Q4 2023 International Money Express Inc Earnings Call
Participants
Alex Sadowski; IR; International Money Express
Robert Lisy; Chairman of the Board, President, Chief Executive Officer; International Money Express Inc
Andras Bende; Chief Financial Officer; Intermex Wire Transfer LLC
Marcelo Theodoro; Chief Digital Officer; Intermex Wire Transfer LLC
Mike Grondahl; Analyst; Northland Capital Markets
Presentation
Operator
Good day and welcome to the International Money Express conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions to ask a question. You may press star, then one on your telephone keypad. To withdraw your question, please press the star Band two. Please note this event is being recorded.
I would now like to turn the conference over to Alex Sadowski, Investor Relations Coordinator. Please go ahead, sir.
Alex Sadowski
Good morning and welcome to our quarterly earnings call. I would like to remind everyone that today's call includes forward-looking statements, including our 2024 guidance and actual results may differ materially from expectation for additional information on International Money Express, which we refer to as Intermex or the company. Please see our SEC filings, including the risk factors described therein all forward-looking statements on this call are based on assumptions and beliefs as of today, and you should not rely on our forward-looking statements as predictions of future events. Please refer to Slide 2 of our presentation for a description of certain forward looking statements. The Company undertakes no obligation to update such information except as required by applicable law.
On this conference call we discuss certain non-GAAP financial measures. Information required by Regulation G under the Securities and Exchange Act for such non-GAAP financial measures is included in the presentation slides for our earnings press release and our annual report on Form 10 K, including reconciliation of certain non-GAAP financial measures to the appropriate GAAP measures. These can be obtained in the Investors section of our website at Intermex online.com.
Presenting on today's call is our Chairman, Chief Executive Officer and President, Bob Alessi, and Chief Financial Officer, Andrew spending. Also on the call today are Chris Horn, Chief Operating Officer, Joseph Aguilar, President, Latin America, Randy Nelson, EVP of Retail sales, Marcello Theodore, our Chief Digital Officer, Benson Erickson, Chief Human Resources Officer, Andrew convey, EVP, Finance and Business Intelligence, and Karim Barone, Director of Financial Analysis.
Let me now turn the call over to Bob.
Robert Lisy
Good morning. Nymex is proud to announce fourth quarter earnings that are a testament to truly our as a company. On page 3, you can see that in the quarter we delivered revenue of just under $172 million, up 11.2% year over year and diluted GAAP EPS of $0.49, up 40% year over year. Furthermore, adjusted EBITDA was up 14.5% to $33.3 million and adjusted diluted EPS of 21.7% to $0.56. We continued to deliver solid earnings and cash generation for our shareholders in every environment and our fourth quarter results fully demonstrate that we believe our omnichannel strategy is most efficient way to serve the various needs of the consumer in this market.
Intermex continues to offer our best-in-class service and loyalty offerings through both our retail and our digital products. This is an advantage that no other provider can claim a retail network requires years of careful precision effort to build.
And as a result, it's very difficult to replicate. Our technological advantage makes transacting fast and convenient for both digital and retail consumers. These critical factors has made our model highly profitable and drives exceptional generation of cash. How we deliver our products and services. The market is even more important at retail. Intermex has taken and will continue to take a highly refined rifle-shot approach while building our network of retailers.
This strategy enabled the Company to deliver products and services to consumers through the highest performing retail agent network in the industry. All this occurs while maximizing Asian retail performance that drives ROI and profitability. We are most interested in connecting with consumers in markets where our value added approach resonates the strongest. This is one where Intermex is able to best differentiate our value added service where we can in turn capture margin and where we will ultimately benefit our shareholders.
Our retail model requires a modest investments. Our sales and marketing costs are roughly 8% of gross margin and only 3% of total revenues in our digital offering to continue to demonstrate that same focus on efficiency and profitability while growing our transactions 43% this quarter and doing that by way of a highly efficient customer acquisition spend. As a result, we are delivering a highly attractive margin.
Finally, we continued to develop and introduce new features and functionality to deliver a user experience that is among the best in class. We continue to upgrade our application and it has received a rating of 4.8 out of five from our users. Our expanding margins related to our digital products place us in a great position to expand in new markets, including India, Philippines and others through our new partnership with Visa in the broader market, significant amounts of capital have been spent by some providers to grow digital market share.
In many cases, spending may not have achieved an ROI that would support that investment. Our strategy is to carefully cultivate and grow our digital business with the same efficiency that we have demonstrated while building our retail network. That is one key reason why our current digital business is profitable and growing. We're taking the approach that no one else in the industry has taken for offering a value added product and carefully crafted strategy to capture share in the right markets.
As we do with our retail business, we will leverage our best in class customer service and our metric orientation to drive profitable growth. This translates into consistent product expansion, strong margins, exceptional cash generation and a fortress balance sheet. As we talked about previously, but the National acquisition we closed in Q4 of 2023 brings Intermex meaningful presence in the U.S. to Dominican Republic market. With that acquisition on board for over 12 months, you will see on page 5, we have recast our market share calculation over time to include the DR. In 2023. We captured a 21.4% share in the top five markets to Latin America, we have successfully grown our market share over time while sustaining attractive margins year after year.
Our Q4 EBITDA margins, excluding acquisitions were well north of 20%. Some of the best we have seen in the history of the Company, we have been able to attain these outsized results through the execution of our metrically driven strategy. We have a highly efficient base of retail agents who rely on our products and services we offer and deliver these products. The customer base who appreciates Intermex is value added approach. We continue to strengthen our relationship with our retail agents while deepening our competitive moat and growing our mutually beneficial, high-margin business.
Additionally, we have the ability to carefully select where and when to progressively pursue wires at reduced gross margins. This practice is put in place when meaningful incremental transactions can be captured in areas where Intermex has a low market share in the upside potential is quite large. This approach enables us to capture new business in such a way that we do not affect margins at our current high profit retailers.
As a result, we're able to generate incremental earnings for our shareholders. We refrain from reacting to market pressures with a broad brush approach that degrades margins for the Company. Our approach is simple but not easy, so requires focus and disciplined execution. These behaviors are in our corporate DNA, but are very difficult to replicate in our quest for new business and to catalyze incremental growth. We have launched bold strategies to penetrate previously untapped and underdeveloped markets.
Our focus sharpened some locales right with untapped wire potential detail to the ZIP code for our presence has been minimal. As a part of our aggressive approach to drive revenue in high-potential areas, we've decided to expand our outside sales force by adding six new positions to our already robust team of 40. This expansion is a fresh strategy designed to intensify our market penetration and coverage. Moreover, we've taken a decisive step by significantly enlarging our inside sales team.
I'll move that marks a departure from traditional methods by tripling the team size from 12 to 36 members and strategically positioned these roles offshore for not only enhancing our capacity to engage with our current agents, but also tripling our daily interactions in a cost effective manner. This strategic enhancement is expected to dramatically boost our same-store sales, representing an almost 60% surge in our total sales force capacity. This considerable investment in our sales infrastructure is an approach we are confident will yield substantial returns over the next 12 to 18 months, signifying our aggressive pursuit of growth through innovative stacking strategies.
From an inorganic perspective, we're also making great progress. The I. transfer business in Europe grew at 17% in Q4 we continue to expect great things for our European division, including strong digital opportunity to access in the coming months for the national business in the US is much more powerful and efficient than a year ago. We believe significant opportunities remain to expand to additional corridors through our current agent base to Mexico alone.
Now armed with the Intermex payer network and fee structure, we see potential for millions of dollars of increased margin annually. We have begun to execute against this plan. Additionally, there will be more efficiencies to be leveraged as the year unfolds. These businesses are proving to be great additions to Intermex, and we're excited and optimistic about their combined future.
Before I turn the call over to Andreas to go deeper into the numbers. A few final thoughts on operating discipline and why we say Q4 was a testament to who we are as a company by almost all key measures were strong and exceeded market expectations. We face some revenue headwinds. In spite of that, we persevered and delivered a solid quarter of growth. We talked about our plan to capture incremental wires in Q3 I'm pleased to report that our efforts are continuing to be productive, and the sales team continues to execute on that plan.
At the same time shortly after Q3 earnings, we saw Mexico market growth slowed considerably to levels we have not seen in years interim Intermex fashion. We put a critical eye on our business and challenged every corner of the company to maximize efficiency. We delivered on what we set out to do. It generated strong earnings despite a weaker than expected top line. While it is difficult to predict what our key markets will do in 2024. The guidance Andreas will take you through later in the presentation, anticipate underlying softness in that market for a period of time.
Our guidance also anticipates a tenacious focus on efficiency and execution that is part of our culture and why we feel better positioned than anybody else in the market. We are confident in our differentiators and the management team and the Board feel there's tremendous value in Intermec stock. We will continue to be highly profitable and produce considerable free cash in spite of the investments we are making in our future growth. And finally, we will use the share of that free cash to increase our stock buyback program. We anticipate being twice as active in our existing program and we'll continue to assess block trades that benefit our shareholders.
With that, I'll turn the call over to Andras.
Andras Bende
Thanks, Bob, and good morning, everyone. On Slide 6, you can see both unique customers and transactions up double digits year over year. Most importantly, we grew this business at healthy margins, which you'll see reflected in the coming pages on slide 7, strong trend and profitable digital growth. Continued transactions were up 42% at the best margins we've seen for our digital products. We're confident in our product, our digital partnerships and the team that's bringing onto the market.
Also worth mentioning is the growth on the digital receive side. Those transactions terminating by electronic payment methods like bank accounts, mobile wallets, et cetera, are a key factor in that almost 18% year over year growth. You can see to the right, these transactions are typically very cost efficient ways for us to deliver a wire So this trend is also a nice margin tailwind for us.
On Slide 8, we present a picture of our volume growth in average principle sent on face value. It appears that the average principal was down year over year to $406 transaction in Q4. That is mostly driven by the inclusion of legacy now and I transfer the sentiments are structurally lower principal amounts, excluding those business were essentially flat for the quarter.
On the next page, you can see revenue growth of 11.2% for the quarter and 20.5% for the year. As Bob mentioned earlier, revenue was at the lower end of our guidance as we were not immune to the slowdown in sales in Mexico. However, as you see Next on page 10, our strategy to grow transactions in the core while preserving margins, coupled with a rigorous cost agenda, yielded strong earnings results. You can see net income up almost 34% for the quarter and diluted EPS up 40% as we closed on the National acquisition in Q4 last year were going over about $2.5 million in transaction costs, which is bolstering the GAAP numbers.
On the next page, you can see a little cleaner reflection, which among others adjust out those transaction costs adjusted net income is up 13.5% and adjusted diluted EPS is up 21.7%.
Finishing up the P&L, adjusted EBITDA grew at 14.5% in the quarter with adjusted EBITDA margins at 19.4% versus 18.8% in the prior year. So again, our targeted strategy to grow wires in this environment without degrading margins is delivering for shareholders. Also worthy to note, Q4 23 includes a full three months for the NASDAQ transfer, both structurally lower margin businesses. Yet our year over year margins still improved by 60 basis points, a testament to our focus to deliver a premium product through highly tactical execution.
Finally, on cash on the balance sheet, we ended up the quarter on a Sunday of a holiday weekend with $239 million on the balance sheet and $106 million of undrawn revolver capacity. Free cash generated, which again removes day of the week cyclicality was up 26% year over year. Balance sheet remains in great shape. While the headline shows us about 1.6 times leverage. We have to remember that we've closed on a weekend with $114 million drawn on the revolver and most days a week.
That revolver is completely undrawn. If we look at our average daily debt position for 2023 versus our adjusted EBITDA for all of 2023, it implies a leverage of below one times as far as capital allocation goes at, the top of the list are aggressive incentives at retail that deliver highly accretive transaction and margin growth. After that, we continue to see great value in the stock. In the quarter, we purchased about $25 million in stock, $10 million by our regular quarterly program at another $15 million through block purchases.
As Bob mentioned earlier, we expect to double our quarterly underlying program from $10 million to $20 million, and we'll continue to make block purchases when and where it makes sense for our shareholders.
As far as M&A goes, we're always going to look for opportunity, especially with the balance sheet we have. However, we're going to continue to be selective stewards of the Company's capital resources exercising a prudent approach with robust screens for value.
On the final slide, I'll take you briefly through our guidance for 2024 and for the first quarter for the full year 2024, we anticipate the following revenue of $681 million to $701.8 million, fully diluted GAAP EPS of $1.81 to $1.96, adjusted EBITDA, $124 million to $127.7 million, adjusted diluted EPS of $2.13 to $2.31. For the first quarter. We anticipate the following revenue of $150.4 million to $155 million fully diluted GAAP EPS of $0.32 to $0.35, adjusted EBITDA of 24.4 million to $25.1 million, adjusted diluted EPS of $0.39 to $0.42.
This guidance takes into account a noteworthy step down in market growth for Mexico. The key corridor in Latin America, while we're not immune to the effects of growth slowing at the single largest country to country corridor in the world. We anticipate four things will continue to beat the market growth rate in both retail and digital Our margins will remain strong, justified by premium product and highly tactical execution. We'll pivot to an even leaner operating model, maximizing returns in the face of the market whose pace of growth has come back down or and finally, we'll utilize our strong liquidity and ability to generate cash to more aggressively pursue shares by our buyback program.
In summary, we continue executing the interest playbook and are well positioned to deliver another strong year for our shareholders.
With that, I'll turn it over to the operator for questions.
Question and Answer Session
Operator
Thank you. We will now begin the question and answer session to ask a question, you may press star one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed. You may withdraw your question.
Pressing star two. Our first question comes from David Sharp with CDGMB., please proceed, Greg.
Good morning and thanks for taking my questions. But Bob, can you provide a little more thought, I guess a background in geographic context for the sales force expansion since it's such a dramatic increase, particularly the internal. Is this bolstering up efforts in the western regions, those ZIP codes? I know you've long been targeting or I thought you said something about offshore? And can you just provide some more background kind of how many auto insurance in a broader kind of multi-year context of kind of what you think your footprint will look like?
Robert Lisy
Yes, we've on the inside team has been primarily located in Miami with a few folks out in California to be more productive relative to time zones. And we had 12 folks that were directly responsible for contacting agents by telephone. Those are separate and apart, but supporting our efforts at retail with our outside sales team, we recognized that our reach could be benefited by having more folks available. And what we did is created 24 positions in Guatemala.
We have people that are fully bilingual that will be augmenting those 12 folks and then working teams of three people, one in U.S. two in Guatemala to live a set of agents, approximately 12 different teams. So each team will have about 13th of our existing agents. And what they'll be doing is calling those agents and looking at opportunities where we might have a decline in wires where it's a slow start-up with a new agent.
Our experiences is that contact drives many more wires and the payback is really even good of the U.S. team, but the fact that it's much more efficient cost wise to do this in Guatemala, we are able to triple our reach from an inside perspective without anywhere near tripling the cost of that function.
Now addition of the that we've had 40 district sales managers in the U.S. that have been separating our accounting for our existing business and going out after new business, those will be augmented by a 15% increase so we tripled the size of the inside and then a 15% increase are the folks out there in the US at retail that will be visiting our existing agents will have the primary responsibility for adding new agents in the vacant ZIP codes where we have opportunities.
We've coupled this with a approach that is looking at different offerings that will be more attractive to both the agent and to the consumer in certain ZIP codes where today we haven't penetrated and as we talked about and signaled in the text that these are opportunities where we're not giving away any margin where even if we're taking a lower margin, be more aggressive, it's all found transactions because we have not penetrated those ZIP codes in the past.
So represents a total remake of what we're doing from an aggressive perspective in the West, but also a remake relative to supporting our existing base and becoming more aggressive at retail so on, we think that it will pay large dividends in the next 12 to 24 months. And we'll have we'll see an extension of our rate of growth of further separation from our rate of growth over the market rate of growth in that period of time.
Got it. Understood. Maybe and as a follow up along, that sort of increasing the internal sales force focus on monitoring existing agents. It looks like a lot of the forward guidance is impacted by what you're witnessing in Mexico. I mean, notwithstanding some of the movement, some of the Banco de Mexico data.
I know kind of one of the largest, the largest global player I know on their call had mentioned they had returned to gaining share in Mexico after a long time. And you've talked about pricing pressures in that corridor and in past calls, is there are you do you feel like you're maintaining share and in the US to Mexico at sort of your mature agents?
Robert Lisy
I mean, we think there are two things going on. We think we're gaining share in retail and we're gaining share a digital seat. The challenge for us is today, our business is not weighted the same way as the market. So we're not having 20% of our business to Mexico go digital, and that's the hot, faster growth piece of the business. I think we believe we're growing just as well as the digital pieces and just as well as the retail pieces, but our our percentages are more like 95% retail today and 5% digital so that that weighting causes our growth to maybe look not as good as it does.
We think, again, we're beating and exceeding at retail and beating and exceeding it digital. And we think this program where we're adding not only adding the folks to target, but also the fact that we'll be taking a look at what we're willing to offer the agent and the consumer at retail in these underserved or unserved areas is going to make a lot of difference and will make a certain further separation between us and market share also in the market growth, which will gain further market share for us.
Understood, Steve. I'll just a quick quick follow-up for Andras. I guess some salary benefit, the largest OpEx after agent charges, I guess it was 72 million last year. There may be some when I see all noise. But as we think about the increase in sales headcount, I don't know if it's all variable in commission base, it is there, Ray kind of a good figure we ought to think about for an annualized figure in salary and benefit this year. It seems like that would be the line item moving the most.
Andras Bende
Yes, I think it's relatively small these additions. I mean we have in terms of our salary movement year over year, you're going to see in aggregate for the business 4% to 5%. So we've really dialed back on that. So that impact of these ads is relatively small and taking into account all the other areas where we're dialing back costs as much as we can it's not really going to push through to be a visible impact.
Operator
Our next question comes from Mike Grondahl with Northland Securities.
Mike Grondahl
Hey, good morning, guys. Did you guys call out the revenue number from line ash now? And I transfers I'm trying to just back into an organic growth rate for 4Q.
Andras Bende
Yes, sure, Mike, because we're all on the main call together with Asha now, Illinois S&L in Q4, it was about $18 million I transferred in Q4 was about five, which means your organic growth in the quarter was about little under 5.5%.
Mike Grondahl
Got it. And then also last quarter, you guys kind of talked about, I'll call it for, you know, growth drivers that you were sort of strategically heading towards or implementing one was sort of targeted counter offers. One was new agent One was some overall selected pricing actions. And I think kind of new market strategies. Could you handicap like which one of those four you're ahead on, maybe which ones you're kind of behind on let us know how each of those four are going?
Robert Lisy
I think on the most important and the one that we're doing the best in is the targeted offerings. So that's what we mentioned in the in the in the text was that that program is going quite well and we've executed well against it. We brought in tens of thousands of wires on on that program, which were essentially paying a little bit of commission upfront, let's say, to an agent. And then we're reducing the amount of payment that the agent gets over time.
So doesn't have a huge impact on our commission that the agent gets our gross margin over time, but it's more of an upfront payment to bring back wires that we haven't had in the past. That has done quite well. And I think we're executing and continuing to execute against that on the second one with new agents, and we continue to drive growth through our new agents. And that's going well as well on.
We are targeting that growth in specific ZIP codes is the thing that we're going to spend more time on, and that will be sort of a targeted along with new agents, which will be this sort of new price offering where we'll be a little bit more aggressive with both the agent and the consumer. But again, I want to highlight and make sure I underscore that. That does not mean we're going to where we have have plus million wires and we have it at X margin. We're not going and discounting there.
We're being aggressive with price where we're not where we're not getting wires, where we have a small level of market penetration where we might not be serving in this ZIP code at all. So we feel both of those strategies are going well. The overall actually our overall approach to the market has been better margins. We've brought the pricing component into finance and Andrew coupe that is ahead of the of the up sales planning and analysis has been running the pricing, and we've actually done much better in terms of margins versus the margins a year ago.
And that's been done because we've done less of our sort of wholesale changes in market and more specific changes related to when we get wires as a benefit of moving price on new markets?
I'm not sure what that piece was. I think on we have Canada, we certainly have the growth in Menasha Now let me touch on the rationale for a minute. We think Menasha now has got a lot of pent-up growth in that it became really a Dominican Republic product. And we've now given them the payer relationships we have in Mexico and our payer cost to Mexico, and we've already seen an uptick in those wires. There's a lot more to do.
There's a lot more putting them on our payer network and a lot of volume of transactions in their retail network, both company stores and the retailers that have not been tapped in the past because National was focused primarily on the Dominican Republic. So we still see a lot of growth opportunity there. And then additionally, Europe has been growing well. We think there's a lot more opportunity in Italy. We think we're looking at things in other parts of Europe as well. And so those are the new markets where growth will come from.
Mike Grondahl
Got it.
On in terms of the buyback, did I hear correctly you guys had been kind of programmatically buying at 10 million a quarter starting 1Q 24th. That's going to uptick 20 million a quarter?
Andras Bende
That's right, Mike, when we will also be active in terms of block purchases if they're going to benefit the shareholder as well. But we feel that we'll have an underlying 20 million that we'll be able to pickup each quarter, but we have some price parameters built into that as well. So it's not at all costs, but we feel pretty good about being able to pick up 20 million worth of quarter and then blocks on top of.
Mike Grondahl
Got it. And just lastly, are you able to put like a revenue range for in terms of growth, what Mexico is acting as a headwind for 24 like five points of revenue growth, 4.7 points. What do you see that headwind as roughly as compared to like 23?
Robert Lisy
Yes, I think right now we see that that the Mexico growth in fourth quarter as an industry was only at 3.5% and our assumptions in the plan, we presented assumed that kind of growth sustaining itself throughout 2024. So we're not dependent on that coming back at all as the market starts to come back.
I'll just to put it in perspective. In Q2 of 2020, which was the height of COVID. The market grew at 3.6 and in Q4 of 2023 grew 3.5. So it actually grew a 10th of a percent slower than it did during COVID in Q4. And we kind of projected that through 24. Our on upside is is these investments that we're making in sales from a growth perspective that are totally been assimilated into our cost structure because we've done a lot of zero-based budgeting as well.
That's eliminated some, I think, unjustified or on inefficient cost rates that we've now put back into the sales perspective, we think that our target and our aspiration is to separate ourselves further from that growth number. But our assumptions are based on Mexico staying around three or 4% growth as an industry through 24.
Operator
Our next question comes from Kris bang with UBS.
Thanks for taking our questions. So my first question is about the Visa Direct opportunities. And it's relatively new. I understand it's kind of nascent and you talked about them that enabling you to go into important markets such as India and Philippines and a couple of others to call it out at the last call and potentially some more this year.
So on the first part, maybe can you talk a little bit about the potential opportunities and the expansion plans this year and how what are your kind of longer-term outlook from the Visa Direct partnership? And then the second part is on how much of that Visa Direct opportunities or new markets do have you have baked into the plan this year for the for 2020 guidance?
Marcelo Theodoro
It's Marcelo here. I'm going to I'm going to cover the first question. So we see a huge opportunity in this partnership because it makes their own honey Moon from Moatize coal through multi regional approach to a global approach. So there are important corridors that we're going to embrace like India or Philippines. As I said, those are huge markets that we believe we can address at a lower cost and a great experience.
As Bob mentioned before, we did incorporate that to our projections for 2024. But of course, it's a increasing number throughout the year due to our current focus on Latin America. So it's a new target audience that we have to embrace. We see some traction already, but it's a midterm exercise that we are going step-by-step.
Andras Bende
And I would just jump in, Chris, this is Andreas. I think the overall contribution that from an overall company perspective, this is still quite small. What was baked into 2024? I think we could see it as an option. If it really pops right now, the contribution from the overall materiality to the plan is quite small.
All right. Thanks a lot to both of you. That's very helpful. And the second part is the spot into asphalt a little bit about the fourth quarter performance, I guess outside of the Mexico market, what were some of the trends you saw in the market because of the performance in, I guess, the rest of the latter regions compared to what you had expected going into the quarter? Thank you.
Robert Lisy
I think we've seen the broader market and certainly not only Mexico, but Guatemala and other key countries for us slow down. We love relative to growth, not as acutely as Mexico asked, but we also see some really strong growth where we've executed well in certain countries and have at times been vet.
Bert, you know, on the borderline of triple digit growth countries like for Agua and others where we've been growing very quickly. So I think the overall market has slowed a bit. So virtually just about every country in Latin America, but we've been able to grow well outside the size of the market in certain markets like Nicaragua, I believe Ecuador, Colombia were growing much faster than the market in those areas.
On Dominican Republic, we're seeing that there's some slowing in that market. We think that's a market that's moving a little faster to digital. Dominican people in the U.S. tend to be more likely banked and they're more likely bank they have more options, meaning that they have the option to go to digital easier and more fluidly than somebody who's maybe of an undocumented up to them MEMBER ups of the workforce from Mexico or Honduras or Guatemala. So those are those are that's how I'd sum up the overall trends.
Thank you so much. That's very helpful. Let's jump back to the queue.
Operator
Our next question comes from send soundbites we need. Please proceed.
Great. Thanks. Thanks, guys for taking the questions. I'm hopping on for Mike today. And I was wondering if you guys could provide some insight into some of the pricing dynamics you saw in the fourth quarter. I know earlier in the year and it goes in the third quarter, you guys mentioned some pricing pressures stemming from competitors. So could you guys just talk about what you saw in the fourth quarter and maybe how you guys are thinking about pricing in 2024?
Robert Lisy
Yes. What we saw is that we've actually been able to extend our margins in Q4 and increase them by being more efficient and slicing it a little bit center previously, we made BIGGER movements with price related to the whole market. And now our price movements are related to places where there is an incremental upside in terms of wires or we're very careful about is that we don't want to be discounting where we have wires in house where people are perfectly happy with the pricing and those wires are already wires we're going to get now as we look at 24, the big opportunity for us is certain areas of the country where there still remains. For instance, Southwest, we have a million.
Foreign-born is living in ZIP codes in California that we haven't tapped into at all because our California businesses in which it's several million wires a year. We haven't tapped in those ZIP codes at all. We also have another set of ZIP codes that have about 1.7 million people where we tapped into very slightly. And so those are the places where you'll see a different pricing perspective, a different pricing action will be much more aggressive there, but that doesn't degrade at all our current margins.
Our current margins are going to stay relatively stable. Those margins will be ones that will come in at a lower gross margin per transaction but will be incremental transactions. So the overall average might come down a bit, but nothing will be done to degrade the core business.
Got it. Okay. That's super helpful. And then just a quick follow-up on. Can you guys talk more about some of the momentum you're seeing in the transfer business and any expectations or any goals you guys have for the upcoming year?
Andras Bende
Yes, I would say that we built a plan that we feel comfortable can be in the mid 10s if we're operating the business similar to how it's operating today, but a little bit more efficient than I think what we're trying to do is is create more of a big bang plan, which if we get off to the right start, we'll be investing quite a bit in the front end. I think in the second half of the year. Italy in particular, is a really interesting opportunity. I think structurally the margins are better in Italy.
And I think our penetration there in what's a really big economy. It shows a lot of opportunity, but we're doing well in Spain as well. And then they were I think they've they've restarted their growth trends in Spain as well. I think that that geography is a little bit trickier because the margins aren't as good. But I'm but I again, I think that mid 10s is the baseline and only upside from there.
Awesome. Thanks, guys. Appreciate it.
Andras Bende
But what I would add to that is that today we're generally just in two countries in Europe continent. We have one store in Germany. It's a huge market opportunity. We think there's opportunities for us with our European license not only to expand further in Germany in the middle run, but also in France and we're also looking at opportunities in the UK to get started there.
So I think you'll see us be much more active in Europe. We think Europe is a great opportunity at retail. But because of the nature of the consumer there, we believe that our digital opportunity will catch on even faster because more consumers are already ready to do digital wires they have bank accounts, they're paid on the books on a payroll card. And so we were looking forward to getting our digital app up and going in Europe and then also target expansion as we grow through other key countries like Germany, France and ultimately UK.
Yes, makes sense. Thanks, guys.
Operator
(Operator Instructions) This concludes our question and answer session. I would like to turn the conference back over to the speakers. Any closing remarks.
Robert Lisy
Thank you all for tuning in and look forward to talking to you all soon. Thanks again. Have a great day.
Operator
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
