This was a particularly terrible year for fintech companies, not only the obvious victims of the Terra/Luna and FTX meltdowns, but also recently dominant public fintech companies like Affirm (down 91% year-to-date), Coinbase (down 86 % for the year), PayPal (down 63% for the year) and Root (down 92% for the year).
However, there must be some joy in ending even a terrible year on a positive note, which is why FIN is pleased to offer a company that has had a fantastic 2022 in almost every way: International Money Express. In a year when the Nasdaq fell 33.7%, Intermex shares are up 49%.
Intermex is primarily a remittance company that makes it easy for Latin American clients working in the US to send money to their home countries. FIN has long argued that the global money transfer market is ripe for technology-driven disruption. (Indeed, there are strong reasons to believe that when Facebook set out to create its own global currency a few years ago, first called Libra and then Diem, the company had its eye on remittances.) The World Bank estimates that in 2022 the global remittance economy was 626 billion, up 5%, although remittances had fallen 10% in 2021.
Intermex wasn’t on our radar until late December when Mark Palmer of BTIG issued an investment note (with a buy recommendation). One reason for its obscurity, which may also explain the stock’s success in 2022, is that the company is small; even after an enviable year, its market cap is below $1 billion.
The company has existed since 1994, when it first set up shop in Oregon and Washington. It was purchased by a private equity firm and went public in 2018. It now operates in all 50 states, Puerto Rico, and 21 countries in Latin America and Africa.
What is the company’s secret sauce? According to Palmer, Intermex “pre-funds” wire money, “so that immigrants who send money on a Friday can get it to their families within minutes versus days for many competitors who lack the resources to do such pre-funding. This feature helps to explain which Intermex can charge a small premium while offering a service that is supposedly merchandised.”
In November, Intermex completed the acquisition of La Nacional, for 42.3 million dollars. This acquisition gives Intermex a market share of more than 20% in seven countries. According to Palmer, “in addition to giving the company a leading position in the Dominican Republic, it also gives them opportunities for growth in Europe and gives a boost to the nascent digital business.”
