Earnings Call Transcript - IMXI Q1 2020

Operator, Operator

Good afternoon and welcome to International Money Express Incorporated First Quarter 2020 Earnings Conference Call. Please note this event is being recorded. I would now like to turn the conference over to Sloan Bohlen, Investor Relations. Please go ahead.

Sloan Bohlen, Investor Relations

Good evening. Before we begin, let me remind you that this conference call includes forward-looking statements, including our outlook for fiscal 2020. Actual results may differ materially from expectations. For additional information on Intermex, please refer to the company’s SEC filings including the risk factors described therein. You should not rely on our forward-looking statements as predictions of future events. All forward-looking statements that we make on this call are based on assumptions and beliefs as of today. I refer you to Slide 2 of our presentation for a description of certain forward-looking statements. We will undertake no obligation to update such information except as required by applicable law. In this conference call, we will also have a discussion of certain non-GAAP financial measures. Information required by Regulation G of the Exchange Act with respect to such non-GAAP financial measures is included in the presentation slides for this call, which can be obtained at the Investor Relations section of our website at intermexonline.com. We also refer you to Slides 14 through 18 of this presentation for a reconciliation of certain non-GAAP financial measures to the appropriate GAAP measures. I am joined on the call by Chairman and Chief Executive Officer, Bob Lisy; and Chief Financial Officer, Tony Lauro. Let me now turn the call over to Bob.

Bob Lisy, CEO

Good evening and thank you to our analysts and investors for your participation in tonight’s earnings call. Clearly, this is a unique time for all of us. As a result, we have altered the usual sequence of our remarks to focus more time on COVID-19 and how Intermex is proactively responding to the crisis. Before I begin our formal remarks, I would like to offer my thanks to all of our hardworking employees, agents, and of course, our loyal customers. I take a lot of pride in the hard work and talent that exists at Intermex, and those traits have never been more obvious than over the past month, and it continues today. With that, let’s turn to Slide #3 with the company’s response to COVID-19. In a very compressed timeframe, we have ensured the safety of all of our employees in both our corporate offices and our call centers with social distancing procedures and remote access tools. We did all of this without missing a beat. As you likely know, our business has been deemed an essential service in most states and municipalities. As we noted earlier this month, 95% of our locations remain open, and transaction volumes have remained quite strong to date. Additionally, the majority of our retailers are in the food or food-related businesses, so they are deemed essential on that criteria as well. Now, what high-level trends have we seen in the business since the onset of COVID-19? Initially, because of the volatility in the Mexican peso, we saw an uptick in the number of wires, but an even more pronounced increase in the average amount sent. The transaction flow has begun to normalize, but at a greater level than we would have initially anticipated, with brick-and-mortar transactions down approximately only 10% year-over-year in April. Conversely, our online unit has begun to experience growth at an even greater level than previously. That business grew at a year-over-year rate of approximately 130% in Q4. However, our projection for April is a growth rate of 282% year-over-year. This represents an approximate doubling of our online transaction volume from February to April. In summary, I would like to say one more time thank you to our employees and agents who have worked so hard to maintain our high standard of service through these difficult times. We certainly appreciate it as do our customers who have come to rely on us for best-in-class service. With that, let’s turn to Slide 4 to provide some color on what we are seeing on the ground with COVID-19 as it has evolved here in the U.S. As you read from our release, Intermex experienced an increase in volume, which has historically been consistent with the initial onset of an increased volatility or distress. The key unknown will be at what level will transaction volumes stabilize as the economic impact of the pandemic is realized. We would note that our customers tend to be less economically sensitive than most. Without generalizing, in many cases our customers work multiple jobs and are quick to move to opportunities that are available when certain options are limited. Oftentimes, they go through great hardships to come to the U.S. The whole purpose for being here is to make money and take care of critical needs back home. Additionally, many of our customers work in essential businesses such as agriculture, food processing, and construction, and as a result, they continue to work. Intermex has also built a strong franchise by means of our core strategy to be located often in more rural areas as opposed to being heavily concentrated in large metro centers. There has been less disruption of business as usual in those geographies. Before speaking to the quarter results, let’s first ground you all in why we believe Intermex is well-positioned from a competitive and business model perspective. Many of you have heard me describe Intermex as a house built of brick during our fireside chat we conducted a few weeks ago. I would like to spend a minute or two on what that means. First and most importantly, Intermex has always taken an approach to drive profitable and sustainable growth, both in our legacy and new markets. Profitability and sustainability sound like an obvious enough strategy, but I can tell you that many competitors in our industry and companies in general do not follow that approach. We have never focused on growth on the top line that is not ultimately profitable and sustainable. We believe many competitors in the remittance industry, some in retail and many online providers, focus on volume growth with little consideration for profitability and sustainability. This has created two issues for those companies. They often have to compromise service quality because of the absence of a long-term viable model. And more importantly today, these companies have little to no margin of error, as the volume of remittance drops off before they become unprofitable. Intermex is well-positioned because our model provides us with the leverage to withstand challenging conditions, such as the one we are experiencing, and the resources to become more aggressive during these times to maximize growth opportunities. This is the main reason we tend to gain share in weak markets just as we do in stronger ones. The other important and related component of the house made of brick is that our model creates exceptional liquidity and superior free cash flow. This is a powerful capitalization model, which is critically important in times of uncertainty. Tony will detail our liquidity later in the call, but I will simply state upfront, Intermex has more than ample capital to fund our business in a wide range of scenarios over the coming quarters. I would also like to highlight that Intermex is run by a very talented and capable team that has operated remittance businesses through recessions and volatility previously. There is a lot that goes on behind the scenes in this business. And in our view, it is critical to have an organization that is proactive rather than reactive. The past month Intermex has again proven its operational superiority in this regard. Lastly, we believe our reputation for customer reliability is a significant differentiator in times of stress and volatility. In recent weeks, we have heard from some of our payers that a number of smaller competitors have had liquidity shortfalls. The result of these issues is that receivers are not receiving their funds in a timely fashion. These issues do not occur at Intermex, and we expect our reputation as a highly reliable provider will only grow in the coming months. If we turn to Slide 5, let’s review our first quarter results across key performance indicators. First for revenue, we exhibited a solid 13% year-over-year growth. As I began the call, we highlighted an increase in year-over-year volume growth compared with last quarter. We believe that COVID did increase the average principal amount of the transactions for several days in March, but conversely as the month further unfolded, the transaction growth year-over-year began to slow. As I just spoke to, we are proud of how the company has handled our customer needs without any disruption and believe our service, quality, and reliability will continue to win new customers from our competitors. Turning to profitability, Intermex continued to drive operating efficiencies in Q1. Our adjusted EBITDA grew at 23%, which again is unmatched across our industry. Same goes for EBITDA margin which ended up the quarter at 17.1% or nearly 140 basis points higher than a year ago. Finally, we grew our adjusted net income by over 30% compared to last year and drove free cash flow of $7.3 million in the quarter. Tony will walk you through our liquidity and the broader results in a second, but I would like to reemphasize that our EBITDA growth and free cash flow generation is a significant outlier in our industry. Clearly, markets are in flux, so I won’t speak to valuation or how we believe our model is underappreciated. I will say that our philosophy and dedication to profitability and sustainable growth will drive significant competitive advantage for Intermex, however the coming months and quarter play out. With that, I will turn the call over to Tony.

Tony Lauro, CFO

Thanks, Bob, and good evening to our analysts and investors on today’s call. To continue Bob’s point about the house of brick, I would like to provide a little more detail on our liquidity and cash generation than we have in the past. On Slide 6, you will see that we added $7.3 million of free cash generated in the quarter, up $2.5 million or 52% from the first quarter a year ago. These figures reflect a conversion of adjusted EBITDA to free cash of 55% after taxes, investments, and debt servicing. Our business model, which combines strong margins and variable cost structure, where 80% of our costs vary with transaction volume, has positioned us well to weather this crisis. Turning to Slide 7, let’s look at the efficiency of our adjusted EBITDA conversion to free cash. In Q1 of this year, we converted 55% of our adjusted EBITDA to free cash, of which we’re extremely proud. This represents growth of over 10 percentage points to the conversion rate from the same period last year. We feel that our profitability and free cash generation are differentiators that will serve us well in the quarters and years ahead. Turning now to Slide 8, I will quickly walk through our first quarter results, as Bob touched on a number of these metrics already. First, on the top half of the page, we grew transactions by nearly 14% over last year on volume growth of over 17%, again an uptick in year-over-year growth compared with what we saw last quarter. Turning to the bottom half of the page, you can see that our revenue growth year-over-year was 13%. Despite a favorable mix shift towards Mexico transactions, revenue grew slightly more slowly than transactions. This was driven in large part because of the extreme volatility in the USD to Mexican peso exchange rate, which led to an abnormally high volume of cancellations in March. Last on the bottom right, our adjusted EBITDA growth of nearly 23% was impressive again, especially given the FX backdrop I just spoke to. The key drivers here were one, our mix which shifted back in favor to Mexico compared to less profitable markets; and two, operating leverage gained through slower growth of our fixed costs. Now if we turn to Slide 9, we continue to see our strategy and execution pay off in the form of market share gains, as you can see in the increased share to Guatemala in the lower middle portion of the page. Unfortunately, since we are reporting earnings in late April, the first quarter market share data are not yet finalized from the Bank of Mexico and typically become available in May. We will update our investor presentation on the day they become available. I will close my remarks on Page 10. Let me start with a comment that should be expected. Given the current state of our global economic uncertainty attributable to the pandemic, we’re suspending our full year 2020 outlook for revenue and adjusted EBITDA. Bob mentioned what we have seen so far in April is about a 10% decline in volume year-over-year. At this level, we remain very comfortably profitable and continue to generate free cash. While this is not a projection of future performance, we wanted to at least provide transparency on the current month’s performance so far. In closing, I would like to note once more an exceptionally strong quarter with nearly 23% adjusted EBITDA growth, remarkable in light of this crisis. While we don’t know what will happen in the quarters to come, we’re very confident in our ability to continue to provide our essential service to the communities we serve. We are equally grateful for the resilience we have seen from our agents and our customers. I wish the entire Intermex community, our employees, agents, customers, analysts and investors’ good health and safe passage through these trying times. With that, let me turn the call back to the operator for questions.

Operator, Operator

Our first question comes from Mark Palmer with BTIG. Please go ahead.

Mark Palmer, Analyst

Yes, thank you. Thanks very much, gentlemen. You touched during your remarks on the fact that some payers had said that smaller competitors had been facing liquidity shortfalls. Could you speak a little bit more broadly on what you are seeing in the competitive environment, particularly among those smaller independent players who make up a lot of the market and whether you are seeing other signs of weakness that could potentially translate into share gains?

Bob Lisy, CEO

Yes, Mark. Hi, this is Bob. I will begin to answer that and then give you some of the top line and then maybe turn it over to Randy for some additional color, Randy Nilsen, our Chief Revenue Officer. So we have seen quite a bit. I mean, there has been one competitor that actually shut down over the entire weekend, Easter weekend. I won’t name their name at this time, but it’s a relatively middle-sized competitor. We have seen other people shut down parts of the country. What happens in those cases is, is that it’s a good sign of a liquidity problem even ones other than the ones we hear from the payers. They are really not having enough pesos that they were able to fund in time at the time that they were buying the pesos for that day and not willing to take the risk with the volatility that’s going on. So we have seen that on a sort of intermittent basis with at least three different competitors. We also heard from, as I said, a number of providers, payers in Mexico and in Guatemala with certain providers, certain money transfer companies, not being able to pay their wires and then having to hold off on paying wires until they were able to fund. For those of you that are sort of maybe not as aware of how the market works, on a Friday, any company is really going to have to buy the number of pesos that they are going to need for Friday, Saturday, Sunday, and they are going to fund that in advance. And for us, it’s tens of millions of dollars. For the small guys, even it could be $10 million or more. And as these days get where margins get thinner or where some agents may shut down temporarily and because of quarantine issues and they can’t collect funds, all those kinds of erratic sort of behaviors lead to guys that are right on the brink failing and not being able to have the funding available to pay the wires out at the other end on a timely basis. So, what happens at the end of the day is that the customer, the receiving customer is turned away at the Elektra or turned away at Bancomer or wherever they go to pick up the money down in Mexico, calls back to the sender. The sender goes back to the agent retailer. The agent retailer has to call the provider. The provider is on the phone and may not even have a real answer. The wire ultimately has to be refunded, but they don’t have the money to refund the wire either at that time. And so it really ties up the consumer’s money. The consumer doesn’t want to use that provider again. Ultimately, the retailer who ended up spending maybe an hour or so of their time tracking this down doesn’t want to have the consumer send through that provider again. So, it starts to move wires to the more reliable companies. From what we are seeing and what we have heard from the one public company that’s reported already, it seems that our transaction volume, where it’s down, has been down a lot less than the competition. We are hearing that from payers as well. So, we won’t know how much share we have attained or picked up, Mark, for a month or two, because of the lag in the reporting. But the feel is, is that we are grabbing share from the small competitors and actually some of the larger competitors as this crisis has unfolded. Randy, I don’t know if there is anything you would add to that?

Randall Nilsen, CRO

Yes, if I may please. Thanks Bob. Hi, Mark. Bob has done a really nice job explaining how the market works on the weekends. In the sales team, we hear from time to time and even more so during March that companies have slowed down or that their service is unavailable, but it’s all basically rumors. I was just thinking as Bob was talking, 5 or 6 companies have had salespeople from 5 or 6 companies contact us in the past couple of weeks looking for employment, confirming that their companies have had downsizing events. What that does for us on the sales team, Mark, to kind of answer your question, does it open up opportunities for us. Every time we hear of the events, like the one Bob referenced where a competitor was down for about 2.5 days over Easter weekend, it gives us the opportunity to go to all of the retailers that share our service with that company and send a strong reminder that they want to be offering a service that they can have confidence in. That gives us another opportunity to go to retailers where we may not have our service today, but a competitor may and talk to them about the same messaging. So, our sales team has been very, very active over the past several weeks on a competitive front, contacting retailers that we don’t do business with as well as our own retailers over the phone, stressing all of the solutions that we bring them and reinforcing doing business with the leader that they can have confidence in. We do think it’s going to open up some great opportunities for us moving forward. Thank you.

Mark Palmer, Analyst

Thank you. And just one quick housekeeping question for Tony is, what was the company’s cash balance and revolver availability as of the quarter-end?

Tony Lauro, CFO

Yes, so, hi, Mark. When you say cash balance, I assume you mean our free cash that’s available outside of working capital.

Mark Palmer, Analyst

That’s correct, yes.

Tony Lauro, CFO

In which case, yes, so we had about $36 million available, and based on the day that we closed, our $35 million revolver was all available as well. But we feel like even towards peak needs of working capital, we’re still sitting at about $35 million, $36 million of free cash.

Operator, Operator

The next question is from David Scharf with JMP Securities. Please go ahead.

David Scharf, Analyst

Hi, good afternoon. Thanks for taking my questions, and I know Florida has been in the news quite a bit lately, so hopefully everybody is staying safe down there. A couple of things, Bob. One, I just wanted to briefly touch base on the agents. It looks like the 95% figure you cited, I mean that’s tremendously positive. I think when we think about a lot of these small businesses, even if they’re in food services and essential; that they would be more struggling. It sounds like you have a high degree of comfort level with the kind of relative health of the agent base. Are you aware of whether or not any of them are applying for PPP loans or have your salespeople in the regular course of just contact with them have any sense that any are sort of more struggling around the brink, or do you feel like that 90% to 95% figure is going to hold up over the next couple quarters?

Bob Lisy, CEO

Well, you asked a lot of questions here. I think during any downturn, there’s always the possibility that the agent network, which are mostly small businesses, has a chance for some of those businesses not to make it, and that brings in a whole other piece which relates to agent defaults and all that. We think we’ve got a great handle on that. We don’t see—at this point see a lot of agents that look like they’re struggling to that degree. I mean relative to the money transfer business, as we’ve said and we disclosed, our April numbers are better than 90%. When you look at most parts of the country, it’s disproportionate, as you can imagine in a place like New York or the Northeast, where it’s been decimated by COVID, it’s a much deeper cut into our transaction volume. So many areas of the country are operating at pretty close to 100%, if not at 100%. So those agents are—I don’t want to say unaffected, but in many cases they’re unaffected. I mean they’re not unaffected in terms of the impact of COVID being out and being a pandemic. But from the standpoint of their business, have been somewhat unaffected. We have heard, and Randy might comment on that, we’ve heard of the agents that have even asked our advice or could we help them out in applying for a small business loan, and we’ve done what we could to help with that. I think there will be agents that will apply, and many of them that will get it. But I think again, I think we feel like it’s a pretty solid base. We have been really surprised and delighted at really the level of agents that are still up and active. For one, I think there are a few things that it’s really proving about really the industry to start with. Number one is that this is a really essential service, right? When you start thinking about, well, what services are essential? For us, it’s drugstores and food stores and all this. But this is the money that’s going back to people in Mexico, Guatemala, El Salvador, Honduras, and others to pay for food, to pay for medicine, to pay for shelter. So it has been deemed an essential service. There have been a few places where agents—I think there was the San Francisco 7-county area, there were a couple little pockets of more upscale neighborhoods where they were forced to shut down if they weren’t in food stores. But generally speaking, they’ve not been forced to shut down. Some have self-quarantined because it’s been really rampant in their area. But we really, I think it says something about how resilient the business is in itself, how resilient our worker is. Because you think about it, our Mexican volumes have been staying pretty close to 100%, and we’re finding that others and again in a few pockets, the Northeast has been hit much, much harder. But there are states that are really, you know, the middle of the country for us has remained quite strong. So at this point, again, Tony said it well in the end. We can’t really predict what’s going to happen in the next month or two. As states start to go back into business a bit, Georgia leading the way, Florida has removed other than our area down South Florida, restrictions for starting Monday or starting to peel some back. We expect the business to begin to pick back up again. Is there a second run of the virus and things? We can’t look into that. But the way we see it right now today, we feel like our business is really, really solid. We feel like if things continue at the level that they are right now, we’re going to remain very cash flow positive, very profitable, and with a lot of extra cash in the bank and free cash that we’re never going to have to really even begin to think about using for this purpose still available for us for any other purposes, whether it be acquisitions or whatever. So as much as you could feel good about such a terrible pandemic, we feel really good about how we are positioned right now, and how our interaction with the agents is working, and the collection of the funds and all the rest of it.

David Scharf, Analyst

Got it. No, I mean I think resilient is the appropriate word. Hey, I am wondering as a follow-up, when Randy shared the anecdote about 5 or 6 salespeople from smaller competitors reaching out to you guys, it got me thinking. As you think about the sales strategy, with all of the uncertainty that the pandemic has introduced and all of the operational considerations that kind of force you to refocus on; has it altered how you’re viewing sort of the 2020 sales plan in terms of trying to open up new agents in new states or are you putting your foot on the brake a little bit or are you still...

Bob Lisy, CEO

Let me begin with an answer, and then again, I’ll let Randy give more detail. First, it’s not just the small guys. Remember, MoneyGram early on, I mean early, early on before I think any of us knew the impact, put a 20% pay cut across their whole organization. When you start talking about salespeople, I mean if we cut our salespeople pay by 20%, we’d have half of them out on the street ready to leave, because they’re very price-sensitive. That’s salespeople. So it’s not just the small guys. It’s been MoneyGram as well. The second piece of that is, Randy will talk to it, but we’re still putting up agents. We think that whereas—and we’re doing it remotely. We’re shipping the PCs out. We can do the training and the activation, all of that remotely without going out. We also know that there are going to be some states that we’re probably within the next week or two going to be able to start putting our salespeople back on the street, because those states' restrictions are peeling back, and we’re going to equip them to work safely with all the PPE that they need to be able to do that, and with certain protocols. We’ll be back out in the field in those areas. But lastly, I think the thing that’s most important is that this is a great opportunity for strong companies. This is a great opportunity for companies that have built these houses of brick like we have built, which is a company that has the kind of margins built in, that have not been built on sort of fluffy sales. They have been built on sustainable, profitable business, and they have been built in a way that has put money in the bank and made it a solid company. We are so well-positioned to go in after these small guys now that have disappointed retailers and disappointed consumers. Once we hit the ground running, I think certainly we miss a month or so here where we’re not activating agents at the same level we would have been if we were in the field. But I think we’re going to have a pent-up opportunity to go after agents, because there’s going to be a lot more opportunities that are frictional, because of the shortfalls of the companies that have failed their retailers during this period of time. If things start to wave back in as we’re seeing, in stages, and we start to get back to normal here in the summer; I think we are going to have an incredible second half of adding agent retailers because there’s going to be a great level of dissatisfaction between consumers, retailers, and actually sales reps in companies who have either been laid off, didn’t get paid or have their pay cut during this time. Fortunately, we’ve been able to mobilize our people to continue to sell, and to continue to drive in transactions that in some days are 100% year-over-year in April. We’re really pleased about that. We really can’t wait to be able to get back out there, even though we’ve been really productive while we’re not out there, because we think there’s more business for us to gather up than we can imagine, because of the shortfalls of the companies we are competing with. Randy, is there anything you’d like to add to that?

Randall Nilsen, CRO

Yes, two quick comments. Thanks Bob. Hi, Dave. I do want to say that the number we told you, the 95%, in fairness that’s a little bit fluid, right? Even in your neck of the woods, in the Bay area, we had some agents that went down initially maybe for a week or two. Then they called and said, we are missing out on business. We need to get reactivated. We need to get back in the game. They’ve been up now for a couple of weeks. Maybe in another part of the country, we see someone else for a few days or a couple of weeks temporarily suspend themselves. It hasn’t been like a big group of agents just has been shut down during this entire time period. The other thing I do want to stress is that Bob’s right on. We have really taken advantage of this opportunity to try to fine-tune our selling skills. Every day, our sales team is calling their agents over the phone and they’re prospecting over the phone. They’re taking every advantage, like I mentioned a few minutes ago, to call these retailers that are offering an inferior service to ours, and make them aware of everything we can bring to them. We feel really good about coming out and hitting full stride here mid-year.

Mike Grondahl, Analyst

Yes, thanks guys, and congratulations on the quarter. Any update on the— I think it was 10 to 12 salespeople you hired last fall, how are they progressing?

Bob Lisy, CEO

Sure, Randy, why don’t you just go ahead and talk about that directly?

Randall Nilsen, CRO

Sure, sure. Hi, Mike, how are you? We did make—gosh, I think you’re right. I think about 8 or 10 people at the end of the year, beginning of this year. Two were sales leaders that are doing a really nice job for us. We really like the way they’ve come in and made an impact. We do a very good job, I think, as we’ve shared with you before. We literally track here’s the business that each sales representative inherited and here’s what they’ve done with it week one, week two, month one, month two; and really track that from the very beginning. In fact, there are lists our sales managers earlier this week, reviewing that new hire performance plan and again, some of the new folks have been a little bit impacted, because they started in January. They went through some orientation in February, and then they didn’t get a full month in, in March on the street building up their prospect bank. They of course had to be doing it virtually in April. But we like the talent we’ve brought in and we’ve seen an immediate turnaround in some markets, but we like what we see in really every market right now. We have a couple of vacant positions right now, but we’re still interviewing for them. We have every intention to fill those once we find the right candidate, and continue to add where we need to add.

Mike Grondahl, Analyst

Got it. And then one more quick, there was a mention about some volatility, FX volatility in March in Mexico and some cancellations. Did that affect—I couldn’t tell if that was industry, smaller players, or if you guys even had a little bit of that activity?

Bob Lisy, CEO

Yes, Mike, what happened—this is Bob—what happens is that it’s a simple thing. Let’s say the sender on a Sunday decides to send money, and he sends it, and at that day he’s quoted a peso rate of 24 pesos per dollar. On Monday, there’s bad news, and the peso plummets, and it goes to 26 pesos a dollar. At that point, his beneficiary, the receiver on the other end, hasn’t picked up the money yet. He goes in and he decides that he’s going to cancel the wire and replace it. Those kinds of cancellations will cause there to be some losses, if you will, when people trade and re-trade a wire. It happens in these cases of volatility, and it’s kind of baked into the number. But it will be part of the ways that you might see FX not be quite as big of gains as you normally would see. I think the other thing that happens that’s not really cancellation-oriented is that when the peso is continually trading down, it allows people that are short of funds a little bit better opportunity to lean into it, because they might be able to buy those pesos tomorrow at just as good or a better rate than they did the day before. We talked before about the fact that a declining peso over time can sometimes favor people that are shorter of funds. But in this case, the volatility crosses some of that out because it’s hard to predict. We had days in March where the peso went from 24 to 26 and other days when it went back from 26 to 23 in a day or something like that, maybe not specifically. You can’t really take a bet on either side of that and believe that either way is going to—it was just very hard to pick which direction the peso was going. Some of that was just baked in. In some cases, we had to end up cancelling wires and then reissuing them at a better FX rate, which in the end can end up costing us money to do that. That’s baked into that FX gain.

Mike Grondahl, Analyst

Got it. Okay. Hey, thank you guys.

Operator, Operator

The next question is from George Mihalos with Cowen. Please go ahead.

Unidentified Analyst, Analyst

Hi, guys. This is Phillip on for George. Thanks for taking my question. I wanted to know if you could discuss a little bit about your customer segments, specifically ones that are focusing on restaurant and hospitality, and what kind of stress you’re seeing in those customer areas?

Bob Lisy, CEO

We’re really not seeing a great stress in those areas in the sense that—let’s first talk about the Mexican component of our business, which is the largest, is probably mostly focused in the areas of agriculture, and in construction and then sometimes food processing. Those areas have all been very much deemed essential businesses. That’s why the Mexican component, which as you well know is a big share of our business, has been really strong. Guatemala would be similar to that. I think there are other groups and some Mexicans and others, but particularly more other countries that might be more involved in the restaurant business. In those cases, in a lot of cases even in that, these are delivery people. They’re not typically chefs. We’re not typically talking about bartenders. We might be talking about busboys, in that case that there’s some sensitivity. The thing about our consumer is that the numbers play out. Let’s just talk about the numbers. I mean, you know, we continue to hold a strong growth number. We continue to hold a strong growth number through April. Our customers are resilient. They are people that will move quickly from one job to another. If they’re working in a restaurant, they will go off and start delivering food, or they’ll go to a car wash or whatever happens to be open to find work. As we said in the earnings release earlier that our customers will move from one project to another, because they’ve gone through such hardships to get here and their work really is essential work for everyone back in their family. Additionally, many of our customers work in essential businesses such as agriculture, food processing, and construction, and as a result, they continue to work. The other thing that I think that’s really important for us is that we’ve always been a business that’s been more focused in agriculture in the rural areas than we’ve been a city-based business. We do a lot of business in more agricultural areas than we do in metro areas, like New York or in LA. Because of that, where the virus has not been as rampant, our business has held up really, really well. We feel pretty strongly about it, and it continues to hold up as we said, quite well through April.

Unidentified Analyst, Analyst

Great, appreciate that color. And then for a follow-up, can you just talk about what kind of flexibility you have in the non-service expense line? It looks like it trended down a little bit year-over-year, even with strong revenue growth. So if you could just help contextualize that for us, that would be great?

Tony Lauro, CFO

Yes, sure. Bob, do you want to take that?

Bob Lisy, CEO

Yes, sure. First, you just need to think about in our entire cost structure, about 80% of our costs are variable with transactions. That remaining 20% is split between salaries and other operating expenses, if you will. The flexibility we have—and some of it is—the flexibility we have in the situation, there are some costs that just naturally are going to come down, like T&E for example. Obviously, you’re going to take a little bit of a hit to your hiring plans during a time like this. You can’t get people in to interview and those sorts of things. Some of that is just timing and will come back. We have flexibility in other things like advertising, which is in there. But by and large, it’s going to be in your hiring and it’s going to be in things like travel and expense. But more importantly, I think the big takeaway here is going to be that we’re getting great leverage out of the fact that 80% of our costs are variable. When we get a volume decline, we don’t see a big impact to our unit profitability on a fully-loaded basis.

Tony Lauro, CFO

Yes, I think one of the things you have to remember is that versus maybe one of the other public companies that reported recently, I mean they had 1% revenue growth and a 20% EBITDA decline. We’ve proven ourselves to be great operators, because we had a 13% revenue growth and a 20% EBITDA growth. We are very, very good at that, and have been good at that over time. Right now, we don’t see a necessity to do a lot of that, because we’re still holding quite strong in the disruption with our team to be able to handle this.

Unidentified Analyst, Analyst

Great. Really appreciate that. Thank you.

Operator, Operator

This concludes our question-and-answer session. I would like to turn the conference back over to Robert Lisy for any closing remarks.

Bob Lisy, CEO

Yes. Thank you all for your time today on the call, and thank you for your questions. We look forward to talking to you all soon, and hope you all stay well, and best wishes from all of us to hopefully we’ll all be through these difficult times soon and back to normal days, where we’ll toward even rosier days in terms of the business world. So thank you again for your time. We’ll talk to you soon. Take care.

Operator, Operator

The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.