an exemption from the adoption of new or revised financial accounting standards until they would apply to private companies; and
an exemption from compliance with any new requirements adopted by the Public Company Accounting Oversight Board requiring mandatory audit firm rotation or communication of Critical Audit Matters (“CAMs”) in the auditor’s report. A CAM is defined as any matter arising from the audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements; and (2) involves especially challenging, subjective, or complex auditor judgment.

We will remain an “emerging growth company” until the earlier of (1) the earliest of the last day of the fiscal year (a) following January 19, 2022, the fifth anniversary of us becoming a publicly-traded company, (b) in which we have total annual gross revenue of at least $1.07 billion or (c) in which we are deemed to be a large accelerated filer, which means the market value of our common stock that is held by non-affiliates exceeds $700.0 million as of the last business day of our prior second fiscal quarter, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period. As of June 30, 2020, the market value of our common stock that is held by non-affiliates approximated $307.5 million.

The Merger
As discussed in Part I of this Annual Report on Form 10-K, the Merger was completed on July 26, 2018 (the “Closing Date”) and was accounted for as a reverse recapitalization where FinTech was treated as the “acquired” company for financial reporting purposes. Accordingly, the Merger was treated as the equivalent of Intermex issuing stock for the net assets of FinTech, accompanied by a recapitalization. The net assets of FinTech were stated at historical cost, with no goodwill or other intangible assets resulting from the Merger. The consolidated assets, liabilities and results of operations prior to the Closing Date of the Merger are those of Intermex, and FinTech’s assets, liabilities and results of operations are consolidated with Intermex beginning on the Closing Date. The shares and corresponding capital amounts included in common stock and additional paid-in capital, pre-merger, have been retroactively restated as shares reflecting the exchange ratio in the Merger for all periods. The historical financial information and operating results of FinTech prior to the Merger have not been separately presented in this Annual Report as they were not significant or meaningful.

In connection with the closing of the Merger, FinTech redeemed a total of 4.9 million shares of its common stock at a redemption price of $10.086957 per share, resulting in a total payment to redeemed stockholders of approximately $49.8 million. The aggregate consideration paid in the Merger consisted of approximately (i) $102.0 million in cash and (ii) 17.2 million shares of FinTech common stock.

After the completion of the transactions on the Closing Date, there were 36.2 million shares of International Money Express, Inc. outstanding common stock, warrants to purchase 9 million shares of common stock (“Warrants”) and 3.4 million shares reserved for issuance under the International Money Express, Inc. 2018 Equity Compensation Plan, of which stock options to purchase 2.8 million shares of common stock and restricted stock units in respect of 21.2 thousand shares of common stock were granted to employees and independent directors of the Company in connection with the completion of the transaction. All of the Warrants were eliminated following the Closing Date through a tender offer and mandatory conversion that resulted in the issuance, between April and May of 2019, of approximately 1.8 million shares of common stock and the payment by the Company of approximately $10.0 million in cash in exchange for the Warrants tendered in the tender offer (the “Warrants Offer”). These transactions resulted in the Company having a total of approximately 38.0 million shares of Common Stock outstanding following the issuance.

Secondary Offerings
In September 2020 and September 2019, the Company conducted underwritten secondary public offerings in which certain selling stockholders sold an aggregate of 5.7 million shares of the Company’s common stock at a price to the public of $13.50 per share and 6.0 million shares of the Company’s common stock at a price to the public of $12.75 per share, respectively. The Company did not receive any proceeds from these sales of common stock.
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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 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 customers 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 and fees primarily consist of agent commissions and bank fees. Service charges and fees 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 and fees 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 customer 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, finance 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 recognized as an expense on a straight-line basis over the requisite service period; unrecognized compensation expense related to options and restricted stock units (“RSUs”) of approximately $6.3 million is expected to be recognized over a weighted-average period of 2.2 years.
Other Selling, General and Administrative
General and administrative expenses primarily consist of fixed overhead expenses associated with our operations, such as information technology, rent, insurance, professional services, non-income taxes, facilities maintenance and other similar types of 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, provision for bad debt and expenses associated with increasing our network of agents. These expenses are expected to continue to increase at a slower pace than our increase in revenues.
Transaction Costs
We incurred transaction costs associated with the Merger in 2018. These costs included all internal and external costs directly related to the transaction, consisting primarily of legal, consulting, accounting, advisory fees and certain incentive bonuses. Due to their significance, they are presented separately in our consolidated financial statements. There were no similar transaction costs incurred in 2020 and 2019.
Depreciation and Amortization
Depreciation largely consists of depreciation of computer equipment and software that supports our technology platform. Amortization of intangible assets is primarily related to our agent relationships, trade name and developed technology.
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Non-Operating Expenses
Interest Expense
Interest expense consists primarily of interest associated with our debt, which consists of a term loan and revolving credit facility. The effective interest rates for the year ended December 31, 2020 for the term loan facility and revolving credit facility were 5.78% and 1.00%, respectively. Interest on the term loan and revolving credit facilities 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.
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 2037. After consideration of all evidence, both positive and negative, management has determined that no valuation allowance is required at December 31, 2020 on the Company’s U.S. federal or state deferred tax assets; however, a valuation allowance of $0.2 million as of December 31, 2020 has been recorded 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 expenses, and foreign tax rates applicable to the Company’s foreign subsidiaries that are higher or lower than the U.S. statutory rate. The Tax Cuts and Jobs Act, enacted in December 2017, reduced our federal corporate tax rate from 34% to 21% beginning in 2018.
Net Income (Loss)
Net income (loss) is determined by subtracting operating and non-operating expenses from revenues.
Earnings (Loss) per Share
Basic earnings (loss) per share is calculated by dividing net income (loss) by the weighted-average number of common shares outstanding for each period. Diluted earnings (loss) per share is calculated by dividing net income (loss) by the weighted-average number of common shares and common share equivalents outstanding for each period. Diluted earnings (loss) per share reflects the potential dilution that could occur if outstanding stock options and warrants at the presented dates are exercised and shares of restricted stock have vested, using the treasury stock method.
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 34 Company-operated stores throughout the U.S. 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.
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Results of Operations
The following table summarizes key components of our results of operations for the periods indicated:

Year Ended December 31,
(in thousands, except for share data)202020192018
Revenues:
Wire transfer and money order fees, net$307,909 $273,081 $232,380 
Foreign exchange gain, net46,763 44,268 39,765 
Other income2,537 2,252 1,756 
Total revenues357,209 319,601 273,901 
Operating expenses:
Service charges from agents and banks238,597 212,670 182,471 
Salaries and benefits32,831 30,705 32,926 
Other selling, general and administrative expenses
22,086 27,095 19,442 
Transaction costs— — 10,319 
Depreciation and amortization10,828 12,689 15,671 
Total operating expenses304,342 283,159 260,829 
Operating income52,867 36,442 13,072 
Interest expense6,566 8,510 18,448 
Income (loss) before income taxes46,301 27,932 (5,376)
Income tax provision12,517 8,323 1,868 
Net income (loss)$33,784 $19,609 $(7,244)

Year Ended December 31, 2020 Compared to the Year Ended December 31, 2019
Revenues
Revenues for the above periods are presented below:
Year Ended December 31,
($ in thousands)2020% of
Revenues
2019% of
Revenues
Revenues:
Wire transfer and money order fees, net
$307,909 86 %$273,081 85 %
Foreign exchange gain, net46,763 13 %44,268 14 %
Other income2,537 %2,252 %
Total revenues$357,209 100 %$319,601 100 %
Wire transfer and money order fees, net of $307.9 million, for the year ended December 31, 2020 increased by $34.8 million from $273.1 million for the year ended December 31, 2019. This increase of $34.8 million was primarily due to a 18% increase in transaction volume largely due to the continued growth in our agent network, which grew by 5% from December 2019 to December 2020.
Revenues from foreign exchange gain, net of $46.8 million for the year ended December 31, 2020 increased by $2.5 million from $44.3 million for the year ended December 31, 2019. This increase was primarily due to higher transaction volume achieved by growth in our agent network and a higher average amount sent by our customers as a result of increased foreign exchange volatility during the year.
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Operating Expenses
Operating expenses for the above periods are presented below:
Year Ended December 31,
($ in thousands)2020% of
Revenues
2019% of
Revenues
Operating expenses:
Service charges from agents and banks
$238,597 67 %$212,670 67 %
Salaries and benefits
32,831 %30,705 10 %
Other selling, general and administrative expenses
22,086 %27,095 %
Depreciation and amortization
10,828 %12,689 %
Total operating expenses
$304,342 85 %$283,159 89 %
Service charges from agents and banks— Service charges from agents and banks were $238.6 million for the year ended December 31, 2020 compared to $212.7 million for the year ended December 31, 2019. The increase of $25.9 million, or 12%, was primarily due to the increase in transaction volume described above.
Salaries and benefits— Salaries and benefits were $32.8 million for the year ended December 31, 2020, which represented an increase of $2.1 million from $30.7 million for the year ended December 31, 2019. The increase of $2.1 million is primarily due to $1.9 million in increased wages, largely in management and other areas, to support the continued growth of our business and $0.6 million increase in share-based compensation. These increases are partially offset by a $0.4 million decrease in commission expense for our representatives primarily due to a lower than expected gross margin achieved compared to established goals.
Other selling, general and administrative expenses— Other selling, general and administrative expenses of $22.1 million for the year ended December 31, 2020 decreased by $5.0 million from $27.1 million for the year ended December 31, 2019.
The decrease was the result of:
$3.7 million - nonrecurrence of settlement and legal fees associated with a Telephone Consumer Protection Act of 1991 (“TCPA”) class action lawsuit in 2019;
$1.2 million - primarily lower legal and professional fees in connection with the 2020 secondary offering of the Company’s common stock as compared to the 2019 fees, as well as the fees related to the Warrants Offer in 2019;
$1.1 million - decrease in travel expenses due to reduced employee travel due to the COVID-19 pandemic; and
$0.9 million - reduction in advertising and promotion expense due to a change in marketing strategy.

These decreases were partially offset by:

$1.0 million - higher IT related expenses incurred to sustain our business expansion;
$0.4 million - higher rent and other operating expenses;
$0.3 million - loss incurred in the closure of a financial institution in Mexico; and
$0.2 million - higher provision for bad debt as a result of higher account receivable balances due to the increase in volume.

Depreciation and amortization— Depreciation and amortization of $10.8 million for the year ended December 31, 2020 decreased by $1.9 million from $12.7 million for the year ended December 31, 2019. This decrease is mainly due to $2.4 million less amortization related to the trade name, developed technology and agent relationships during the year ended December 31, 2020 as these intangibles are being amortized on an accelerated basis, which declines over time. This decrease was partially offset by an increase in depreciation of $0.5 million associated primarily with additional computer equipment to support our growing business and agent network.
Non-Operating Expenses
Interest expense— Interest expense was $6.6 million for the year ended December 31, 2020, a decrease of $1.9 million from $8.5 million for the year ended December 31, 2019. The decrease was primarily due to a reduction in interest rates paid under the Credit Agreement (as defined below) and lower drawings under the revolving credit facility.
Income tax provision— Income tax provision was $12.5 million for the year ended December 31, 2020, an increase of $4.2 million from an income tax provision of $8.3 million for the year ended December 31, 2019. The increase in the income tax provision was mainly attributable to higher taxable income resulting from higher revenues.

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Net Income
We reported net income of $33.8 million for the year ended December 31, 2020 compared to net income of $19.6 million for the year ended December 31, 2019, which resulted in an increase of $14.2 million due to the same factors discussed above.
Earnings per Share
Earnings per Share - Basic for the year ended December 31, 2020 was $0.89, representing an increase of $0.37, or 71.2%, compared to $0.52 for the year ended December 31, 2019 due to the same factors discussed above.
Earnings per Share - Diluted for the year ended December 31, 2020 was $0.88, representing an increase of $0.36, or 69.2%, compared to $0.52 for the year ended December 31, 2019 due to the same factors discussed above.
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 acquisition activity, which varies from period to period and amortization of intangibles expense is primarily related to the effects of push down accounting resulting from acquisitions.
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 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 Credit Agreement;
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.


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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 push-down accounting, which will recur in future periods until these assets have been fully amortized, and excludes the amortization of other intangible assets related to the acquisition of Company-operated stores, 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, 2020 was $42.3 million, representing an increase of $9.7 million, or 30.0%, from Adjusted Net Income of $32.6 million for the year ended December 31, 2019. The increase in Adjusted Net Income was primarily due to the increase in revenues of $37.6 million, offset primarily by an increase in service charges from agents and banks of $25.9 million due to higher transaction volume.
The following table presents the reconciliation of Net Income, our closest GAAP measure, to Adjusted Net Income:
Year Ended December 31,
(in thousands, except for share data)20202019
Net Income$33,784 $19,609 
Adjusted for:
Share-based compensation (a)3,237 2,609 
Offering costs (b)509 1,669 
TCPA Settlement (c)60 3,736 
Loss on bank closure (d)
252 — 
Other employee severance (e)— 172 
Other charges and expenses (f)637 305 
Amortization of intangibles (g)6,841 9,248 
Income tax benefit related to adjustments (h)(2,981)(4,789)
Adjusted Net Income$42,339 $32,559 
Adjusted Earnings per share
Basic$1.11 $0.87 
Diluted$1.10 $0.87 
Weighted-average common shares outstanding
Basic38,060,290 37,428,345 
Diluted38,358,171 37,594,158 

(a)Stock options and restricted stock were granted to employees and independent directors of the Company.
(b)Represents expenses incurred for professional and legal fees in connection with secondary offerings for the Company’s common stock and Warrants Offer.
(c)Represents legal fees and charge for the settlement of a class action lawsuit related to the TCPA.
(d)Represents a loss incurred in 2020 related to the closure of a financial institution in Mexico.
(e)Represents severance costs incurred during 2019 related to departmental changes.
(f)Includes loss on disposal of fixed assets and foreign currency (gains) losses.
(g)Represents the amortization of certain intangible assets that resulted from the application of push-down accounting.
(h)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.

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Adjusted Earnings per Share - Basic (previously defined and used as described above) for the year ended December 31, 2020 was $1.11, representing an increase of $0.24, or 27.6%, compared to $0.87 for the year ended December 31, 2019.
Adjusted Earnings per Share - Diluted (previously defined and used as described above) for the year ended December 31, 2020 was $1.10, representing an increase of $0.23, or 26.4%, compared to $0.87 for the year ended December 31, 2019.
The following table presents the reconciliation of GAAP Earnings per Share, our closest GAAP measure, to Adjusted Earnings per Share:
Year Ended December 31,
20202019
BasicDilutedBasic and Diluted
GAAP Earnings per Share$0.89 $0.88 $0.52 
Adjusted for:
Share-based compensation0.09 0.08 0.07 
Offering costs0.01 0.01 0.04 
TCPA settlementNMNM0.10 
Loss on bank closure0.01 0.01 — 
Other employee severance— — NM
Other charges and expenses0.02 0.02 0.01 
Amortization of intangibles0.18 0.18 0.25 
Income tax benefit related to adjustments(0.08)(0.08)(0.13)
Adjusted Earnings per Share$1.11 $1.10 $0.87 

NM - Per share amounts are not meaningful.
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 are not an indicator of ongoing, future company performance.
Adjusted EBITDA for the year ended December 31, 2020 was $68.4 million, representing an increase of $10.8 million, or 18.7%, from $57.6 million for the year ended December 31, 2019. The increase in Adjusted EBITDA was primarily due to the increase in revenues of $37.6 million, offset by an increase in service charges from agents and banks of $25.9 million due to an increase in volume transaction as well as increases in other operating expenses to support the growth in our business.
The following table presents the reconciliation of Net Income, our closest GAAP measure, to Adjusted EBITDA:
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Year Ended December 31,
(in thousands)20202019
Net Income$33,784 $19,609 
Adjusted for:
Interest expense6,566 8,510 
Income tax provision12,517 8,323 
Depreciation and amortization10,828 12,689 
EBITDA63,695 49,131 
Share-based compensation (a)3,237 2,609 
Offering costs (b)509 1,669 
TCPA Settlement (c)60 3,736 
Loss on bank closure (d)252 — 
Other employee severance (e)— 172 
Other charges and expenses (f)637 305 
Adjusted EBITDA$68,390 $57,622 
(a)Stock options and restricted stock were granted to employees and independent directors of the Company.
(b)Represents expenses incurred for professional and legal fees in connection with secondary offerings for the Company’s common stock and Warrants Offer.
(c)Represents legal fees and charge for the settlement of a class action lawsuit related to the TCPA.
(d)Represents a loss incurred in 2020 related to the closure of a financial institution in Mexico.
(e)Represents severance costs incurred during 2019 related to departmental changes
(f)Includes loss on disposal of fixed assets and foreign currency (gains) losses.

Year Ended December 31, 2019 Compared to the Year Ended December 31, 2018
Revenues
Revenues for the above periods are presented below:
Year Ended December 31,
($ in thousands)2019% of Revenues2018% of Revenues
Revenues:
Wire transfer and money order fees, net
$273,081 85 %$232,380 84 %
Foreign exchange gain, net44,268 14 %39,765 15 %
Other income2,252 %1,756 %
Total revenues$319,601 100 %$273,901 100 %
Wire transfer and money order fees, net of $273.1 million for the year ended December 31, 2019 increased by $40.7 million from $232.4 million for the year ended December 31, 2018. This increase of $40.7 million was primarily due to a 19% increase in transaction volume largely due to the continued growth in our agent network, which has grown by 10% from December 2018 to December 2019.
Revenues from foreign exchange of $44.3 million for the year ended December 31, 2019 increased by $4.5 million from $39.8 million for the year ended December 31, 2018. This increase was primarily due to higher transaction volume achieved by growth in our agent network.


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Operating Expenses
Operating expenses for the above periods are presented below:
Year Ended December 31,
($ in thousands)2019% of
Revenues
2018% of
Revenues
Operating expenses:
Service charges from agents and banks
$212,670 67 %$182,471 67 %
Salaries and benefits
30,705 10 %32,926 12 %
Other selling, general and administrative expenses
27,095 %19,442 %
Transaction costs
— — 10,319 %
Depreciation and amortization
12,689 %15,671 %
Total operating expenses
$283,159 89 %$260,829 96 %
Service charges from agents and banks— Service charges from agents and banks were $212.7 million for the year ended December 31, 2019 compared to $182.5 million for the year ended December 31, 2018. The increase of $30.2 million, or 17%, million was primarily due to the increase in transaction volume.
Salaries and benefits— Salaries and benefits were $30.7 million for the year ended December 31, 2019, which represented a decrease of $2.2 million from $32.9 million for the year ended December 31, 2018. The decrease of $2.2 million is primarily due to $4.7 million of share-based compensation in the year ended December 31, 2018 related to the accelerated vesting of incentive units in connection with the Merger that did not reoccur in 2019. This decrease during the year ended December 31, 2019 was offset by $1.0 million in increased wages, largely in management and other areas to support our growing operations and a $1.5 million increase related to share-based compensation.
Other selling, general and administrative expenses— Other selling, general and administrative expenses of $27.1 million for the year ended December 31, 2019 increased by $7.7 million from $19.4 million for the year ended December 31, 2018.
The increase was the result of:
$3.7 million - settlement and legal fees associated with a TCPA class action lawsuit;
$1.8 million - legal and other professional fees associated with the Company’s SEC filings, including the Warrants Offer and a secondary offering in 2019 of the Company’s common stock;
$1.1 million - higher insurance premiums, property taxes and other operating expenses; and
$1.1 million - higher IT related expenses incurred to sustain our business expansion.

Transaction costs— Transaction costs of $10.3 million for the year ended December 31, 2018 include costs related to the Merger, consisting primarily of employee bonuses, termination of management fee agreement, change in control fee to our lender and legal and other professional fees. There were no transaction costs for the year ended December 31, 2019.
Depreciation and amortization— Depreciation and amortization of $12.7 million for the year ended December 31, 2019 decreased by $3.0 million from $15.7 million for the year ended December 31, 2018. This decrease is due to $3.1 million less amortization related to the trade name, developed technology and agent relationships during the year ended December 31, 2019 as these intangibles are being amortized on an accelerated basis, which declines over time. This decrease was partially offset by an increase in depreciation of $0.1 million associated primarily with additional computer equipment to support our growing business and agent network.
Non-Operating Expenses
Interest expense— Interest expense was $8.5 million for the year ended December 31, 2019, a decrease of $9.9 million from $18.4 million for the year ended December 31, 2018. The decrease of $9.9 million was due to a reduction in the interest rates paid under the Credit Agreement, which accounted for $4.6 million, and the write-off of unamortized debt origination costs and a prepayment penalty of $3.5 million and $1.8 million, respectively, related to the November 2018 refinancing of our senior secured credit facility, which were recorded during the year ended December 31, 2018 and did not reoccur in 2019.
Income tax provision— Income tax provision was $8.3 million for the year ended December 31, 2019, an increase of $6.4 million from an income tax provision of $1.9 million for the year ended December 31, 2018. The increase in the income tax provision was mainly due to an $8.5 million increase attributable to higher taxable income, offset by $1.6 million less non-deductible expenses and $0.5 million of write-offs of transaction costs and net operating losses and other items.
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Net Income (Loss)
We reported net income of $19.6 million for the year ended December 31, 2019 compared to net loss of $7.2 million for the year ended December 31, 2018, which resulted in an increase of $26.8 million due primarily to the same factors discussed above.
Earnings (Loss) per Share
Earnings per Share - Basic and Diluted for the year ended December 31, 2019 was $0.52, representing an increase of $0.80, or 285.7%, compared to a Loss per Share - Basic and Diluted of $0.28 for the year ended December 31, 2018 due primarily to the same factors discussed above.
Non-GAAP Financial Measures
Adjusted Net Income and Adjusted Earnings per Share
Adjusted Net Income (previously defined and used as described above) for the year ended December 31, 2019 was $32.6 million, representing an increase of $14.2 million, or 77%, from Adjusted Net Income of $18.4 million for the year ended December 31, 2018. The increase in Adjusted Net Income was primarily due to the increase in revenues of $45.7 million and a decrease in interest expense and salaries and benefits, offset by an increase in service charges from agents and banks of $30.2 million as well as increases in other operating expenses to support the growth in our business.
The following table presents the reconciliation of Net Income (Loss), our closest GAAP measure, to Adjusted Net Income:
Year Ended December 31,
(in thousands, except for share data)20192018
Net Income (Loss)$19,609 $(7,244)
Adjusted for:
Transaction costs (a)— 10,319 
Incentive units plan (b)— 4,735 
Share-based compensation (c)2,609 1,091 
Offering costs (d)1,669 — 
Transition expenses (e)— 348 
Management fee (f)— 585 
TCPA Settlement (g)3,736 192 
Costs related to registering stock underlying warrants (h)
— 615 
Other employee severance (i)172 106 
Other charges and expenses (j)305 410 
Amortization of intangibles (k)9,248 12,392 
Income tax benefit related to adjustments (l)(4,789)(5,187)
Adjusted Net Income$32,559 $18,362 
Adjusted Earnings per share
Basic and diluted$0.87 $0.72 
Weighted-average common shares outstanding
Basic37,428,345 25,484,386 
Diluted37,594,158 25,484,386 

(a)Represents direct costs related to the Merger, which consist primarily of legal, consulting, accounting, advisory fees and certain incentive bonuses.
(b)In connection with the Merger, incentive units were granted to our employees, which became fully vested and were paid out upon the closing of the Merger.
(c)Stock options and restricted stock were granted to employees and independent directors of the Company.
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(d)Represents expenses incurred for professional and legal fees in connection with a secondary offering of the Company’s common stock and the Warrants Offer.
(e)Represents recruiting fees and severance costs related to managerial changes in connection with becoming a publicly-traded company in 2018.
(f)Represents payments under a management agreement with a related party pursuant to which we paid a quarterly fee for certain advisory and consulting services. In connection with the Merger, this agreement was terminated.
(g)Represents legal fees and charges for settlement of class action lawsuits related to the TCPA.
(h)Represents professional fees in connection with the registration of common stock underlying outstanding warrants.
(i)Represents severance costs incurred related to departmental changes.
(j)Includes loss on disposal of fixed assets, foreign currency (gains) losses and legal expenses considered to be non-recurring.
(k)Represents the amortization of certain intangible assets that resulted from the application of push-down accounting.
(l)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 except for $1.7 million of offering costs for the year ended December 31, 2019, $4.3 million of non-deductible transaction costs and $4.7 million of non-deductible incentive units plan expense in the year ended December 31, 2018.

Adjusted Earnings per Share - Basic and Diluted (previously defined and used as described above) for the year ended December 31, 2019 was $0.87, representing an increase of $0.15, or 20.8%, compared to $0.72 for the year ended December 31, 2018.
The following table presents the reconciliation of GAAP Earnings per Share, our closest GAAP measure, to Adjusted Earnings per Share:
Year Ended December 31,
20192018
Basic and DilutedBasic and Diluted
GAAP Earnings (loss) per Share$0.52 $(0.28)
Adjusted for:
Transaction costs— 0.40 
Incentive units plan— 0.19 
Share-based compensation0.07 0.04 
Offering costs0.04 — 
Transition expenses— 0.01 
Management fee— 0.02 
TCPA Settlement0.10 0.01 
Costs related to registering stock underlying warrants— 0.02 
Other employee severanceNMNM
Other charges and expenses0.01 0.02 
Amortization of intangibles0.25 0.49 
Income tax benefit related to adjustments(0.13)(0.20)
Adjusted Earnings per Share$0.87 $0.72 

NM - Per share amounts are not meaningful.
The table above may contain slight summation differences due to rounding.

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Adjusted EBITDA
Adjusted EBITDA (previously defined and used as described above) for the year ended December 31, 2019 was $57.6 million, representing an increase of $10.5 million, or 22%, from $47.1 million for the year ended December 31, 2018. The increase in Adjusted EBITDA was primarily due to the increase in revenues of $45.7 million, offset by an increase in service charges from agents and banks of $30.2 million as well as increases in other operating expenses to support the growth in our business.
The following table presents the reconciliation of Net Income (Loss), our closest GAAP measure, to Adjusted EBITDA:
Year Ended December 31,
(in thousands)20192018
Net Income (Loss)$19,609 $(7,244)
Adjusted for:
Interest expense8,510 18,448 
Income tax provision8,323 1,868 
Depreciation and amortization12,689 15,671 
EBITDA49,131 28,743 
Transaction costs (a)— 10,319 
Incentive units plan (b)— 4,735 
Share-based compensation (c)2,609 1,091 
Offering costs (d)1,669 — 
Transition expenses (e)— 348 
Management fee (f)— 585 
TCPA Settlement (g)3,736 192 
Costs related to registering stock underlying warrants (h)
— 615 
Other employee severance (i)172 106 
Other charges and expenses (j)305 410 
Adjusted EBITDA$57,622 $47,144 
(a)Represents direct costs related to the Merger, which consist primarily of legal, consulting, accounting, advisory fees and certain incentive bonuses.
(b)In connection with the Merger, incentive units were granted to our employees, which became fully vested and were paid out upon the closing of the Merger.
(c)Stock options and restricted stock were granted to employees and independent directors of the Company.
(d)Represents expenses incurred for professional and legal fees in connection with a secondary offering of the Company’s common stock and the Warrants Offer.
(e)Represents recruiting fees and severance costs related to managerial changes in connection with becoming a publicly-traded company in 2018.
(f)Represents payments under a management agreement with a related party pursuant to which we paid a quarterly fee for certain advisory and consulting services. In connection with the Merger, this agreement was terminated.
(g)Represents legal fees and charges for settlement of class action lawsuits related to the TCPA.
(h)Represents professional fees in connection with the registration of common stock underlying outstanding warrants.
(i)Represents severance costs incurred related to departmental changes.
(j)Includes loss on disposal of fixed assets, foreign currency (gains) losses and legal expenses considered to be non-recurring.

Liquidity and Capital Resources
We consider liquidity in terms of cash flows from operations and their sufficiency to fund business operations, including working capital needs, debt service, acquisitions, 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.
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Notwithstanding the recent effects of the COVID-19 pandemic in the U.S. economy, 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. While our operating cash flows may be affected by the economic conditions resulting from the pandemic and other factors, 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, 2020. 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. We will, however, continue to evaluate the nature and extent of these potential impacts to our business and liquidity and capital resources and take action, as necessary, to preserve adequate liquidity, such as limiting discretionary spending and re-prioritizing our capital projects, to ensure that our business can continue to operate during these uncertain times.
The Company and certain of its domestic subsidiaries as borrowers (the “Loan Parties”) entered into 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 to pay for the cash portion of the Warrants Offer. 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 December 31, 2020, we had total indebtedness of $89.4 million, consisting of borrowings under the term loan facility and excluding debt origination costs of $1.8 million. As of December 31, 2020 and 2019, there were no outstanding amounts drawn on the revolving credit facility. There were $53.0 million of additional borrowings available under these facilities as of December 31, 2020.
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 year ended December 31, 2020 for the term loan and revolving credit facility were 5.78% and 1.00%, 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, and 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 payment or penalty.
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, 2020 and 2019, 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.
In addition, the Credit Agreement establishes certain restrictions on payment of dividends or cash distributions other than for certain purposes, including the following: i) to pay cash dividends to the Company in an amount necessary to cover reasonable and customary corporate and operating expenses, ii) to purchase, redeem or otherwise acquire warrants, rights or options on the Company’s common stock of an aggregate amount of up to $10 million plus the Available Amount (as defined in the Credit Agreement), iii) to repurchase the Company’s common stock from current or former employees in an aggregate amount of up to $5 million per calendar year, and iv) other restricted payments in an aggregate amount not to exceed $5 million plus the Available Amount.
As a result of the restrictions described above, among others, substantially all of the Company’s net assets as of December 31, 2020 and 2019 are considered restricted net assets.
The obligations under the Credit Agreement are guaranteed by the Company and certain domestic subsidiaries of the Company and secured by liens on substantially all of the assets of the Loan Parties, subject to certain exclusions and limitations.
On April 20, 2020, the Company received funds under the Paycheck Protection Program (the “Program”) in the amount of $3.5 million. Although the Company believes that it met all eligibility criteria for a loan under the Program at the time of its application, subsequent to receiving the funds, the Small Business Administration (“SBA”), in consultation with the Department of the Treasury (“Treasury”), provided additional guidance to address public, borrower and lender questions concerning the eligibility criteria under the Program. Based on this guidance provided by the SBA and Treasury, the Company returned the funds received under the Program on April 29, 2020.
Our indebtedness could adversely affect our ability to raise additional capital, limit our ability to react to changes in the economy or our industry, expose us to interest rate risk and prevent us from meeting our obligations. See “Risk Factors—Risks Relating to Our
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Indebtedness—We have a substantial amount of indebtedness, which may limit our operating flexibility and could adversely affect our business, financial condition and results of operations.”
Cash Flows
The following table summarizes the changes to our cash flows for the periods presented:
Year Ended December 31,
(in thousands)202020192018
Statement of Cash Flows Data:
Net cash (used in) provided by operating activities$(880)$52,534 $19,838 
Net cash used in investing activities(4,062)(6,719)(5,451)
Net cash used in financing activities(6,160)(32,944)(1,113)
Effect of exchange rate changes on cash(108)217 (40)
Net (decrease) increase in cash(11,210)13,088 13,234 
Cash, beginning of the year$86,117 $73,029 $59,795 
Cash, end of the year$74,907 $86,117 $73,029 

Operating Activities
Net cash used in operating activities was $0.9 million for the year ended December 31, 2020, a decrease of $53.4 million from net cash provided by operating activities of $52.5 million for the year ended December 31, 2019. The decrease of $53.4 million is a result of $66.3 million related to changes in working capital, primarily due to prefunding activity with our paying agents, offset by $12.9 million of cash generated by our operating results for the year ended December 31, 2020, which were positively impacted by the further growth of the business.
Net cash provided by operating activities was $52.5 million for the year ended December 31, 2019, an increase of $32.7 million from $19.8 million for the year ended December 31, 2018. The increase of $32.7 million is a result of additional cash generated by our operating results for the year ended December 31, 2019, which were positively impacted by the further growth of the business, and also $15.5 million related to changes in working capital.
Investing Activities
Net cash used in investing activities was $4.1 million for the year ended December 31, 2020, a decrease of $2.6 million from $6.7 million for the year ended December 31, 2019. This decrease in cash used was primarily due to lower purchases of property and equipment, partially as a result of the COVID-19 pandemic, and no acquisitions of agent locations during the year ended December 31, 2020.
Net cash used in investing activities was $6.7 million for the year ended December 31, 2019, an increase of $1.2 million from $5.5 million for the year ended December 31, 2018. This increase in cash used was primarily due to higher purchases of property and equipment during the year ended December 31, 2019 consistent with the growth of our agent network and IT department infrastructure.
Financing Activities
Net cash used in financing activities was $6.2 million for the year ended December 31, 2020, which consisted of scheduled quarterly repayments due on the term loan facility, offset by proceeds from issuance of stock as a result of the exercise of options.
Net cash used in financing activities was $32.9 million for the year ended December 31, 2019, which consisted primarily of $30.0 million in revolving credit line repayments, $10.0 million related to payments made in connection with the Warrants Offer and $5.0 million of quarterly payments due on the term loan facility, partially offset by $12.0 million in borrowings under the Credit Agreement.
Net cash used in financing activities was $1.1 million for the year ended December 31, 2018. The year ended December 31, 2018 included the repayment of the term loan of $95.8 million, the payment of $3.5 million in debt origination costs and $1.8 million of a prepayment penalty, offset by borrowings of $90.0 million as part of the refinancing of a former senior secured credit facility, $10.0 million of net borrowings under the revolving facility and net proceeds related to the Merger.
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Contractual Obligations
The following table includes aggregated information about contractual obligations that affect our liquidity and capital needs. At December 31, 2020, our contractual obligations over the next several periods were as follows:
(in thousands)TotalLess than
1 year
1 to 3 years3 to 5 yearsMore than 5
years
Debt, principal payments$89,383 $7,661 $81,722 $— $— 
Interest payments$10,918 4,216 6,702 — — 
Non-cancelable operating leases$4,991 1,476 2,077 1,438 — 
Total$105,292 $13,353 $90,501 $1,438 $— 

Our consolidated balance sheet reflects $87.6 million of debt as of December 31, 2020, as the principal payment obligations of $89.4 million are gross of unamortized debt origination costs of $1.8 million. The above table reflects the principal and interest of the revolver and term loan under the Credit Agreement that will be paid through the maturity of the debt using the rates in effect on December 31, 2020 and assuming no voluntary prepayments of principal.
Non-cancelable operating leases include various office leases, including our office headquarters.
Off-Balance Sheet Arrangements
We are not a party to any material off-balance sheet arrangements, such as guarantee contracts, retained or contingent interests, certain derivative instruments and variable interest entities that either have, or are reasonably likely to have, a current or future material effect on our consolidated financial statements.
Critical Accounting Policies and 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.”
Critical accounting policies are those policies that management believes are very important to the portrayal of our financial position and results of operations, and that require management to make estimates that are difficult, subjective or otherwise complex. Based on these criteria, management has identified the following critical accounting policies:
Revenue Recognition
Revenues for wire transfer and money order fees are recognized at the time the transaction is processed. The Company acts as the principal for these transactions as the Company controls the service at all times prior to transferring the funds to the beneficiary, is primarily responsible for fulfilling the customer contracts, has the risk of loss and has the ability to establish transaction prices. Therefore, these fees are recognized on a gross basis equal to the full amount of the fee charged to the customer. These fees also vary by transaction primarily depending upon, the principal amount sent, the send and receive locations, as well as the respective currencies of the send and receive locations. Foreign exchange gain, which represents the difference between the exchange rate set by the Company and the rate realized, is recognized upon the disbursement of U.S. dollars to entities from which the Company is acquiring foreign currency. Other income primarily represents revenues for technology services provided to the independent network of agents who utilize the Company’s technology in processing transactions and check cashing services, for which revenue is derived by a fee per transaction.
On January 1, 2019, the Company adopted the new accounting standard, Revenue from Contracts with Customers, as amended, which modified the existing accounting standards for revenue recognition. Refer to Part II, Item 8, Financial Statements and Supplementary Data, Note 4, “Revenue Recognition Standard” for further information about the impact of the adoption of this new accounting standard.
Accounts Receivable and Allowance for Credit Losses
Accounts receivable are recorded upon initiation of the wire transfer and are typically due to us within five days. We maintain an allowance for credit losses for estimated losses resulting primarily from the inability of our sending agents to make required payments. When preparing these estimates, we consider a number of factors, including the aging of a sending agent’s account, creditworthiness of specific sending agents, historical trends and other information. We review our allowance for credit losses policy periodically, reflecting current risks and changes in industry conditions and, when necessary, will increase our allowance for credit losses and recognize a
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provision for bad debt expense, included in other selling, general and administrative expenses in the consolidated statements of operations and comprehensive income (loss).
Goodwill and Intangible Assets
Goodwill and intangible assets result primarily from business combination acquisitions. Intangible assets include agent relationships, trade name, developed technology and other intangibles, all with finite lives. Our agent relationships, trade name 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, rather, an impairment test is conducted on an annual basis, at the beginning of the fourth quarter, or more frequently if indicators of impairment are present. 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 compare the implied fair value of goodwill with its carrying amount. To the extent the carrying amount exceeds its implied fair value, an impairment charge would be necessary.
We review for impairment indicators of finite-lived intangibles and other long-lived assets whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
Income Taxes
We account for income taxes in accordance with GAAP which require, among other things, recognition of future tax benefits measured at enacted tax rates attributable to deductible temporary differences between financial statement and income tax bases of assets and liabilities and to tax net operating loss carryforwards to the extent that realization of said benefits is more likely than not.
We account for tax contingencies by assessing all material positions, including all significant uncertain positions, for all tax years that are open to assessment or challenge under tax statutes. Those positions that have only timing consequences are separately analyzed based on the recognition and measurement model provided in the tax guidance.
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. For tax positions meeting the more likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. We are subject to income taxes in the U.S. federal jurisdiction and various state jurisdictions. 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. Our policy is to classify interest accrued as interest expense and penalties as operating expenses.
Our foreign subsidiaries are subject to taxes by local tax authorities.
Recent Accounting Pronouncements
Refer to Part II, Item 8, Financial Statements and Supplementary Data, Note 2, “Summary of Significant Accounting Policies”, for further discussion.
ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Foreign Currency Risk
We manage foreign currency risk through the structure of the business and an active risk management process. We currently settle with our payers in Latin America primarily by entering into foreign exchange spot transactions with local and foreign currency providers (“counterparties”). The foreign currency exposure on our foreign exchange spot transactions is limited by the fact that all transactions are settled within two business days from trade date. Foreign currency fluctuations, however, may negatively affect our average exchange gain per transaction.
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In addition, included in wire transfers and money orders payable, net in our consolidated balance sheets as of December 31, 2020 and 2019, there are $7.6 million and $12.6 million, respectively, of wire transfers payable denominated in foreign currencies, primarily in Mexican pesos and Guatemalan quetzales.
Also, included in prepaid wires, net in our consolidated balance sheets as of December 31, 2020 and 2019, there are $50.1 million and $16.4 million, respectively, of prepaid wires denominated in foreign currencies, primarily in Mexican pesos and Guatemalan quetzales.
We are also exposed to changes in currency rates as a result of our investments in foreign operations and revenues generated in currencies other than the U.S. dollar. Revenues and profits generated by international operations will increase or decrease because of changes in foreign currency exchange rates. This foreign currency risk is related primarily to our operations in our foreign subsidiaries. Revenues from our foreign subsidiaries represent less than 1% of our consolidated revenues for the year ended December 31, 2020. Therefore, a 10% increase or decrease in these currency rates against the U.S. Dollar would result in a de minimis change to our overall operating results.
The spot and average exchange rates for Mexico, Guatemala and Canada currencies to U.S. dollar are as follows:
202020192018
Spot(1)
Average(2)
Spot(1)
Average(2)
Spot(1)
Average(2)
U.S. dollar/Mexico Peso19.89 21.47 18.86 19.23 19.65 19.22 
U.S. dollar/Guatemala Quetzal7.79 7.71 7.69 7.69 7.73 7.52 
U.S. dollar/Canadian Dollar(3)
1.28 1.34 1.31 1.33 — — 
(1)Spot exchange rates are as of December 31, 2020, 2019 and 2018.
(2)Average exchange rates are for the years ended December 31, 2020, 2019 and 2018.
(3)We commenced operations in Canada during 2019, therefore we did not include information prior to this year.

Long-term sustained appreciation of the Mexican peso or Guatemalan quetzal as compared to the U.S. dollar could affect our margins.
Beginning in March 2020, we have experienced increased volatility in the U.S. dollar/Mexican peso rates related to economic effects of the COVID-19 pandemic, as well as actions taken by governments and central banks in response to the pandemic. We cannot, however, reasonably estimate the duration or extent of that volatility.
Interest Rate Risk
Interest on the term loan 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. Because interest expense is subject to fluctuation, if interest rates increase, our debt service obligations on such variable rate indebtedness would increase even though the amount borrowed remained the same. Accordingly, an increase in interest rates would adversely affect our profitability. Due to the economic effects of the COVID-19 pandemic, market interest rates have declined significantly, with the 10-year Treasury bond yield falling below 1.00% on March 3, 2020 and averaging 0.89% for the year ended December 31, 2020, and the 30-day LIBOR rate decreasing to 0.15% as of December 31, 2020, favorably affecting interest expense on the variable-rate portion of our debt for the year ended December 31, 2020. We cannot predict, however, whether or for how long interest rates will remain at these low levels.
As of December 31, 2020, we had $89.4 million in outstanding borrowings under the term loan. A hypothetical 1% increase or decrease in the interest rate on our indebtedness as of December 31, 2020 would have increased or decreased cash interest expense on our term loan by approximately $0.9 million per annum.
Credit Risk
We maintain certain cash balances in various U.S. banks, which at times, may exceed federally insured limits. We have not incurred any losses on these accounts. In addition, we maintain various bank accounts in Mexico, Guatemala and Canada, which are not insured. During the year ended December 31, 2020, we have not incurred material losses on these uninsured accounts. To manage our exposures to credit risk with respect to cash balances and other credit risk exposures resulting from our relationships with banks and financial institutions, we regularly review cash concentrations, and we attempt to diversify our cash balances among global financial institutions.
We are also exposed to credit risk related to receivable balances from sending agents. We perform a credit review before each agent signing and conduct ongoing analyses of sending agents and certain other parties we transact with directly. As of December 31, 2020, we also had $1.5 million outstanding of notes receivable from sending agents. Most of the notes are collateralized by personal guarantees from the sending agents and by assets from their businesses. Due to the COVID-19 pandemic, it is possible we could be adversely affected by
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credit losses, such as those related to our outstanding notes receivables from sending agents. At the date of this report, however, we are not aware of any significant exposure and are continuing to monitor our credit risk.
Our provision for bad debt was approximately $1.8 million for the year ended December 31, 2020 (0.5% of total revenues), $1.6 million for the year ended December 31, 2019 (0.5% of total revenues) and $1.2 million for the year ended December 31, 2018 (0.5% of total revenues). The increase in our provision for bad debt in the year ended December 31, 2020 is consistent with the increase in account receivable balances due to our growth in volume.
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ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INTERNATIONAL MONEY EXPRESS, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

All other financial statement schedules for International Money Express, Inc. have been omitted because they are not applicable, or because the information required is included in the respective consolidated financial statements or notes thereto.
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Report of Independent Registered Public Accounting Firm
Shareholders and Board of Directors
International Money Express, Inc.
Miami, Florida

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of International Money Express, Inc. and subsidiaries (the “Company”) as of December 31, 2020 and 2019, the related consolidated statements of operations and comprehensive income (loss), changes in stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2020, and the related notes and financial statement schedule listed in the accompanying index (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.



/s/ BDO USA, LLP

Certified Public Accountants

We have served as the Company's auditor since 2017.

Miami, Florida

March 15, 2021
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INTERNATIONAL MONEY EXPRESS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except for share data)

December 31,
20202019
ASSETS
Current assets:
Cash$74,907 $86,117 
Accounts receivable, net of allowance of $1,503 and $759, respectively
55,017 39,754 
Prepaid wires, net53,281 18,201 
Prepaid expenses and other current assets3,521 4,155 
Total current assets186,726 148,227 
Property and equipment, net13,021 13,282 
Goodwill36,260 36,260 
Intangible assets, net20,430 27,381 
Deferred tax asset, net 741 
Other assets3,036 1,415 
Total assets$259,473 $227,306 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt, net$7,044 $7,044 
Accounts payable12,771 13,401 
Wire transfers and money orders payable, net41,746 40,197 
Accrued and other liabilities22,380 23,074 
Total current liabilities83,941 83,716 
Long-term liabilities:
Debt, net80,579 87,623 
Deferred tax liabilities, net692  
Total long-term liabilities81,271 87,623 
Commitments and contingencies, see Note 17
Stockholders’ equity:
Common stock $0.0001 par value; 230,000,000 shares authorized, 38,217,125 and 38,034,389 shares issued and outstanding as of December 31, 2020 and 2019, respectively
4 4 
Additional paid-in capital59,310 54,694 
Retained earnings34,960 1,176 
Accumulated other comprehensive (loss) income(13)93 
Total stockholders’ equity
94,261 55,967 
Total liabilities and stockholders’ equity
$259,473 $227,306 

The accompanying notes are an integral part of these consolidated financial statements.
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INTERNATIONAL MONEY EXPRESS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE INCOME (LOSS)
(in thousands, except for share data)

Year Ended December 31,
202020192018
Revenues:
Wire transfer and money order fees, net$307,909 $273,081 $232,380 
Foreign exchange gain, net46,763 44,268 39,765 
Other income2,537 2,252 1,756 
Total revenues357,209 319,601 273,901 
Operating expenses:
Service charges from agents and banks238,597 212,670 182,471 
Salaries and benefits32,831 30,705 32,926 
Other selling, general and administrative expenses
22,086 27,095 19,442 
Transaction costs  10,319 
Depreciation and amortization10,828 12,689 15,671 
Total operating expenses304,342 283,159 260,829 
Operating income52,867 36,442 13,072 
Interest expense6,566 8,510 18,448 
Income (loss) before income taxes46,301 27,932 (5,376)
Income tax provision12,517 8,323 1,868 
Net income (loss)33,784 19,609 (7,244)
Other comprehensive (loss) income(106)95  
Comprehensive income (loss)$33,678 $19,704 $(7,244)
Earnings (loss) per common share:
Basic$0.89 $0.52 $(0.28)
Diluted$0.88 $0.52 $(0.28)
Weighted-average common shares outstanding:
Basic38,060,290 37,428,345 25,484,386 
Diluted38,358,171 37,594,158 25,484,386 

The accompanying notes are an integral part of these consolidated financial statements.
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INTERNATIONAL MONEY EXPRESS, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(in thousands, except for share data)

Common StockAdditional
Paid-in Capital
Retained Earnings
(Accumulated
Deficit)
Accumulated Other
Comprehensive
(Loss) Income
Total
Stockholders'
Equity
SharesAmount
Balance, December 31, 201717,227,682 $2 $46,076 $(10,174)$(2)$35,902 
Net loss— — — (7,244)— (7,244)
Net equity infusion from reverse recapitalization18,955,101 2 9,987 — — 9,989 
Share-based compensation— — 5,826 — — 5,826 
Balance, December 31, 201836,182,783 $4 $61,889 $(17,418)$(2)$44,473 
Adoption of new accounting pronouncement—