Betterware de México(BWMX) - 2022 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Betterware's standalone net revenues declined by 30% compared to Q2 2021, attributed to a decrease in the average number of associates and distributors [32] - Consolidated net revenues increased by 25% compared to Q2 2021, driven by the inclusion of JAFRA's results [36] - Consolidated EBITDA decreased by 20% compared to Q2 2021, impacted by lower operating leverage and one-time expenses related to the acquisition [36][37] - Consolidated net income decreased by 45% year-on-year due to lower operating leverage and higher interest expenses from the JAFRA acquisition [37] Business Line Data and Key Metrics Changes - JAFRA's financial results were included from April 7, 2022, through the end of the quarter, contributing to the consolidated results [31] - Betterware's EBITDA margin contracted by 484 basis points to almost 24% due to lower revenues and higher SG&A expenses [33] - JAFRA's higher gross margin contributed to a consolidated gross margin expansion of 1,230 basis points to 69.1% [36] Market Data and Key Metrics Changes - Betterware's market share expanded to 7.7% in 2021, up from 5% in 2020, indicating stronger brand positioning [21] - Household penetration for Betterware increased to 29% in 2021, up from 24% in 2020 [21] - The home solutions market in Mexico experienced a normalization back to pre-pandemic levels, affecting demand trends [20] Company Strategy and Development Direction - The company aims to accelerate JAFRA's revenues to a high-single-digit to low-double-digit growth rate in the near term [9] - Strategic pillars include product innovation, technology, and business intelligence to enhance growth prospects [5][9] - Plans for international expansion to the U.S. by Q4 2023 and further expansion to South America by 2025-2026 [30] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges posed by a softer economic environment and inflationary pressures on consumer confidence [17][54] - There is optimism regarding the recovery of the associate base and sales trends, with signs of growth observed in July [22][51] - The company is adjusting its pricing strategy to reflect lower container costs and drive demand [58] Other Important Information - The company is evaluating divestments of unproductive assets worth around MXN 500 million to MXN 700 million to enhance financial strength [42] - Proposed dividend payment of MXN 200 million for the quarter, subject to approval, to prioritize financial strength amid uncertainty [45] Q&A Session Summary Question: Recent growth in associates and distributors - Management attributed the growth to changes in the rewards program and catalog adjustments, which have yielded better results [49][50] Question: State of the consumer today versus three months ago - Management noted inflationary pressures and a lack of consumer confidence but adjusted strategies to align with the new environment [54][55] Question: Revised pricing strategy - Management explained that prices were raised by 12% earlier due to increased container costs, but recent declines in container costs have allowed for more aggressive pricing strategies [57][58]