International Money Express, Inc. (NASDAQ:IMXI) Q4 2019 Earnings Conference Call March 9, 2020 5:00 PM ET
Sloan Bohlen - IR
Robert Lisy - Chairman, President & CEO
Tony Lauro - CFO
Randall Nilsen - Chief Sales & Marketing Officer
Conference Call Participants
Michael Grondahl - Northland Capital Markets
Timothy Chiodo - Crédit Suisse
David Scharf - JMP Securities
Georgios Mihalos - Cowen and Company
Mark Palmer - BTIG
Josh Beck - KeyBanc Capital Markets
Joseph Foresi - Cantor Fitzgerald & Co.
Greetings, and welcome to International Money Express Fourth Quarter 2019 Earnings Conference Call. [Operator Instructions].
As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Sloan Bohlen, Investor Relations. Please go ahead, sir.
Good evening. Before we begin, let me remind you that this conference call includes forward-looking statements, including our outlook for fiscal year 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 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 on our website. We also refer you to Slide 16, 17 and 18 of this presentation for a reconciliation of certain non-GAAP financial measures to the appropriate GAAP measures.
I'm 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.
Thanks, Sloan, and thank you all for joining us on our year-end 2019 call. As you can see from our press release, we ended 2019 with another strong quarter, with double-digit revenue growth and over 22% growth in adjusted EBITDA compared to last year, which put our full year profitability at the top end of our guided range. We will detail both our financial and strategic accomplishments in a second, but before we do that, I would like to thank our management team and our employees for another successful year.
As we noted last quarter, industry volumes began to slow in the second half of the year, but because of the differentiated way that Intermex serves our customers and the hard work of our team, we continue to outpace both the industry growth rate as well as the growth of our peers. With that, let's turn to Slide #3 and review our key accomplishments for 2019 compared to our strategic priorities when we began the year.
You can see that we began 2019 with the following goals: first, we believe our biggest growth opportunity remains in the expansion of our core business in markets we serve today. As we have noted in the past, there are more ZIP codes in the United States that represent transaction growth opportunities in which we do not do business than those where we currently operate. Second, we continue to develop our new products in quarters as see-through future growth. In 2019, we successfully launched both Africa and Canadian businesses as well as our white label processing service. We believe these initiatives are good examples of how we can leverage our strengths into a new source of revenue and profit. Third, we are pleased with the continued strengthening of our already strong balance sheet. We generated roughly $29 million of free cash in 2019 and ended the year with a total debt of just 1.76x adjusted EBITDA. Our cash generation and debt capacity provides us with the necessary resources to pursue quality acquisition opportunities. Fourth, we are excited about how we have strengthened our leadership team.
As we have noted last quarter, we are pleased to add Joseph Aguilar as our Chief Operating Officer. Joseph brings a wealth of skills and industry experience to us. We have already seen great contribution since his arrival. In January of this year, we also added Max Laba as our Chief Information Officer. Max has already developed a great road map to take our industry-leading platform to the next level. Finally, we constantly look for efficiencies in our business as evidenced by our strong operating leverage we've driven to date.
I want to highlight our recently announced partnership with Ripple as a good example. We're working closely with them to leverage RippleNet platform to speed our connectivity to new partners as well as using on-demand liquidity to drive capital efficiencies. So at the high end, we are very proud of the progress we have made to grow the business in 2019 and simultaneously strengthen Intermex for years to come. If we now move to Slide 4, let's review our fourth quarter and full year 2019 across our key performance indicators.
First, for revenue, as I began the call, Intermex continues to grow at multiples of the industry, and we're pleased to have grown nearly 11% for the quarter and nearly 17% for the full year. Across all of our key markets, even those where we already have a high market share, we grew above the market growth rate once again. As we have noted, industry volumes have moderated from the last few years of exceptional growth. I'll touch on industry trends in a minute, but I must say, we are extremely proud of how Intermex continues to drive significant growth profitability, even as the market slows a bit.
As you can see, adjusted EBITDA grew by 2x our revenue growth in fourth quarter and nearly 23%, and we had similar growth in our adjusted EBITDA over the full year 2019 compared to 2018. Lastly, we continue to take share across both our existing and new markets and believe Intermex remains the best positioned competitor in this space given the metrical approach we take relative to agent recruitment. We combine that approach with industry-leading technology and world-class customer service.
Tony will give more details on our current view of market share in a minute. Before that, let's turn to Slide #5 to review our growth compared to last year's fourth quarter. First, on the top half of the page, we continue to grow much faster than the market with transactions and volumes growing at 12% and 11%, respectively, over last year. On the next page, I'll give some historical context on the industry growth, but it goes without saying that we're again happy with our ability to outpace the competition based on our differentiated approach to the business.
Moving to the bottom half of the page, we grew revenues by nearly 11% over last year, and we are pleased with our adjusted EBITDA growth of nearly 23%. This growth in profitability, again, showed significant amount of operating leverages embedded in our model. As we noted last quarter, our adjusted EBITDA margin declined sequentially, primarily driven by the mix of the business, which Tony will speak to in a minute. At a high level, we are seeing higher growth in our markets outside of Mexico, where margins are generally lower.
To be clear, despite the mix shift, sour overall volumes in Q4, we still expanded year-over-year adjusted EBITDA margins by 160 basis points to end Q4 at nearly 17%, which drove the full year adjusted EBITDA margin to 18%. Turning to Slide #6, which is new in our materials this quarter, I would like to spend a minute on historical industry growth in the U.S. to Mexico corridor. The reason being that I would like to provide some background as to where we are today relative to the trends that we experienced over the last few years. First things first to observe here. First, the low single-digit growth we're seeing today represents growth on top of what has been strong growth for 3-plus years. We continue to have a high degree of confidence in Intermex's ability to outpace the industry growth given our model, but our relative pace of growth will always be impacted by the broader industry trends. The second thing I would like to point out here is why we saw outsized growth in U.S. to Mexico wires over the past few years.
To summarize, we think it's a combination of relative to the disparity between the strength of the U.S. and Mexico labor markets, with U.S. unemployment falling steadily for the last 3 years. And political uncertainty on both sides of the border that has often created a volatile market for the Mexican peso versus the U.S. dollar. Before I turn the call over to Tony, to detail our market share and quarterly highlights, I would like to emphasize once more, Intermex generated free cash of roughly $29 million. Based on our current market cap, it implies a yield of roughly 8%. We're very proud of the growth that we have achieved in 2019, but even more proud of our efficient cash version. With that, I would like to turn the call over to Tony.
Thanks, Bob. Before I discuss our market share in detail some highlights from the quarter, I'd like to take a minute to elaborate on Bob's point about free cash generation. As you can see on Slide 7, which is new in our presentation this quarter, the Intermex model is highly cash generative with a history of converting roughly 40% to 55% of our adjusted EBITDA to free cash.
In 2019, we generated free cash of $29 million. As a side note, we measure free cash after capital investments, taxes and debt servicing. I certainly echo Bob's comments about how unique our company is to have free cash yield of roughly 8%, with historical annual adjusted EBITDA growth over 20%. To put it simply, our company requires relatively little CapEx, but both a highly scalable operating model and massive total addressable market. We plan on highlighting our free cash generation going forward, as we believe, one, that it's an underappreciated component of our financial metrics, but also because we believe the allocation of that free cash to accretive investments can serve as an enabler of future growth acceleration.
Let's turn to Slide 8 to review the competitive landscape. As Bob mentioned, we experienced continued accretion of market share throughout 2019 in both our Mexico and Guatemala markets. For the fourth quarter, Intermex market share to Mexico was 18%, up 60 basis points since the end of 2018.
We grew share at Guatemala to 25.4% as compared to 24% a year ago. To frame this market share growth from a historic perspective, Intermex share of the U.S. to Mexico corridor has increased 2.3x and 1.8x in the U.S. to Guatemala corridor since 2014.
Now let's turn to Slide 9 to review Intermex's share of industry growth for our Tier 1 and Tier 2 countries, which, for competitive reasons, we will disclose on an aggregate basis moving forward. For the full year 2019, Intermex accounted for 31% of the total growth to Mexico, Guatemala, El Salvador and Honduras. This growth highlights the significantly higher growth rates we are seeing in corridors outside of Mexico and demonstrates the mix shift dynamics in our business that Bob touched on.
If we turn to Slide 10, let's review the fourth quarter financial highlights. In the fourth quarter, we grew revenues 10.9% on volume growth of 11.4% as a result of our mix shift away from Mexico to lower margin corridors. Adjusted EBITDA grew nearly 23% for the fourth quarter as margins expanded 160 basis points to 17%. Net income of $5.3 million for the quarter was up 9.8% from the prior year. We also solidified our sales staffing in high priority Western states.
Turning to Slide 11. Let's review the full year 2019 financials. For the full year, we grew revenues by nearly 17% on 15.7% growth in volumes. We grew adjusted EBITDA by 22.2% for the full year as we've been able to deliver strong operating leverage throughout the year by successfully executing key efficiency initiatives. First, and most importantly, we've been diligent in our efforts to migrate our agents to lower cost deposit methods with our banks. We realized over $2 million in savings in 2019 and believe there are some additional savings to be captured in 2020. We've remained focused on building a highly scalable business across all functions, and our SG&A expense growth is outpaced by our revenue growth. Executing on these initiatives drove adjusted EBITDA margin to 18% for the year, up just over 80 basis points.
Lastly, moving to Slide 12, I'll discuss 2020 guidance. As you saw in our press release, we're forecasting 2020 revenue in the range of $340 million to $355 million. Embedded in this range is our estimate that industry growth will remain similar to what we have observed in the past few months. I share Bob's conviction that Intermex can continue to outpace the broader market. But industry trends will clearly impact our absolute growth.
Moving to adjusted EBITDA. We remain confident in our ability to deliver operating leverage and are forecasting a range of $62 million to $66 million. We're excited about our prospects for 2020 and look forward to updating you on our progress as we move throughout the year.
With that, let me turn the call back to the operator to take your questions.
[Operator Instructions]. Your first question comes from the line of Mike Grondahl with Northland Capital Markets.
Guys, could you talk a little bit about the competitive environment and what you're seeing there?
Sure. Mike, this is Bob, and then I'll have Randy add a bit more to this because he's a lot closer to the action, our Chief Revenue Officer. I think we're seeing consistent behavior from competitors that we saw throughout the second half of 2019. They've continued to, I think, a little sharper discounting than we've seen previously or at least through the first half of 2019, but I don't believe that it's gotten any more heated. We certainly see that more in high velocity markets like California and Texas, and less so in the in other markets that are not as large relative speaking to Mexico and Guatemala.
But it's been a continued sort of basis. We, however, have been able to begin to lay in place plans that don't put us in the eye of the discounting, but put us in a position to battle against that without necessarily discounting in the same way that competitors are, and we're finding that, that's beginning to take hold in a number of markets and become successful for us.
So we think that these things happen on an intermittent basis. You'll see discounting get really heavy, but they're, in many cases, they're unsustainable numbers that can obviously because they're unsustainable, are not something that people typically, the competitors will hold up for long periods of time because ultimately, there's no conversion of that to long-term profitability. So whereas it's been going on, we think like we're in a position that we're responding to it well. And secondly, we think that it's something that happens intermittently. We but if it continues, we still have a -- I think we're well positioned with the plans we put in place to attack against that in those markets where it's really strong. And Randy, I don't know if you want to...
Sure. I would just add. Thanks, Bob. Mike, Bob is exactly right. The only thing I would add is that we saw maybe 2 or 3 new entrants in markets like California and Illinois. And to Bob's point, I think what we've seen throughout the year, especially the back half of the year is that these competitors who have come in as discounters, positioning themselves as discounters really are moving wires from previously -- previous competitors who had kind of done the same thing. So we like where we're positioned. And to Bob's point, we feel really good about the quality service we're providing to the customer that is looking for value moving forward.
Got it. Great. I'll just follow-up with a quick question on Ripple. You have a big concentrated market, 60% of your business going to Mexico. So is your plan to get some of that on Ripple? How do you kind of see that progressing in 2020? And what are the benefits?
Mike, it's Tony. We're looking at Ripple for a couple of other products, which I think we mentioned in the press release. The first of which is RippleNet, which, as you know, is their hub connecting financial institutions together, which will enable us to onboard new payers faster than we would if we were doing direct connections to each one. So that has more applicability for us outside of Mexico, where we're building out our network into other corridors.
But the other would be on-demand liquidity, I think that might be more of what you're talking about, where we can use XRP as kind of a pivot currency to swap U.S. dollars for pesos, 24/7. And it's early days, but we would expect to be testing that later this year. And to the extent that it is viable, either from a rate perspective or a capital efficiency perspective, we'll expand it. But it's too early to say how much we intend to do.
Yes. I think the only thing that I would say is, Mike, that Ripple will not be an answer for places like Mexico. We're very proud about the relationships we have there. And as one of the Top 2 providers, we believe, today, company-wise, with Western Union and one of the Top 4 with Western Union, MoneyGram and Ria that we don't think that we could replicate the kind of relationships we have with the key payers like Bancoppel, Electra with a Ripple-type setting. That's a commoditization, and we differentiate ourselves a great deal through those relationships. We have very tight relationships that strategically setting plans and objectives with those payers. And so you won't really see us leveraging Ripple in our core markets.
I think it will bring us more growth in newer markets in places where we're exploring going into ancillary products, but probably not in our core business because those are really critical where we differentiate ourselves from others because of the kind of volume we drive and the relationships we've built over the years with direct relationships.
Your next question comes from the line of Tim Chiodo with Crédit Suisse.
A couple of things here. One, on the take rate. So just kind of the core take rate, not even looking at the FX fees, which I understand is an important part of it. It looked a little strong, at least relative to our number. I just want to see that take rate upside, was there any sort of a mix shift there that you could call out maybe a mix shift towards sort of the better states for you, the better price state plus competitive? Or was there any other type of pricing that might have been taken during the quarter?
And then the follow-up question is just if we could dig into a little bit more of those sales force hires. I know in the past, you mentioned that it's challenging to find the right people. And maybe just expand upon the folks that you added, where they'll be and when we should start to think about them becoming a productive part of the organization?
This is Bob. Let me answer the second question first, and then I'll ask for a little bit of clarity just to make sure I'm not going off on an answer, we as a group are not going off on an answer, on your first question, that's not directly on target.
On the second piece, we've gone from having as many as 12 vacancies in our, what we call districts, which are -- where the sales rep meets the agent retailer. So that's our field sales people. We have that going into parts of the second half of the year. And now as we begin the year, we have vacancies down to about 4, and we have very few of them out in California, and that's a typical number. So don't even look at it from 12 to 4. But look at it that we have more than 40 of those jobs. So we have less than a 10% vacancy. You're typically going to have vacancies of 5% or to 10%. So we'll fill those jobs, but there's always frictional sort of movement in those roles. So we feel like we're just about up to full employment.
We brought in a very experienced recruiter, who was a big investment for the company relative to where we were spending on recruitment. And that individual has done a tremendous job in bringing in not only talent for our sales organization but also for our sales management team. We've brought in a couple of new sales managers, one directly for the state of California, who's done a great job in the early going and one who has the wrap around or the mountain states in the west, what's critically important. And so that recruiter has done a great job as well as other jobs, not just sales in the company. So we're really happy with that effort, and we think we'll continue to be closer to full employment.
One thing I want to stress, though, is that just like driving unsustainable growth, driving the hiring of people who are not sustainable and don't believe in our mission and the way we do business, which has been high profitability, which was in a value-added service in a commoditized industry and growing many times the rate of the industry is more difficult than hiring people from other companies who traditionally have gone about putting up as many retailers as fast as they can and discounting the product and so that they can sell as many wires that they can.
It's not sustainable. It doesn't deliver the kind of quality retailers and relationship with the consumers that we want. And so we have a little bit tougher mission. Now with the way we reposition ourselves from a recruiting perspective, we think we're right on the mark. Really happy with the results, and we think we'll be able to continue that. But our difficulties are not difficulties that will be shared by all of our competitors whose models look quite a bit different and expect a lot less from their salespeople than we necessarily do. And then if you could clarify your first question again. I want to make sure that I'm clear about what you're asking.
No problem. Thank you, Bob, and that was very helpful on the hires, very impressive. The question was really just versus our model, when we look at wire transferring money order fees, divided by volumes. That percentage take rate looked a little bit higher than maybe what we were modeling. And just wanted to see if there was any mix shift or maybe pricing that might have been taken to help drive that? Or maybe there's not much to call out there?
It was in line with what we were expecting broadly. So we have seen a little bit more of a mix shift to the lower margin corridors, but it's nothing outside the normal volatility we would expect.
We've been for a while, I mean, two movements that you'll see is that the business is moving in two directions. And the way this business has been built. We purposefully built it with a tremendous focus on Mexico and Guatemala first, because they're the two countries with the highest margins. And we have to lay the groundwork with all fixed cost and then profitability coming through those countries. Now you see us growing very quickly to the other countries in Latin America, which include El Salvador, Honduras, Dominican Republic, Peru, Ecuador, amongst others, Colombia.
And those countries typically will have lower margins, and you're going to see those growing faster as a percentage, not in absolute wires, but faster as a percentage than Mexico and Guatemala because they're very new countries for us, and we have very low market shares. And so that will -- that will shift a little bit the average make per transaction. Typically, most of those countries are either dollarized or have a very controlled currency or lightly-traded currency, so the opportunity to make money on FX is much smaller, if at all. And then additionally, you see us growing faster in markets where, meaning U.S. outbound markets where prices are a little bit more competitive, and we're a later entry. And so -- but it's not to say that in our apples-to-apples comparisons, if you looked at our core market than in a particular ZIP code in a stronghold state that margins have gone down dramatically, it's more about the shifting of both the country destinations and also the shifting of higher growth in ZIP codes and geographies where margins might be lower even for Mexico and Guatemala.
Your next question comes from the line of David Scharf with JMP Securities.
I'm going to apologize in advance for having to raise coronavirus contingencies, but obviously it's top of mind. I'm wondering, first question, Bob, can you just remind us, listen, obviously, it's going to be spreading nationally, but those of us in California are close to Ground 0, at least for the initial expansion. While you've shifted some of your new recruiting away from original California targets were, is it still expected to be the largest outbound state? Can you remind us of maybe the mix send the volume?
Well, I don't want to stay away from reminding you of the mix, but California is our largest outbound state. It delivers more transactions than any other state. We've also talked about -- hello?
Yes, yes. I'm sorry.
Okay. We kind of lost it for a minute there. We had some really word feedback. We've also talked about the fact that California is a very underpenetrated state for us in terms of market share, but that's not really pertinent related to this. So yes, it's a really important state for us, but we have growth coming from throughout the country. We don't think we're overexposed in a way in California in such a way that if that is disproportionately hit by the coronavirus that, that's going to have a deeper impact on us, certainly not than our competitors, but certainly not than proportionally throughout the United States with any other state.
Got it. And sort of a similar theme to maybe the last question on margins and currency, just waking up today to learn about a new shot in an oil war, Mexico not nearly as much as a decade ago, but it's still a very energy-dependent economy.
Does this more -- just trying to get a sense, to the extent that it creates more volatility in the peso, are there any rules of thumb we should think about for the opportunity to make more on the FX markup? Or is that something that's just too...
Well, the volatility comes from, typically, the peso's been very earmarked to the U.S. economy, it seems. And when we -- and even a easy earmark has been, if you look at the volatility of the peso over the last few days as U.S. stock market's been quite volatile and headed downward, you'll see that the peso's gone up as much as a whole peso, which is a big movement, even though that's MXN1 on MXN20, there are 5% movement, it's still a lot compared to a normal movement of the peso. We don't see a whole peso. We're usually talking in terms of centavos or cents, Mexican cents. So it's been moving a lot. It's been moving a lot in sort of in the -- so the peso gets weaker when the U.S. economy is predicted to be weaker.
If the stock market gets weak, and it starts to downturn and usually the peso gets weaker. When that happens, we've talked about before, we see higher average amounts being sent because the consumer doesn't know how long this will last, and they take advantage of the peso being on sale, and we'll see principal amounts, the average that people are sending sometimes go up by as much as $50 to $100. And remembering that the FX gains are very sensitive to that, and we make a percentage of FX gain on that. So that comes down to the bottom line, it's very helpful when those things happen.
Typically, it's not sustained because the worker only has so much money, they might send a little bit more money, but they can't send 20% or 30% more on an ongoing basis. So if the peso then basically when it if it stays at that high level, it's no longer perceived on sale, it becomes a new normal. And the principal amounts kind of stabilize and the opportunities to make more in FX stabilize again. The difference is, is that if it's if it stays at a higher level, of course, which doesn't do in the long term, you're making more in every transaction, not necessarily with the fee, but the percentage we're making on the exchange rate.
So in the short term, yes, in the long term, it kind of moderates and sort of catches up and flattens out, but we're in a stage right now where obviously, it's new to people, a MXN21 per dollar, first time ever, I think, if we're correct, and that is historic and that causes people to drive more wires and particularly larger principal amounts in their wires at least in the short run.
Got it. And I think you saw that phenomenon 1.5 years ago. Near the...
Yes. Well, it's happened a number of times. And the Mexico election was almost 2 years ago now, in June of 2018, and that was a really volatile time where things weren't easy. And I think right at the time of the first Trump was elected in November of '16, and we saw it. So we've seen it intermittently, right, when the market responds. But it always sort of responds, even when you have an off day that just in the middle, like some profit taking and the Dow goes down by 200, 300 points. Sometimes you'll see the peso go up by MXN0.10 or MXN0.12 in that day. So it is correlated a lot to the U.S. stock market.
Got it. And one last question, I guess, sort of sensitivity analysis, I believe that you commented that your guidance was based on comparable industry growth as a year ago or recent second half trends, which I took to mean it was not factoring in any potential recessionary pressures that we might find ourselves in the balance of 2020.
And I guess, the question is about, not necessarily to the penny, but if for whatever reason, if there were a confluence of external shocks that led to, let's say, top line coming in, maybe 5% below your guidance. At this point, would you anticipate responding with some areas of expense rationalization to kind of maintain that 18-plus percent margin and potentially cut back some near term investments? Or would you continue to invest for the longer-term on things like RippleNet and the white label lots?
Well, I mean, like when we talk about RippleNet, I'm not sure that's the greatest example of a long-term investment, first of all. So I think it's part of our overall where we're headed. But I think more importantly is what we're doing with our online business, with our card-based business, with our processing business, those are our businesses that are really -- that we invest in. I think that what I'll say rather than where we'll go is, I think we've proven, look at our fourth quarter results at 22%, 23% EBITDA in a market that slowed a bit. And we proved our ability as operators well and above the industry. I mean, look at the numbers of everyone else. Everybody else had negative EBITDA. I mean, even the guys that have been the stars, right? Their money transfer division came in at a minus 6 in the EBITDA year-over-year, we came in at a positive 23, yet our growth was half what it's been.
So we've demonstrated over the years our exemplary ability to operate. And we'll make decisions that will be best for the business, and those decisions may very well be to continue to invest or they may very well be to drive a higher operating number at the bottom line, but we certainly have the capacity to do that. I mean, with this sort of a bit of the canary in the mineshaft, right? I mean, as the volume slowed down in second quarter, we were guys that told you guys about it long before anyone else. We took a little bit of heat because we lowered our guidance for revenue top line, right? But what did we do? We delivered the high end of our EBITDA guidance, almost right up against it. What a great showing of what great operators we are here at Intermex, and we'll continue to do that and continue to drive numbers that our shareholders can be really happy with, particularly on the EBITDA line.
Your next question comes from the line of George Mihalos with Cowen & Company.
Just maybe to follow-up on that last question a little bit. Tony, looking at the $340 million to $355 million in revenue guidance for next year, so sort of implying sort of the 6% to 11% rate of growth. Can you just help us what's baked in implicitly at that low end of the range of 6% versus the 11%?
Yes. So I would just say, kind of the middle of the range is what we've seen through the fourth quarter as we exited last year, and those are the trends that it's built on. So to the extent that, like David asked, if there's a shock to the economy or things like that, then that could drive us down towards the low end of the range. Or if we see the pricing pressure that we've seen so far, if somehow that goes deeper, that could move us down on the revenue side as well. And conversely, the top end of the range would be the market starts to grow something more like what it grew over the last three years and not just what it did in the fourth quarter. Those are probably the big objects or big eventualities that could move us in the range, right? Obviously, there's a macroeconomic component in there. And there's a general belief for modeling assumption that things will continue the way that they are.
Okay. That's helpful. And then in terms of growth from a modeling perspective throughout the course of the year, I would assume you're thinking about growth being a little bit more back-end loaded, just given comparison to the first quarter?
Yes. I'm not sure that our growth is going to be back-end loaded. The way that we're looking at it, we're actually going to be looking at some tough comps from a year-over-year perspective. So I think our growth is probably going to be pretty steady throughout the year is the way that I would think about it.
Your next question comes from the line of Mark Palmer with BTIG.
You had mentioned the company's debt capacity and how you had ample debt capacity. And can you just talk about how comfortable you are with different leverage levels with potentially adding leverage in the current environment and how that would guide your thinking with regard to pursuing M&A opportunities?
Yes, Mark. So we're sitting at a 1.7 EBITDA leverage ratio now, actually 1.7 and 1.8. Our lenders would be comfortable taking us to 3.25 or even 3.75, but we're going to be much more comfortable keeping it under 3. And keeping it under three would mean if we bought something that brought with it no EBITDA, there's about $80 million of capacity there. But I don't think that we would be inclined to do that. So I would say, generally speaking, we're pretty conservative when it comes to debt, especially if we're heading into some sort of weird macroeconomic times. But somewhere between 2 and 3 is our comfort level.
Your next question comes from the line of Josh Beck with KeyBanc.
I just wanted to ask about maybe the market share gain trends. Obviously, you're doing really well versus competitors. Just kind of what your expectations are for that trend as we look into the 2020 and beyond?
I think you'll see us continue to gain share across all the countries that we have been focused upon, which includes Mexico and Guatemala. Remember, our denominators now is getting pretty large in both Mexico and Guatemala, we're in 18% share to Mexico, 25% or 26% to Guatemala. So you're not going to -- obviously, you have to grow the incremental portion, the upside of Guatemala at more than 26% to gain share. So the hurdle is much larger. We do expect to continue to gain share in both Mexico and Guatemala, but more importantly, we think there's a huge amount of opportunity to gain share, which we're doing quite well in countries like Honduras, El Salvador, Dominic Republic and others, where we may have a market share of 15 or less percent, sometimes even in single digits, where we're growing at a very high rate and growing a large percentage of the much larger percentage of the overall business. We think there's a lot of headroom.
I talked about a little bit earlier. The way this thing's been built was built strategically for a reason. We took a lot of heat as a company that we were too centralized in Mexico and Guatemala, but it proved to be very good strategy in the sense that those are countries that have the best margins, and we're able to build a company that brought down an 18% EBITDA margin continued to grow very nicely in terms of both EBITDA and free cash flow. And as a result, now it enables us at that margin to be able to be more aggressive as we add market share in the other countries like El Salvador, Honduras and others that we named, where the margins aren't quite as good, frankly, because either they're dollarized countries or very tightly regulated currencies that really isn't much of an opportunity to add the FX component. So therefore, the revenue is not a lot lower, but the margin's lower because they don't have that FX piece.
So now we're able to continue to be much more aggressive. And many of those countries are much more concentrated in terms of less ZIP codes where the ex patriots were to reside. Mexico, for sure, and Guatemala, to a lesser extent, are very expansive throughout the entire country, but we can target a couple of hundred ZIP codes that really drives many of the countries like Dominican Republic and others. And that's a much easier chore now with add-ons and is growing those market shares. This is the first time, as you'll see, we talked about our growth in terms of number or percentage of wires we delivered to all of our core countries and we delivered, I think, was more than 30% of the growth in those, which, obviously, we're nowhere near 30% share overall to all those countries, which means that we're grabbing share pretty quickly when it comes to all of Latin America.
Okay, very helpful. And I also wanted to ask just about the growth states. Obviously, there's a really big opportunity there versus some of your stronghold states. And as we go through the year, what are some of the key milestones and initiatives that you're gauging in some of those growth states?
Well, we're trying -- we're really not talking as much in calling out states because it's really -- we find many of our competitors, some of them which enjoy the status of being public that come directly after us when we give too much information about our business. But what we will say is that there's certainly a much lower level of market share in the states that have the largest populations of foreign borns, particularly in our core markets. We continue to work against that, and we think that we have an ability to double in many of those large states. And so there's a tremendous opportunity there. We continue to work against it. That's why we've had the hires that we've had, and we think that, that will go on for a period of time.
I don't want to talk too much about specific states because that's a difficult thing that provides -- none of our competitors really provide even country-based information. I'm talking about outbound countries, let alone initiating states in the U.S., and that's kind of -- it's a difficult thing for us to share because we're sharing it try to figure out how much to share with you as an analyst, without saying too much to our competitors, and that's a difficult line to walk sometimes.
That makes total sense. I definitely respect that. But thanks for the answers there, Bob. Appreciate it.
Your final question comes from the line of Joseph Foresi, Cantor Fitzgerald.
I hope -- can you hear me okay this time? I hope.
Yes, coming through really clear.
I wanted to circle back on sort of the deceleration on the top line. Could you just break that down by component? I'm not -- is it tough comps versus lower volumes versus FX versus -- I just want to make sure I understand sort of what's going on with the numbers sort of properly.
Well, I think there's a few things, right? I mean, number one, the industry has had -- the industry numbers have been tremendously high for the last few years, really starting in November of '16 with the Trump election, and we've had more months where the year-over-year number has been in double digits than we've had, and I think probably in my recollection. So that's the first thing.
We, as a company, have had tremendous comps, because in 2018 we grew our transactions to Mexico dollar volumes at over 40%, and then followed up in 2019 with an overall number on the average of close to 20%. So we were going against not only difficult comps from our own perspective, but difficult comps from the industry perspective. So that's clearly there. It's only natural that the industry would start to pull back a bit. And you're talking about something that's been growing at probably 3x on the average. I'm talking about the industry numbers, the rate of the GDP, if not close to 4x the rate of GDP. And in a company where we personally have grown at a rate of 3 or 4x the industry growth. So that's something that's hard to sustain at that level.
Now having said that, we think that there were also some competitive pressures that were greater in fourth quarter and in the second half of the year, than it happened previously. Part of that, back to my last answer, has a lot to do with a lot of our information we've shared maybe a little bit too freely. And I think we found competition coming at us pretty heavily. We think that we've solved most of that. I think from a standpoint of that we put in place some strategies that have allowed us to kind of come back after that business, and I think they're being applied as we speak. And we've experienced some really great success into December and beyond, obviously, we're not going to address first quarter, but going forward already with that.
I think the last piece was, is that we talked about that in some of our key markets, we had some difficulty in filling key positions, and now we're up to full employment in those key markets. And even with our sales leadership, and that's also going to have something to do with, going forward. But I think it's really important to understand just how much the industry and we have grown over that period and still growing on top of that. So it's slowing growth, but it's still kind of still solid growth. And then there's been the movement, I think, from -- as we talked about earlier, that some of our secondary and tertiary countries have grown faster than Mexico and Guatemala, which doesn't necessarily affect transactions but does affect revenue per transaction a bit. So I think those are all the factors when you kind of look at the revenue line.
Got it. And then so -- and this is kind of my last one, my follow-up. So are we now thinking about this industry as being sort of a high single, low double-digit grower over a long period of time? Or -- and again, this is just because I think I'm trying to get a handle of how you guys work versus the industry. Or could there be years where there's decelerations and then reaccelerations? Just trying to get a handle on to the long...
Yes. I think there's acceleration and decelerations, I think any industry that would be a high single and low double-digit grower forever, and for perpetuity, would be a tremendous industry, right? I mean, that I don't know too many industries that, that's happening, not in sustainability in terms of profitability, some that end up creating bubble. So I don't know that, that's the baseline. I think the baseline is more like a middle single-digit growth. And I think you have variance from that in down periods that can go to 0. I don't think we're in that period now. And I think you can have variance in an up period that can go to low double digits as high as 12%, 13%, 14%. You do have anomalies like, for instance, in June of 2018, when the Socialist candidate was coming to power in Mexico, we saw that the great volatility of the Mexican peso, and it created a growth that had been unprecedented, but that's usually something that comes and goes within a 30- to 60-day period. The ongoing sort of, I think, your earmark this industry's typically been running at 50% higher to maybe 70% higher than the GDP growth.
So you got a -- through GDP growth of 3%. I think you can have 5%, 6% in the industry. But when you have these political factors, along with a good GDP growth and you have very low minority unemployment, which has been the case for the last several years. And then you have the volatility that's been going on. It's really a prescription for a really tremendous growth market that's been out there, certainly through part of '16, '17 and '18, and in the early parts of '19, we really started to see the symptoms of a slowdown in early '19, which really started to slow down a little bit stronger as we got into fourth quarter. But we're already -- I think we're seeing that, that's not a -- putting aside the recent developments of the economy this week and stuff, we are seeing that, that was not as drastic or continuing to move downward in the way that it appeared in fourth quarter, particularly early that it was a bit of a dip that started to already come back a bit. So we -- I think we expect more normal numbers, which I think are middle single-digit industry growth this year. Unless, again, given if something goes astray with the coronavirus greatly or something like that, then obviously, all bets are off. But I think under normal conditions, I think we're booking at a middle single digit.
Ladies and gentlemen, we have reached the end of the question-and-answer session, and I would like to turn the call back to Mr. Bob Lisy for closing remarks.
Yes, thank you all for joining us on the call. We look forward to speaking with you all soon. Thanks again. Have a great day.
This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.