Welcome to the International Money Express, Inc. first quarter 2019 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note, this conference is being recorded. I will now turn the conference over to your host, Sloan Bowen, investor relations. Mr. Bowen, you may begin.
Good evening. Before we begin, let me remind you that this conference call includes forward-looking statements, including our outlook for fiscal year 2019. 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. We undertake no obligation to update them 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.
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.
Thanks, Sloan. Thank you to our investors and analysts joining us for our first quarter conference call. This quarter, I would like to start with a review of some updates to our strategic priorities for 2019. If you turn to slide three, you can see that we are focused on the same initiatives that we spoke about on our fourth quarter call. I am pleased to report that we are on track on each of these key priorities. We remain focused on organic expansion, both in our growth and stronghold states. As we have mentioned before, we continue to see a long runway for growth and believe our results this quarter offer further proof of the growth opportunity available to Intermex. Secondarily, I would like to provide you with a quick update on the new growth initiatives we have highlighted last quarter.
As you may recall, we announced our plans to expand into Africa and Canada. We are now selling wires and processing them from the U.S. outbound to Africa and plan to officially launch our Canada outbound business in second quarter. We would note that for both of these markets, that we are progressing in line with our expectations, but we don't expect any material financial impact for Intermex from Africa inbound or Canada outbound business until 2020. As a reminder, we believe Africa will represent a market opportunity similar in size to Guatemala. In the case of Canada, we are focused on four or five of the largest key cities and believe that market opportunity is comparable to the state of Texas.
Lastly, we do not have any incremental update regarding our infrastructure other than to say that Intermex backend is well-positioned to support our competitive advantages as well as help grow our profitability and scale in efficient way. Let me now turn to slide four for a high-level review of our quarter against key performance indicators. We're pleased across the board as first quarter 2019 continued to show strong momentum carried through from a successful 2018. Similar to last quarter, we have summarized our results across four main categories. First, as you saw in our press release, Intermex had another strong growth quarter with 22% growth in both our top-line revenue and adjusted EBITDA. The growth was driven by both our stronghold states as well as our growth states. We believe our success continues to stem from our differentiated approach and execution in serving our customers and agents.
As a reminder, we do not believe that retail ubiquity is the most efficient way to grow revenues. We focus on adding agents based on customer demands and our ability to serve those customers in targeted, local, and personal ways. The ultimate impact of this strategy is that we continue to gain market share, and this quarter was consistent with that trend. On that point, let's frame our growth versus the industry. First, we look at the remittance volume in our U.S. to Mexico corridor. The industry grew at about 7.4% in the quarter, whereas Intermex grew at a rate of over 21%, almost three times the rate of the market. Similarly, Guatemala overall industry volumes grew approximately 9.2%, while Intermex grew at more than twice the rate of the market at 20.4%.
The best part about our market share is that we believe a significant amount of future potential Intermex still is untapped in what we call our growth markets. Lastly, we'd like to note again that we are proud of the value we've delivered for our shareholders as Intermex shares have now appreciated nearly 20% since we were listed on the Nasdaq back on July 27th, 2018. Let's turn to slide five and review key metrics for first quarter. As you saw in our press release, we are pleased with our growth in both revenue and profitability. Starting at the top half of the page, we grew transactions and volumes by 24% and 23% respectively over last year, driven by both our expansion but also by healthy growth in the industry, as we have referenced. On the bottom left, strong volumes resulted in 22% revenue growth over last year.
Lastly, on the lower right, we also grew adjusted EBITDA by 22%. Tony will give some additional color, but here I will note at a high level that we have less operating leverage in first half of 2019 as we had some expenses this year that were front-loaded, which normalize year-over-year in the final two quarters. The most important thing to remember is the 22% growth in EBITDA is well within the expectations relative to achieving our 2019 targets.
Turning to slide six before I turn the call over to Tony to review our financials and outlook, let's review our market share position that we've done in previous quarters. Through the first quarter, Intermex continues to expand our market share in both Mexico and Guatemala. As we have shown, Intermex more than doubled its market share to Mexico over the past four years and delivered similar growth to Guatemala. We are most focused on the recent trends, however, we are pleased that we have continued to grow our market share during the first part of 2019. Specifically, we believe our market share in Mexico expanded to 18%. Similarly, in Guatemala, we increased our market share to 25.5%. Additionally, we've made significant increases in our market share in our secondary countries.
While we don't target any specific market share, we are focused on penetrating both our existing and newer growth markets with our service models. We believe these results are proof that Intermex continues to create a value-added proposition through the differentiation of its service. With that, let me go ahead and turn the call over to Tony to review our financial results in more detail. Tony?
Thanks, Bob. Let's turn to slide seven to review our first quarter metrics. As Bob noted, we had another strong quarter. The number of transactions grew 24% for the quarter, and our dollar volume grew 23%, driven by high growth in our tier 2 and tier 3 markets. Overall, our growth continues to be very healthy relative to industry growth, which is in high single digits. Revenue growth of 22.1% for the quarter was driven equally by the combination of transaction growth and volume growth, as fee revenue and foreign exchange revenue each grew approximately 22%. First quarter adjusted EBITDA also grew approximately 22% in the quarter, similar to last year's growth and in line with our expectations. We believe that operating leverage opportunity still exists, but as Bob noted, there are some front-loaded items that will keep expenses moderately elevated in the first half of 2019.
Specifically, public company expenses like D&O insurance create high year-over-year growth in the first half of 2019, as we did not become public until July of 2018. Second, marketing efforts, particularly around the expansion of our loyalty program, are front-loaded this year. Lastly, higher technology costs associated with our migration to an active-active network configuration have kicked in. Like I said, we see these items creating year-over-year expense growth in the first half of the year, but become normalized versus 2018 in aggregate in the second half. Lastly, we reported net income of $3.2 million, or earnings per share of $0.09 per share for the quarter, which was up from a loss of about $540,000, or $0.03 per share last year. We'd note that there are reconciliations from GAAP net income or loss to adjusted EBITDA at the end of this presentation for your reference.
Turning to slide eight, we highlight our share of the market growth as we bulleted on slide seven. Here you can see the market share gains split out between the Mexico and Guatemala markets. In Q1, Intermex growth accounted for 45% of the total growth to Mexico and over half of all the growth to Guatemala. These capture rates are higher than any of our impressive annual totals over the past five years. We strongly believe the success we have experienced is due in large part to the value and service level we deliver to our customers. As a result, we feel good about our ability to continue to grow share across all of our markets. Turning to slide nine, as you saw in our press release, we are reaffirming our full year 2019 guidance for both revenue and adjusted EBITDA.
Specifically, we still expect revenue in a range of $320 million-$330 million. We also maintain our view that adjusted EBITDA will end the year in the $54 million-$58 million range. I would like to take a minute to reiterate some comments I made last quarter about the quarterly cadence of our EBITDA this year. Because of the timing of the expense items I described a few minutes ago, we do expect that our EBITDA growth for the year will be tilted more towards 4Q than it has in previous years. Before I turn the call over for questions, let me quickly walk through some bullet points on our warrant redemption that completed on April 30th. Here on slide 10, and as you can reference in our press release, Intermex exchanged 8.9 million or 99.5% of our outstanding warrants for cash and common stock consideration.
In exchange for these warrants and in conformance with the offer, we issued approximately 1.8 million common shares and paid approximately $10 million in cash. As we've noted in the past, the reasons for pursuing the exchange included a goal of increasing the liquidity of our shares and for the Intermex investment thesis to appeal to a wider audience of investors. Based on even the past few weeks, we believe the exchange offer has accomplished that goal, and we are looking forward to meeting with additional investors as the year progresses. Lastly, for your modeling purposes, you should note that extinguishing the warrants leaves our stock options as the only material source of volatility in our share count. Based on achieving the consensus target of $17 by year-end, these options would add approximately 300,000 fully diluted shares to the current count of roughly 38 million.
With that, I'll end by saying that we're excited to have had another great quarter, and let me turn it back over to the operator to open the line for your questions.
At this time, we'll be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. Our first question comes from David Scharf, JMP Securities. Please proceed with your question.
Hi, good afternoon. Thanks for taking my questions. Hey, Bob, I'm wondering, I had a couple things to dig into. First, just in terms of the overall health of the U.S. to Mexico corridor, we're coming off of a couple above-trend years, at least based on Banco de México data, north of 10% remittance growth.
Right.
What are you seeing lately? Do you feel like we're going to be reverting to the mean this year, more in sort of the low mid-single digits, or is the first four and a half months looking healthier?
Well, it's hard to predict the next eight or nine months. April numbers are not even out yet. They come out right the first week in June. We have numbers through first quarter. Whereas those numbers represented a bit of a downturn from the overall average for 2018, they actually were better first quarter growth this year than it was last year. First quarter has tended to be a little slower, not in terms of absolute numbers, but in terms of year-over-year growth. Seems like the market has revved up a little bit as the year's gone on. That's not a prediction that will happen in 2018, or 2019 rather, but it's a little too early to say that because first quarter the growth was slower than the overall year in 2018, that will continue. We're still seeing good growth, though.
We're still seeing growth in the 7% range, 6%-7% range, depending on the country, or even higher in some countries. Again, last quarter was somewhat slower, we're still expecting it to begin to rev up as we get into second and third quarter.
Got it. No, it still seems like there certainly aren't any signs of the breaks going on at the macro level. Hey, different topic. In terms of Africa, I appreciate you kind of giving us some context for the opportunity of the receive markets that you provided, comparing it to sort of the Guatemalan opportunity. I'm wondering, from the standpoint of building out those send agents, how concentrated are sort of the key geographic areas in the U.S. for transfers to those four countries? I'm wondering, is this just a sort of 2, 300 agent build-out and that's all you need to do, or is it more dispersed in a longer build than that?
Well, it's going to be a much. I'll let Randy also add to my answer. Randy, our Chief Marketing and Sales Officer, is here with us. It will be a much more concentrated marketplace. The African population in the U.S. is more concentrated within, let's call it five or six different regions of the country, more so than obviously the pervasive nature of particularly Mexico and Guatemala. Particularly along the Mid-Atlantic region and up into New York, there's a little bit in L.A., some in Minnesota. In looking at that, I think there'll be a combination of our overall network. Some of those stores, some of those retailers will do a few wires. Some of them are on borderline of neighborhoods where Africans live, particularly in places like Bronx, New York, and the rest.
There'll be a dedicated group of agents, and I think probably the need will ultimately be somewhere between 300 and 500, depending on some of the other countries that we'll add in Africa as we go forward, some of which are not as much geared or maybe French-speaking and stuff. That will be countries that will add to our outbound list after the group that we started with. I don't know, Randy, if there's anything you'd like to add to that.
No, I think you covered it pretty well. David, I would just say one other thing, which is we were really pleased with the early attachment rate that we saw to Africa, primarily with the fact that about 80% of the agents that were transacting from the U.S. to Africa came out of our existing agent base. We were really pleased to see that there was a good crossover there.
Oh, got it. Okay. Just lastly, then I'll hop off. Is there any update on the GPR card and that launch, how that's progressing?
Well, we have the GPR card out in our branches. As you know, we have 32 brick-and-mortar locations of our own, and we're testing the GPR card and launching it there. I'd call it a test or a launch, a small launch. It's very early on. We're also looking at the GPR card as an opportunity for us to sell that commercially to people who may employ a lot of immigrants, processing plants, farms, and the other thing, even maybe some organizations that handle H-1B visas. There's a lot of routes for us to go. It is out and being tested right now. When I say tested, I mean it's a miniature launch, right? We're testing through live customers up through our branches. We will be rolling it out then throughout the year through our agent network.
Got it. Thank you.
Our next question comes from Mike Grondahl, Northland Securities. Please proceed with your question.
Yeah. Thanks, guys. Two questions. One, can you comment what same-store sales were kind of in your core states, the growth states or the legacy states or the combined? Then I know Mother's Day is kind of a huge holiday for money transfer. Just curious how the recent weekend went.
Well, relative to the same-store information, we've been typically, and we don't usually comment a lot on that, but our same store overall has been running in the mid-single to the middle single, double digits rather, in terms of same store year-over-year. That's the country as a whole. It would be higher than that typically in our more established states because we have more same store business. Then a little bit lower sometimes in some of the newer states, although the newer states are buoyed by the number of agents that are from one year to two years. It's actually, that obviously helps that number.
Same store still drives a lot of our growth, but typically, you'll see that about half of our growth comes from same store, about half of our growth comes from new store, and then you take the sort of the churn away from that, right? Together they represent a number higher than our overall sales. We have a churn, and those are obviously retailers who did transactions last year and don't do transactions this year. It continues to be really healthy. One of the biggest opportunities and one of the biggest growth things for any retailer is that second and third year, because we usually see a retailer who's with us year one, by the time they're year two and three, a very big increase in terms of year-over-year wires.
Got it. Just if you could comment on Mother's Day weekend, how that went.
It went very well. I'm not sure how much we really are comfortable in saying in that that's the second quarter. We're pleased with our activity. We had some very strong days, highest day ever, but we would expect that. The thing to remember about our business, where Mother's Day is a bit of a test in terms of your ability to handle a lot of wires quickly and your call center, your technology, and all the rest of it. Remember, our business is not one that's like retailers at Christmastime, where a huge amount of our sales come from Thanksgiving or just before through to the first of the year. We're a pretty balanced business, our biggest months might only bring 1.5% or 2% bigger as a percentage of the year than our weakest months.
We had a great Mother's Day, but the fact is June, July, August, September, right on through now, November being really the only month in that, the rest of the year, that's somewhat less than par with the rest of them. This is kind of our season when you get into April and May. We should be clipping along and every one of these months will be equally as important to May overall.
Got it. Any update on the competitive environment? Are you guys seeing anything different there?
I'll let Randy go ahead with that. I think he's certainly more tuned in than any of us relative to competitors.
Yeah. Similar to what we reported last quarter, Mike. With respect to last weekend, I'll just add to Bob's comments that a lot of our competitors really do discount during that time, that Mother's Day period, and we held true to our margins and still grew very well. It just reinforces the fact that we really do add value and that consumers and agents alike trust us and want to use us, even when competitors are discounting.
Good to hear. Hey, thanks, guys.
Welcome. Thank you.
Our next question comes from Brad Berning, Craig-Hallum. Please proceed with your question.
Good afternoon, guys. A couple follow-ups on some of the details there. Just curious, what does your average ticket growth rate look like? I'm just wondering about how labor inflation might be showing up in the volumes.
You mean the average principal amount, I guess, is that right?
Yep.
It's been relatively flat year-over-year. It really will be more buoyed by not so much the inflationary rate, but it'll be buoyed more by changes in the trading rate of the peso. If the peso starts to become very weak, our consumers perceive pesos to be on sale, and they'll send larger principal amounts. The solidness of the business, meaning the number of transaction growth year-over-year, seems to be more dependent upon economic conditions. The principal amount has a lot more to do with the trading of the peso. When peso weakens and it goes to 21 pesos per dollar versus 20 pesos per dollar, that signals to the consumer or the sender that it's on sale, and they'll usually send larger principal amounts.
Understood. The legacy markets that you've been in longer, can you give us a refresher a little bit on what your market share looks like for both Mexico and Guatemala? Just want to give some context to how we think about where the overall company could trend towards potentially over time if your newer states are as successful as some of the legacy states.
Yeah. We've touched on it a few times in terms of the information and, for instance, in our stronghold, right? Not every state necessarily in that group, but our stronghold really would include states in the Southeast, where in many cases we have market shares that are 35%-40% between Mexico and Guatemala combined. These are very strong states for us, like the state of Georgia, North Carolina, certainly Tennessee, Kentucky, amongst Florida and others. Overall, those market shares tend to be quite a bit higher, obviously, than our growth states. We think that, for instance, to sort of dimensionalize in California today, in the state of California, we're doing about 5 million wires a year, between 5 and 6 million wires a year, trending towards the 6.
We think that market could be 2 to 3 times as large, and that would certainly be consistent with today our market share in California is probably around 11%. Something like that. We think that we can certainly attain that size of a market based on attaining market share in California and Texas, a smaller number, but similar kind of opportunity. When you look at states like California, you have an upside of hundreds of thousands of wires per month, millions of wires on an annualized basis. Texas, a little smaller, but still, we think Texas has the ability to be as big as California is today for us, which again, is 4 or 5 million wires a year. Even some of the other states out West, whether they be Colorado or whatever.
We still have great growth opportunity in the Northeast and in states like Illinois and the Midwest. The growth opportunities kind of abound, and they're throughout the country. The good thing that's interesting for us is that even in our established states, almost every single one of those states that I think this quarter, every single one of those states, we grew the market faster than the market grew, which means we're continuing to gain market share in states where we already have a really high market share. Even though we have a really big market share in the Southeast in certain areas, if you look at that's no way is the terminal market share, right? That's continuing to grow.
The West and Southwest has an opportunity to continue to grow towards what we have in the Southeast or even the Northeast, they're not fully ramped up either because we continue to gain share in those markets as well.
Yeah, appreciate that. That was going to be my follow-up is, it's good to hear that the legacy markets are still haven't plateaued yet. On the newer African corridor, Help us think about the cost of acquisition versus your legacy business, just help us think about as you try to get into that market, how you're thinking about that.
Yeah. Brad, it's Randy. The cost of acquisition will be very similar as to what it is for Latin American business. There is one caveat where our brand is not recognized in the African community, we're going to have to really demonstrate and prove ourselves and spend a little bit more increasing our brand recognition and gaining brand loyalty. It'll be very similar to that of Latin America.
So far, the year-to-date marketing campaign on that, you feel like you're on target for kind of what you're thinking about for the course of the year?
Yes, we're right on. Like I said earlier, we're pleased with what we've seen first quarter. It's really two and a half months in. We launched on January 17th, we really like what we're seeing so far.
Understood. All right. Appreciate it. Thank you, guys.
Yep.
Our next question comes from Joseph Foresi, Cantor Fitzgerald. Please proceed with your question.
Hi. I guess my first question is just, you talked a little bit about the moderation in the first half of the year and the pickup in the second half of the year. I'm wondering, maybe you could just dive a little bit deeper into what's causing that fluctuation and what gives you sort of confidence in the pickup.
Yeah. Hey, Joe, this is Tony Lauro. You got to remember, in the first half of last year, we weren't public, so we didn't have public company expenses like D&O insurance, investor relations, external reporting. We weren't doing quarterly audits, things like that. We were doing them in the second half of the year. On a year-over-year basis, you see high growth in those expenses in Q1 and Q2, they come back down to be very flat in Q3 and Q4. The second larger would be in marketing, where we have front-loaded our marketing activities this year, where last year we had kind of back-loaded them a little bit. You're seeing high year-over-year growth in our marketing expense this year that also normalizes in the second half of the year.
The third one, which really doesn't quite normalize as much, but in aggregate they do, is that we moved to an active-active network, our infrastructure costs are running a little higher to support that technology.
Got It .
I think the one thing I would add to that, Joe, is just that, we want to be clear, I mean, we've sort of have set a pretty high standard, right? With the first couple quarters out, and delivering a year at over 40% EBITDA growth. We certainly don't feel like we're in any way embarrassed by 22% EBITDA growth, particularly while we do that while opening up a whole new corridor of the world, which we think has incredible opportunity for us going forward. Our first corridor outside of the Latin American corridor, which took some time, even though it wasn't a lot of money, but it takes some time because it's English-speaking, which is different than our Spanish-speaking corridors that we work with today.
In addition to continuing to move forward with the GPR card, a whole new product and a whole new industry that we've never encountered before, while we continue to move along with our processing components and everything else. We're pretty happy with the growth. I mean, obviously we want it to be higher, and we think we can continue to push for it to be higher growth, but we're really happy with that in the backdrop of all the other things we did in the first quarter.
Got it. I wanted to ask a couple questions about Africa and Canada. I'm wondering what drew you to these particular geographies and the strategy for the geographies, are they any different than sort of your standard strategy for Latin America? I'm wondering why you picked Africa and Canada, and then you've sort of been known as being very customer friendly in the same areas that would frequently need and want and use a service like this. I'm just wondering why you picked those two areas and if the strategy is about the same.
Well, let's kind of separate them, first of all, that Canada is a first world country that's an outbound country, right?
Of course.
It's very different than adding Africa.
Totally.
Canada, although it's a different country with different laws and everything else, for us, from a strategic perspective, isn't much different than extending out into more states from a strategic business perspective. Canada is the natural next movement for us in terms of not only Latin America, Canada has a diverse market, and we'll grow with that into more destination countries, more inbound countries as we grow out of Canada. Africa is different. It's an inbound country. It's a country that's a recipient of remittances versus generating them. The reason we picked Africa is because it's highly concentrated, that some of the neighborhoods are very close to the neighborhoods we already work, even though they may not be the same neighborhood.
We have some expertise in that area, we're able to bring in some people who have worked very successfully in the African business for other companies. I think in addition to that, it's a very concentrated market with good margins, that's really things that we look at is, can we do a great job in that market? It's concentrated in the sense that we don't need to have. Remember, we're not guys that believe a lot in ubiquity. That's the Western Union model. Our model is very rifle shot. When you get a market where you can rifle shot with 300, 400, 500 retailers and service the whole continent, that's a really great thing for us. The second part about it is the margins tend to be really good.
Much better than they are in some other areas of Latin America when we get outside of Mexico and Guatemala. All of those things combined make it a very attractive offering for us. I'm really excited about. To me, it's reestablished for me how much this business, this industry is staying in brick-and-mortar because I look at the very fast growth in a brick-and-mortar business for us in a whole new corridor and quickly as it's moved. Not that it's a huge number yet, but it's actually going a little quicker than I thought it would. We're really excited about it.
Okay. The last question, just around margins. You said Africa's got really good margins, maybe higher than what, those are my words, not yours, in Latin America. I understand
Make sure I make you clear. Latin America, other than Mexico and Guatemala.
Got it. Okay.
Other than Mexico and Guatemala.
Got it. I guess I understand sort of the costs and the comps and front-end loading and active network and stuff like that, but I'm wondering just your thoughts on whatever level you can give them about the long-term margin profile of the business, or do you think you'll be adding countries kind of on an annual basis, and we should think of it that way? Thanks.
Yeah. This is Tony again. I'll just reiterate what we've said in quarters past, which is we're going to see pressure as our mix shifts away from Mexico, which is the most profitable market. We're going to see pressure on our gross margin. We're going to see continued expansion of operating leverage over time in order to hold our EBITDA margins stable. We expect our EBITDA margins to stay stable over the medium term, which is the next few years, while investing in new markets and new products. We can absorb those and maintain the EBIT margins that we have. I'll go on to say that our net income margins will continue to expand with our migration to a new debt facility, as well as the runoff of the amortization of our intangible assets, and slightly moving to more favorable tax rates.
We're seeing stable EBITDA margins and expanding net income margins over the foreseeable future.
Great. Thank you.
Our next question comes from Jason Deleeuw, Piper Jaffray. Please proceed with your question.
Hey, thanks, guys. I just want to understand the industry growth that's assumed in the guidance this year versus the industry growth last year. If you could just update us on what you're assuming for overall industry growth this year.
We gave a range because we knew there were a range of potential, not only our own personal performance, but industry growth outlook. I would say what we've seen so far is in line with our expectations. If we see growth rates increase across the industry, we'll start moving towards the higher end of our range. If we see them slow down, we'll move towards the lower end of our range. Right now, we haven't seen anything that makes us concerned about the range that we've provided.
Can you just remind me what was the range, unless I missed that?
The range of EBITDA?
Oh, no, I was saying for industry growth.
Yeah. We didn't provide a range of industry growth in our published guidance. Like I've said, what we've seen so far is in line with what we're expecting.
Okay. On the EBITDA cadence, thanks for the quarterly cadence color there. There are also a lot of difficult or different comparisons year-over-year on the revenue growth. How should we think about the revenue growth cadence over the coming quarters?
Revenue growth, again, some of that's going to depend on how the market growth plays out quarter-over-quarter. We are going to have a tough grow over in the second quarter, because if you recall, second quarter of 2018, we saw a big spike in volume and average send amount, driven by the Mexico election and volatility of the peso.
Got it. Thanks. Just the last question, as you expand into the new growth markets, just trying to get a sense to how competitors are responding. Are the competitors still generally the smaller local players in the areas and any noticeable, just how they respond and then, I guess, how you would respond to how they're responding to you?
Yeah. I'll give you a little background on that. This is Bob. Randy Nilsen will add to that. When we're going into these markets, as you say, expanding in the markets, there's not any of them that are really putting a flag in the ground for the first time. We're already known in the markets. In a place like California, where we still have a huge amount of upside growth, we're actually seeing a lot of people that are coming after our agents possibly, right? As we're going after agents. There's a lot of competition going on. We see that the primary driving forces in terms of competition would be private companies that are smaller competitors.
We do see some competition at retail, as we've spoken about many times, not Western Union with its Western Union yellow and black product, but with Vigo at times, we'll see them be quite aggressive at retail. Not a lot of focus on some of the value adds or the differentiation of the product, but a lot of focus on pricing. We'll see Ria be kind of aggressive on pricing at times at retail. The primary force of driving towards discounting is done primarily from the small niche providers.
That's been something that we've been able to, kind of consistent basis, if you talk to people in the industry, they believe that there's been price compression going on for years and years, and we've been able to sustain, in some years, actually increase our margins, at the gross margin line per transaction, during that sort of compression time of pricing, and do that as we grew our transaction growth year-over-year, two, three, sometimes almost four times the rate of the industry. We continue to kind of hang our hat or leverage on the things that we're great and we think we're really good at and have made us really good, which is very careful, very concentrated and targeted recruitment of quality agents. We don't waste a lot of time and energy being ubiquitous. Western Union is not the only guys with ubiquity.
The small guys like to put up a lot of agents really quickly. Also by being really value-added with the quality of the product and many things we've talked about over the many quarters already that we've spoken to many of you guys, related to banking relationships, quality of technology, our Check Direct product, our call center, our tech support, whatever it might be, always looking to be the best in the industry of any of those components, and we continue to do that. No product anywhere, I think, is completely price inelastic. We recognize that we sometimes in some of the more competitive states have to be at a more aggressive price. In our sort of apples-to-apples states, we're able to sustain price, and we're maybe a little more aggressive in places like California, Texas, and the others. I don't know if that answered.
Randy, you have anything to add to that?
No, I think you got it. Thanks.
Okay. All right.
It's very helpful. Thank you.
All right. Thanks.
We have reached the end of the question and answer session, and I will now turn the call back over to management for closing remarks.
Well, thank you all for your time and attention on our first quarter conference call. We look forward to talking to you all soon. Thanks again.
This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.