International Money Express, Inc. (NASDAQ:IMXI) Q2 2022 Earnings Conference Call August 3, 2022 9:00 AM ET
Company Participants
Mike Gallentine – Vice President, Investor Relations
Bob Lisy – Chairman, Chief Executive Officer & President
Andras Bende – Chief Financial Officer
Joseph Aguilar – Chief Operating Office
Randy Nilsen – Chief Revenue Officer
Chris Hunt – Chief Information Officer.
Conference Call Participants
David Scharf – JMP Securities
Mike Grondahl – Northland Securities
Alex Markgraff – KeyBanc Capital Markets
Timothy Chiodo – Credit Suisse
Operator
Thank you for standing by. This is the conference operator. Welcome to the International Money Express Inc. Second Quarter 2022 Earnings Conference Call. As a reminder, all participants are in listen-only-mode, and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. [Operator Instructions]
I would now like to turn the conference over to Mike Gallentine, Vice President of Investor Relations. Please go ahead.
Mike Gallentine
Good morning, and welcome to our quarterly earnings call. I would like to remind everyone that today’s call includes forward-looking statements, including our updated 2022 guidance and actual results may differ materially from expectations. For additional information on International Money Express, which we refer to as Intermex or the company please see our SEC filings, including the risk factors described therein.
All forward-looking statements on this call are based on assumptions and beliefs as of today. You should not rely on our forward-looking statements as predictions of future events. Please refer to our slide in our presentation for a description of certain forward-looking statements. The company undertakes no obligation to update such information, except as required by applicable law.
On this conference call, we discuss certain non-GAAP financial measures. Information required by Regulation G under the Securities and Exchange Act for such non-GAAP financial measures included in the presentation slides our earnings press release and our annual report on Form 10-K, including reconciliation of certain non-GAAP financial measures to the appropriate GAAP measures. These can be obtained in the Investors section on our website at intermexonline.com.
Presenting on today’s call is our Chairman, Chief Executive Officer and President, Bob Lisy; and Chief Financial Officer, Andras Bende. Also on the call today are Joseph Aguilar, our Chief Operating Officer; Randy Nilsen, Chief Revenue Officer; and Chris Hunt, Chief Information Officer.
Let me now turn the call over to Bob.
Bob Lisy
Good morning, and thank you for joining us. As always, we appreciate your interest in Intermex. The company’s unprecedented growth continued unabated during the second quarter as we set a number of notable performance records and reached some significant milestones.
On Slide 3. During the 3-month period, we completed a record number of remittances, driving record revenues, adjusted EBITDA and net income. I’m proud to report that Intermex is selling almost twice as many transactions as we did when we became a public company just 4 years ago.
To put our history of performance excellence in perspective, we have met or beaten EBITDA expectations every quarter since we went public in 16 out of 16 quarters. Intermex is delivering sector-leading profitable growth and consistently strong operating results, creating significant value for our shareholders.
As for important milestones on Slide 4. We surpassed 4 million wires in a single month for the first time in May. Strong volume during Mother’s Day weekend, which is always a significant event in our industry, helped us achieve that record.
We sold 650,000 wires during Mother’s Day weekend and 232,000 wires on Mother’s Day itself, which also were company records. We ramp up every year from Mother’s Day because we know how important it is for our customers honor their mothers, grandmothers and other important women in their lives by sending money/
Our omnichannel strategy, which we articulated several quarters ago is the foundation for our impressive growth. This strategy enables remittance centers to match their preferred way of sending wires home using various payment methods, including conveniently located best-in-class agents or our state-of-the-art digital platform.
Turning to Slide 5. Our network of high quality, high volume neighborhood agents is the largest and most established distribution channel. Our growing network of highly efficient Intermex agents has been carefully crafted through a lot of hard work that makes it difficult for new or existing competitors to replicate. It is a dominant presence in an exceptional baseline for growing Expanding our agent network is the key to the company’s long-term success and the opportunity ahead is significant.
During the second quarter, the number of Intermex agents grew 11% compared with the same period last year. Within our agent network, there is a built-in opportunity for organic same-store growth, as agents mature from year 1 to year 2, the average number of wires increases significantly. We see the same pattern repeat from year 2 to year 3 and again going into year 4. So as you can see, our retail business is growing vigorously and profitably. We are confident that at that pace of growth we are achieving is sustainable over time.
We’re expanding the retail side of our business through surgical focused efforts recreate highly productive retailers in un-served and underserved zip codes. This highly targeted recruitment of retailers places our agents conveniently and efficiently where the business is being transacted.
We have identified over 1,800 zip codes in the U.S. with populations of 2,000 or more foreign-born Hispanic residences, where an Intermex agent is not conveniently located. We have also identified an additional 1,000 zip codes where we do not have an optimal agent presence to support the population of potential customers.
Our market research and experience tells us most of our current and potential customers prefer to do business in person. We believe 90% of Intermex customers are paid in cash or by paper check and many of these customers are in bank. They use our retail channel because it is easy, convenient and safe for them to stop at a local retailer on payday to send money directly home to their loved ones.
It is more than just convenience though. It is a matter of trust. Banks are not always welcoming our cost-effective solution for our customers. So many prefer doing business in their community at retail stores with a merchant they know and are comfortable with, a retailer speaks their language and understands their culture.
That said, we are seeing a growing number of Intermex customers turning to the smartphones or other electronic devices to wire money home as they choose alternative benefits provided by using our state-of-the-art mobile app we launched earlier this year. The app combines the best features of choice and ease of use. For example, customers can select between the best transaction fee, speed of delivery or exchange rate to suit their preferences.
Staying ahead of the consumer demand for digital remittance channels is another of our key strategic priorities. Demonstrating that commitment to expand our digital capabilities on Slide 6, we recently added a senior level executive to our leadership team to help build this important part of our business.
Marcelo Eduardo joined our company as our Chief Digital Officer, coming to us from XP Incorporated, where he was the EVP and Head of the business units focused on the company’s digital and card box. Before that, he was the Global Head of Digital Products and Solutions for Mastercard worldwide. We’re fortunate to have Marcello’s expertise on board. We’ll rely on him to oversee our digital initiatives and further develop our card products including our general purpose reloadable card.
The challenge for our customers, though, is not access to technology, it is being unbanked and our GPR card is designed to provide an alternative to bridge that gap. Marcello will take the lead in empowering our consumers to participate in e-commerce economy, providing with more opportunities for inclusion. He will be building our digital business on an innovative and highly scalable technology that already sets us apart from our peers.
Here world-class customer service is another point of differentiation for Intermex, whether our customers are wiring money in person or using our digital platform, they know they can rely on us to help them complete their transactions easily, safely and efficiently.
Backing that commitment to customer service is our call centers. We have 600 highly customer service reps on staff who are available to help our retail agents and our customers on a moment’s notice. It routinely takes us 5 seconds or less to answer the phone with a live person of a customer or in each call.
Even on Mother’s Day, while some competitors were apologizing for excessive hold times due to the increased volume, with some old times running as much as 20 minutes or more, we continue to answer our phones in 5 seconds or less. That is important to our partner agents in thousands of retail locations across the country who value how quickly and efficiently they can deliver service to their customers. It is also important to our customers who are venturing onto a digital platform to complete transactions on their own. If they have an issue, they can call and in seconds, be talking to a person who speaks their native language.
With this emphasis on service, we put the customer in charge. It’s a powerful combination. Our best-in-class technology, combined with our best-in-class customer services delivers the highest level of service to our customers in the remittance space.
Turning to our global expansion efforts on Slide 7. Let me give you an update on the Nacional acquisition. We are working through the necessary regulatory approvals at the state and country level, we expect to close the transaction during the third quarter. We will let you know as soon as the deal is completed.
With the completion of the transaction, Intermex will be a market leader in all top 5 Latin American, Caribbean markets, adding the Dominican Republic to the list. The DR along with Mexico, Guatemala, El Salvador, Honduras collectively represent 83% of all money sent to the region from the U.S. In aggregate, we’ll have more than a 21% market share in these 5 key markets.
Acquiring the Nacional and land holdings will also enable us to enter the European remittance market for the first time, expanding our global reach from 28 to more than 70 countries.
In summary, we expect Intermex to continue to grow faster than the high-growth market in which we compete. We will continue to win with our retail and online business because we have developed through metro goal approach, the most productive agent retail network in the industry, complemented by industry-leading technology and outstanding customer service. There continues to be significant positive momentum for Intermex and our shareholders.
With that, I will turn the call over to Andras Bende, our Chief Financial Officer, to provide more context around the strong results we reported this morning.
Andras Bende
Thanks, Bob, and good morning, everyone. The positive second quarter results we reported this morning from the clear competitive advantage we’ve created for Intermex. Intermex stands out as an innovator and leader in the fintech and remittance sectors, thanks to our efficient business management and intelligent investments in people with products and technologies. We’re delivering consistently strong results and sustainable growth as we expand the company’s footprint in the U.S. and globally.
Building off yet another quarter of strong agent growth that Bob mentioned earlier. On Slide 8, you can see the number of unique active Intermex customers grew 15% in the second quarter. The growth in customers, in turn, generated a record 12 million remittance transactions, 18% more than a year ago.
Contributing to the growth in total remittances on Slide 9 was a 170% increase in digitally originated transactions, as customer acceptance of our new mobile app continued at a triple digit pace. 26% of our transactions were sent or received digitally during the second quarter, demonstrating our commitment to omnichannel and meeting the needs of our customers however they choose to transact and with exceptional customer service.
On Slide 10, this record activity in the second quarter resulted in a 22% increase in the principal amount transferred over $5 billion for the 3-month period. The average remittance amount continued to grow by 3% versus a year ago to $447 per transaction.
With the strategy of capturing share through efficiency, technology and service, the company has continued to grow faster than the markets in which we compete. We now have a 22% share in our primary 4 markets, which account for 75%, through all the money transferred from the U.S. to Latin America. To reiterate, those markets are Mexico, Guatemala, Honduras and El Salvador. And as Bob earlier, [Indiscernible] brings us – brings to us to the primary market number 5, and will make us a market leader in the countries representing 83% of the U.S. outbound money transfers to Latin America.
As shown on Slide 11, agent growth, customer growth and increased send size all contributed to a 17% growth in revenue which reached $137 million during the second quarter. We continue to be laser-focused on unit economics and our cost structure, leveraging our growth to efficiently manage banking and payer fees on a per transaction basis.
Additionally, our goal digitally is to pace our spend around our app and online offerings to match or stay ahead of customer acceptance to our markets. We believe in rational unit economics and keeping a tight pulse on consumer behavior. So we prudently allocate our spend wherever we believe the economics is best supported.
As a result of the strong top line growth and ongoing operational improvements, second quarter net income grew 21% to $16 million. Lower depreciation, amortization and interest expense also contributed to improved net income for the quarter. Additionally, as in the press release, the quarter also benefited from an $800,000 refund for state business and occupancy tax.
Turning to Slide 12. Adjusted EBITDA increased 19% to $28 million, and adjusted net income increased 20% to $18 million. Both of these measures benefit from revenue growth, operating efficiencies and strong cost management.
Turning to the balance sheet on Slide 13. Intermex continues to be an efficient operator and strong generator of cash. The company ended the second quarter of 2022 with $114.6 million in cash and an undrawn revolver position of $150 million. We always underscore that position cycle a lot depending on the day of the week of the close. But any way you sight it, we sit in a great liquidity position and the balance sheet is in excellent shape. Net free cash generated, our internal measure, which removes balance sheet cyclicality remained strong with over 60% of EBITDA converted to cash.
Turning to our buyback program. We accelerated the buyback pace in Q2 and repurchased of 504,000 shares for $10 million. That brings our total since we launched the program to 1.1 million shares for $19 million. We’ve been acquiring opportunistically and at an average price of $17.95 per share. The program has been an excellent use of Intermex capital. We have about $21 million left under the existing Board approval for the program.
We’re also looking forward to deploying capital to close the Nacional acquisition in Q3, which we expect to do with cash on hand, when the acquisition closes, we’ll provide more color on the price and how the acquisition will impact the company.
We’re excited about the acquisition and how we’ll strengthen our market-leading position in Latin America, while opening to the door for us in Europe. We expect a positive return on this investment for our shareholders.
As you saw in the press release, we’ve adjusted our full year guidance upward based on the strength of our second quarter results, combined with the operating efficiencies we’ve achieved.
As you see on Slide 14, we’re raising our guidance for the year. We now expect revenue to be in the $542 million to $551 million range, net income of $60 million to $61 million, adjusted net income of $68 million to $69 million and adjusted EBITDA in the $104 million to $106 million range. So great momentum for Intermex and for its shareholders.
With that, I’ll turn it over to the operator for questions.
Question-and-Answer Session
Operator
Thank you [Operator Instructions] Our first question comes from David Scharf of JMP Securities. Please go ahead.
David Scharf
Great. Good morning, everybody. Thanks taking my questions. I was wondering if you can give us an update. You know, particularly as it relates to the runway of growth that you highlighted at newer agents. Is there a vintage analysis in terms of what percentage of your installed agents are both under 24 months old and under 12 months old, just sort of give us a sense of how much near-term organic opportunity there is there?
Bob Lisy
Yeah. David, I’m going to turn it over to Randy to answer.
Randy Nilsen
Sure. Yeah, hi. Good morning, David. Yeah, so we look at our agents in terms of cohorts, and we know at any point in time we’ve got a trailing 12 new agents versus the same-store agents. And it’s right around 15% of our agent base would be new and with that’s increasing each month, each quarter as we have put additional resources, primarily in the Western United States to help us build out the infrastructure there.
And as Bob said, most importantly, that as new agents move from the trailing 12 and to same-store agents, 13 months and more, their volume will double between month 13 and 24 and then months 24 to 36, get a nice bump again. So we really get about 3 years of nice growth from the agents that we have.
David Scharf
Got it. Got it.
Randy Nilsen
We have increased our activity, we put more people in the field that’s what we call regional sales executives, which are people not dedicated to a specific district who are adding to and filling those emptying or underserved and un-served zip codes.
So we expect that, that investment, which we’ve been making, which has been easily sort of managed through upturn, so you’re still seeing us continuing to grow that bottom line EBITDA and net income, even though we’ve invested in more people in the field. And the seeds from that really don’t start to blossom for three or three as those agents start to ramp up. And then again, that volume almost doubles in year 2, and it grows again in year 3. So there’s an investment that’s there that we expect to reap the benefits of in future quarters that we’ve been making this year so far.
David Scharf
Got it. So just to be clear, the 15% that you noted, Randy, those were agents that are – basically one through 12 months, if it’s before they reached that kind of 13 to 24 that Bob just noted, see such a big ramp?
Randy Nilsen
Yeah, yeah. So the way we look at it is, new agents are agents that have been with us 12 months or less, and I just did the math. Right now, it looks like about 20% of our agent base who has been with us less than 20% – sorry, less than 1 year, 12 months.
David Scharf
Okay. Got it. And related to that, I mean, you’re obviously very – it’s a high-touch model in terms of the agent relationship and communication monitoring. Are they – do you get feedback from them about you know, on the ground, what they’re seeing as the sources of growth?
I mean do they communicate specifically perhaps what other vendors, because obviously, there’s no exclusivity. What other remittance competitors primarily taking share from if their locations or is it entirely foot traffic? Any color that the agents are actually providing you so we can better understand how you’re outpacing industry growth so much?
Randy Nilsen
I think there’s a couple of things. One is, is that, as you know, the industry has and continues to grow. So there’s growth there. Our best source though for, who’s doing well and who’s not doing so well tends to be more the payers because that’s not anecdotal, it’s universal. They deal with all of the remitters and they have a sense about who’s growing and who is not.
There are companies we won’t name names in both the smaller folks for struggle. And then we know that some of the larger companies who have their model, we’ve seen has not necessarily yielded growth over the years.
Now that growth doesn’t come exactly one-for-one, you know, the market leader, some people would think of it the yellow and back, there’s a lot of business in big box stores. And that business, as I’ve always said, has moved away from back to be box stores year after year after year.
So it’s not necessarily that we take it directly from, say, a Western Union in retail, people are leaving the big box stores, and they are coming into the convenient location in the neighborhoods where we’ve done an excellent job of executing because we understand the number of foreign borns that live by each zip code.
So in doing that, we have that waiting agent, the best agent possible for us in that neighborhood. We do that whole selection process to make sure we have the best agents that on-site business review. All of those things are what contributes to our outsized performance. But I would say who’s losing in terms of market share, there are some people that are bigger than us, overall bigger companies anyway. And there are some smaller guys that are struggling. It’s not universal. There’s some smaller guys that are doing pretty well. But it’s not universal that, you know, it’s all coming from the large providers, public providers and all going to the small guys or vice versa.
David Scharf
Got it. And maybe last kind of follow-up to the different topic. I’d be remiss if I didn’t ask you about future capital action plans. I know there’s still capacity left on the existing authorization. But more broadly, and I think this was – it was parked in my mind because I think it was mentioned in the press release about a scheduled debt repayment.
And setting aside the high free cash flow conversion, 60% of EBITDA, your balance sheet even after this acquisition is under levered. I mean it’s negative net debt effectively. And is there a target that to EBITDA ratio that you think of business like this could and should support on a sustainable basis?
And maybe related to that, I have to believe that your revolver covenants have a ratio like that defined. And I’m wondering if so, what that limit is, if that gives us any window into ultimately how much debt for capital actions above and beyond EBITDA are potential?
Andras Bende
Yeah, David, this is Andras. So I’ll take that one. I would say that we don’t have a target, but I think that we feel that all comfort to move to utilize the debt portion of the balance sheet a bit more I would say that our comfort levels above 2.5 times, probably start to wind down a bit, so that gives you some goalposts to work with. I think that we don’t have a lot of appetite above that or getting near to the 3 range. But that’s where we stand right now, but we don’t have any hard and fast targets.
David Scharf
Perfect. That’s very helpful. Thank you so much.
Andras Bende
And I think we wouldn’t push the debt in a way that we didn’t have a great use for that right now, we’re funding our growth very easily. As I said, we made a strong investment in making a big investment in our digital and card. We made a strong investment in our retail, more people out in the field.
We continue to look and be vigilant towards potential acquisitions. We felt like a Nacional a perfect acquisition for us. There could be others, it’s our intent to find more, but what we won’t do is just buy things that could not necessarily be helpful to our shareholders just because we have cash in our buckets. So that we won’t do.
David Scharf
Understood. Thank you.
Operator
Our next question comes from Mike Grondahl of Northland Securities. Please go ahead.
Mike Grondahl
Hey, guys. Thanks and congrats on the results. Could you give us an update on the sales force, maybe the number of sales people out in the field compared to a year ago? And then you talked a bit about new agents and whatnot. How does the pipeline look the next 3 to 6 months for kind of continued growth in agents?
Randy Nilsen
Yeah. Hey, Mike, it’s Randy. Good morning. Last year, Q2, we probably ran sales exceed on the – feet on the street, about low 40s, maybe 41, 42 sales force. This year positions probably mid-50s, now we run – we’ve always got a few vacant positions, of course, but that’s allocated headcount probably low 40s compared to mid-50s this year.
With respect to your question about pipeline, we anticipate it’s going to be very similar to the rest of the year as to what we see in the first part of the – first half of this year. I think Bob mentioned we had record-breaking quarter in terms of a number of new retail locations that we added to the network in Q2. And we anticipate we’ll see similar type of results at the back half of the year.
Mike Grondahl
Great. Great. And then maybe just two more. Did you – have you seen any decline in average send amount or just really any effects due to inflation, higher gas prices kind of on your end consumer. Are you seeing?
Andras Bende
Yeah. Mike, this is Andras. We get the inflation question a lot. I think that you have to think about who our consumer is and the typical consumer is somebody who’s come to the U.S. to live very efficiently and work and generate as much as they can to send home to their families and eventually return to a better economic situation.
So that cohort has benefited very much from an outsize growth of wages, particularly to that consumer base. So we’ve seen that. I think that’s part of what’s bolstered the growth in remittent sent.
When you think about the inflation side from a cost perspective to these consumers, they’re not as exposed to maybe gasoline and energy prices as the typical American consumer, they’re definitely not as exposed to the overall goods like the stuff like basket bucket, those bucket that’s an inflation.
But as we have seen that number start to taper, that gross starts to taper a bit in Q2. So we’re only up about 3% year-over-year. I think you’re starting to see some impact of that has come through. But we are still growing. And we’ll just continue to keep an eye on it. I wouldn’t say it’s something that has us worried that we’re going to see a drastic shift in principal size sent.
Mike Grondahl
Got it. Thank you.
Operator
Our next question comes from Alex Markgraff of KeyBanc Capital Markets. Please go ahead.
Alex Markgraff
Hey, team. Thanks for taking the question. Just a couple for me. First, could you expand a little bit on some of the near term priorities with the addition of Marcellus. Just kind of what specifically do you see as the most high-value activities to tackle?
Bob Lisy
Yeah. Well, we’re – they’ll be the same level of activities that we’ve been. I think no one in the industry – I know you folks have a high opinion of Remitly, but they continue to sort of sink like a rock. And we’re not going to participate in the behavior that will continue to have us lose on a unit economic basis relative to each transaction online.
So I think the first company that really understands how to master online, the way we mastered retail. And I don’t suggest that we’ve done that yet, but that’s what we will be spending time to do. And then today, regardless of the customer acquisition costs, which are extremely high, the unit economics just do not provide for an opportunity to do well with that business. And so we’ll continue to work on that, but we’re work at that in a way that’s reasonable in same, so that we can deliver profitability on the online business.
The other thing is Marcel brings a huge amount of experience. He worked with Mastercard for years, and we still believe there’s a huge opportunity for our cared products, particularly in the Hispanic community and in the Hispanic community, maybe even those folks that are not in the remittance business, don’t send money back home. They could be second and third generation, but they still are not necessarily fully banked by U.S. Banks. So we think there is a huge opportunity for our GPR card through our retailers.
Netspend has done a great job and others of managing through the big box stores to their card product and through check cashes. But that hasn’t really touched the Hispanic community well. So we think that’s a huge opportunity for us. Today, we’ve made really good progress related to our payroll card, but our GPR card will be one of the top in terms of getting that card out in the hands of consumers as quickly as possible.
So to be focused on really building the online business but building it in a key way that hasn’t been done so far with the word called profitability. And then secondly, building that GPR part. And I think those are two really interesting verticals for us moving forward.
Alex Markgraff
Got it. And then perhaps one for Randy, just kind of expanding on the commentary around new agent growth. Any way to kind of describe the contribution of the new agents in the Western states. I know you all had talked about kind of hitting our stride in the West, at the Analyst Day earlier this year.
Just I don’t know if you can take a step further and provide some more color around that commentary. But just curious if you can maybe translate that around contribution to growth from new agents in the West versus some of the kind of core regions in the U.S.?
Randy Nilsen
Yeah. Well, I’ll answer the question this way. The new resources that we’ve added to the team that Bob referred to the regional sales executives, two thirds of those incremental heads have been added in the Western. So as they start to hit their stride and activate new agents primarily in un-served or un-served zip code, we’ll see that contribution from that team in the West opposed to the resources in the East. So we’ve already started to see the contribution they’ve been making this year, and they will continue to grow in the back half of the year.
Alex Markgraff
Okay. Appreciate the color. Thank you.
Randy Nilsen
Thank you
Operator
[Operator Instructions] Our next question comes from Timothy Chiodo of Credit Suisse. Please go ahead.
Timothy Chiodo
Great. Thank you. I wanted to talk a little bit about your underlying customer and the recession resistance inherent in the model. So I believe that most of the customers sending their remittance we talked in the past there in industries such as agriculture, construction, services, meaning restaurants, hotels, et cetera.
During the last recession, the remittances were impacted pretty meaningfully into Mexico, but at the same time, it wasn’t very different recession, right? There was a housing downturn. So maybe you could just talk a little bit about how sort of the recession resistance or the stability of the model through any potential recession. Clearly, you’re not seeing anything in your results now, which is great.
Bob Lisy
Well, which may be even more important, we didn’t see much results through the last recession. The macro numbers could have been very weak, and we certainly battle through those. But from 2009 through 2015, the industry virtually did not grow much at all and we more than tripled our business. So a lot of that was taking share. And a lot of it was because some of the competitors have kind of pulled back and they felt the recession and they started to – just take the investment away from retail and away from the things that were really their lifeline.
It isn’t dissimilar to what happened during COVID, when COVID was struck, we reinvested and make sure we had our full team out in the field and a lot of our competitors pull back. And as you through COVID, we never had one single quarter where we actually shrunk year-over-year. Our second quarter was mild growth or modest growth and that’s for sure.
But no quarter was one where we actually fell off.
So we first of all, I think it’s an approach. We do think we have a different way of handling that. We think our precision related to the marketplace and our nimbleness and are somewhat of our aggressiveness is to exploit the way other people will react to a downturn.
But I think additionally, we do a lot of business, not necessarily in urban centers. In urban centers are where those customers will work in service industries, which will have the most kind of impact as there’s a downturn. We do a lot of business in areas at agricultural and we do a lot of business with our consumers who are working in construction related, so they may not be building new homes or new home development but it could be putting decks on the backyard or working on landscaping, things that sometimes actually do better in a recession because people don’t necessarily buy a new home but they do and fix up their homes.
So we feel pretty good about the core business. We have a really large sector of our consumers that are in agricultural, and we think that’s really resistant completely to a recession. And again, housing starts in the construction industry strong, it’s really the two headed these for us. The service is also sort of there, but we’re not as dependent on urban consumers as we are in rural consumers generally. And that really bolsters us related to the agricultural and sometimes even the housing sort of starts and construction workers.
Timothy Chiodo
Excellent. Really appreciate that context. Thank you.
Bob Lisy
Okay. Welcome.
Operator
Our final question is a follow-up from Mike Grondahl of Northland Securities. Please go ahead.
Mike Grondahl
Yeah. Thanks, guys. Hey, Bob, a question for you. You know, roughly 1.5 years or 2 years ago or even a little bit more, you guys started investing in the digital side. And while others were going kind of crazy with their digital spend. You took a real measured cautious approach and your retail business was growing like a weed, you didn’t throw away dollars to get poor unit economics, if you will.
And I think the biggest mentioned a 1.5 years ago was just the CAC [ph] was a lot to get those customers. A lot of marketing spend social media, et cetera. Have you seen any narrowing of that CAC in the last 1.5 years? I mean is it still really wide to your retail business? Or I’m just trying to get a sense if there’s been any…
Bob Lisy
Yeah. I mean, I think there’s two things, right? One is, let’s put it sort of reset the expectations, whereas the digital business is growing to Latin America, and that’s where we’re focused. It doesn’t mean we don’t service other countries. And certainly, with the Nacional business will be, obviously, in many more countries, particularly outbound from Europe.
But when you talk about our bread and butter today, that business, even though the percentages of online is growing faster than retail, the absolute dollars of retail have grown much faster over the last 10 years, 5 years than they have at online. So there still is a market in retail that adds more absolute dollars than the market that adds absolute dollars in terms of the digital business. So that’s number one.
When you have that, you say gosh, there’s a huge business already in retail. It’s been deemphasized by some of the major players. And it’s bigger already to start and is adding more consumers with less focus on it. So we still think that, that business is really easier, lower-hanging fruit in the digital business.
Having said that, we’re an omnichannel provider. We coined that phrase, I don’t know, probably six quarter ago, four to six quarters ago, maybe eight quarters ago and others have kind of begun to use it now. But we want to provide every option of the consumer than they might want.
So on this side of the border, we have digital, and it’s growing for us in triple digits. It’s still a relatively small piece of our business, but it’s certainly growing significantly, and it’s a real business now. We also have the ability to do transactions in retail, but we have the ability to capture transactions in retail also through debit cards.
On the other side, we pay out over the counter, we pay out directly to bank accounts, we pay out through mobile wallets, we pay out through ATMs, we’re exploring other ways to pay out. So our business isn’t to force the consumer into any option. And to me, one of the consumer is very costly to drive to any particular option, it seems to indicate to me that there’s not a pent-up volume or business waiting there, right? Or it’s not hard to sell cold bottles of water in Miami at a festival in August. Hot chocolate might move a little slower.
So we are really going to go where there’s kind of opportunity to sell the cold water, and that’s in retail. At the same time, we’re an omnichannel provider. We recognize that there’s an increasing number of people that become bank, we’re part of the leading some of them to be bank card, payroll card, putting in the hands of consumers. Those consumers are now, in some cases, going to retail and using that debit card. But in some cases, they’re going online and using the debit card.
So from our perspective, we see it. We think there’s been a lot of misinformation in the market about the costliness of handling a retail transaction. When we put up a retailer in our business, that retailer breaks even for us in about seven months. It’s nothing like that online. You just don’t get a payback on that consumer relative to the CAC, even if you have a CAC that drives down to a much lower percentage than it is today.
But even at $40, which I would think most companies probably don’t have that CAC. If you’re making a couple dollars on wire, you need 20 wires from that individual if he sends 10 times a year, 2 years. In retail, I understand we’re looking at a retailer versus the consumer, but after 6 or 7 months, now we paid for that – and by the way, we paid for them in terms of CapEx. That’s just not OpEx, that’s everything.
So it still is a really great way for us to continue to grow, to continue to relevant and gain share as we continue to do in the marketplace. As we continue, no one is in here in this business is turning it back on. We spend probably just as much time focused on our card product and on online, as we do on our retail business.
But investment today is in our retail business because the return on that is so much higher, and we’re obviously trying to drive a return on investment in the short, middle and long term for our investors. And we think that’s the right approach. This omnichannel approach that we take.
Mike Grondahl
Great. Yeah, you’re clearly executing well, and thanks for that insight.
Operator
This concludes…
Mike Grondahl
If there’s no other questions. Do we have any other questions, operator?
Operator
This concludes the question-and-answer session. I would like to turn the conference back over to Bob Lisy for any closing remarks.
Bob Lisy
Thank you all for joining us. We appreciate you joining us for the call today. And we look forward to talking to you all soon and hopefully reporting continued great results. Talk to you soon.
Operator
This concludes today’s conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.
Be the first to comment