Betterware de México(BWMX) - 2025 Q1 - Quarterly Report

Financial Performance - Net revenue for Q1 2025 decreased by 2.9% year-over-year, totaling $3,499,151, primarily due to a 9.8% decline in Betterware Mexico's sales[12][14] - Gross margin contracted by 353 basis points to 66.2%, influenced by higher supply costs and a 20.3% depreciation of the Mexican peso against the U.S. dollar[12][14] - EBITDA fell by 29.1% year-over-year to $535,265, with an EBITDA margin of 15.3%, reflecting lower sales and increased administrative expenses[12][14] - Net income decreased by 48.7% to $151,394, impacted by lower sales and EBITDA, despite a positive effect from reduced interest expenses[12][14] - Free cash flow was negative at -$55,841, primarily due to extraordinary cash outflows and increased working capital requirements[12][14] - Net revenues decreased 9.8% YoY in Q1 2025, marking the first YoY decrease since Q3 2023, primarily due to economic uncertainty and softening demand in Mexico[29] - Gross margin decreased by 473 basis points YoY, with COGS increasing from $18.0 to $20.0, driven by the depreciation of the Mexican peso[29] - EBITDA declined by 31.6%, resulting in a contraction of the EBITDA margin by 594 basis points, reflecting external macroeconomic pressures[29] - Net revenue for Q1 2025 was $3,499,151, a decrease of 8.0% compared to Q4 2024's $3,778,468[46] - Net income for Q1 2025 was $150,728, down 48.0% from $295,263 in Q1 2024[46] - EBITDA for Q1 2025 was $535,265, reflecting a decline in EBITDA margin to 15.3% from 20.4% in Q4 2024[46] Associate and Sales Metrics - The average Associate base decreased by 6.3% to 1,138,418, while the end-of-period base fell by 7.0% to 1,122,047[12][14] - The average base of associates for Betterware Mexico decreased to 645,359 in Q1 2025 from 693,666 in Q4 2024[43] - The average monthly order for Betterware Mexico in Q1 2025 was $2,152, a slight decrease from $2,158 in Q4 2024[43] - Monthly growth rate for Betterware Mexico in Q1 2025 was 18.7%, an increase from 14.3% in Q4 2024[43] - The average monthly order for Jafra Mexico in Q1 2025 was $2,419, a slight increase from $2,439 in Q4 2024[44] - Monthly churn rate for Jafra US in Q1 2025 was 11.8%, a decrease from 14.7% in Q4 2024[45] Strategic Initiatives - Betterware is targeting a 52% reduction in excess inventory for the year, from $529M to $252M, with inventory at $483M as of Q1[29] - Strategic pricing adjustments and increased promotional activities are being implemented to enhance sales engagement and balance affordability with margin protection[29][33] - New compensation plans and catalogue redesigns are set to launch in Jafra US to improve consultant recruitment and sales conversion[36] Future Outlook and Guidance - The company maintains its 2025 financial guidance, projecting net revenue growth of approximately 6.0% to 9.0%[26][25] - Jafra's forward-looking statements indicate potential variability in actual results due to various factors, with no obligation to update these projections[64] Cash Flow and Liquidity - The current ratio declined by 11.9% to 0.92, indicating reduced liquidity[16] - Cash flows from operating activities in Q1 2025 resulted in a net cash outflow of $42,898, compared to a net inflow of $384,223 in Q1 2024[42] - Total cash and cash equivalents at the end of Q1 2025 were $344,073, down from $425,177 at the end of Q1 2024[42] - The proposed dividend for Q1 2025 is Ps. 200M, reflecting management's commitment to shareholder value despite negative free cash flow[24] International Expansion - Betterware's international expansion includes signs of recovery in Guatemala and the launch of operations in Ecuador[32] Jafra Performance - Jafra Mexico's net revenue rose 1.1% YoY, with a gross margin of 73.5%, despite a decline of 398 basis points[30] - Jafra US experienced a 14.6% increase in net revenue in MXN, but a 4.7% decrease in USD YoY, with a strong sales rebound of 27.0% in March[34][36] - EBITDA for Jafra US declined by 9.3% to a negative $633,000, impacted by extraordinary legal settlement expenses of $300,000[36] - Jafra Mexico reported Q4 2023 net revenue of $1,668,956, with a gross margin of 78.8% and an EBITDA of $532,780, resulting in an EBITDA margin of 31.9%[48] - Jafra US experienced Q4 2023 net revenue of $260,256, with a gross margin of 74.4% and an EBITDA of $36,361, leading to an EBITDA margin of 14.0%[49] - Jafra Mexico's Q4 2024 net revenue is projected to increase to $2,038,993, while the EBITDA is expected to rise to $440,630, with an EBITDA margin of 21.6%[48] - Jafra US anticipates a slight decrease in Q4 2024 net revenue to $244,620, with an EBITDA of $891 and an EBITDA margin of 0.4%[49] Reporting Changes - The company will start reporting salesforce metrics under unified terminology for all business units beginning Q2 2024, with no adverse effect on reported results[55] - The company emphasizes the importance of non-IFRS financial measures like EBITDA and EBITDA margin for internal analysis and comparison with industry peers[54] Upcoming Events - The next conference call for Q1 2025 is scheduled for April 24, 2025, at 3:30 pm Mexico City Time[65]