Betterware de México(BWMX) - 2021 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Revenue growth of 81% year-on-year in Q2 2021 and 130% for the first half of 2021 compared to the same period in 2020 [4][20] - EBITDA increased by 92% in Q2 2021 and 166% for the first half of 2021 year-on-year [4][21] - Gross profit margin expanded by 512 basis points to 56.8% in Q2 2021 and by 373 basis points to 57.1% for the first half of 2021 [20][21] - Operating cash flow was MXN 435 million in Q2 2021, representing 58% of EBITDA, and free cash flow was MXN 345 million [21] Business Line Data and Key Metrics Changes - The company retained the majority of its distributors and associates, with average distributor growth of 109% and average associates increasing by 110% over Q2 2020 [6] - The consolidation of the sales force was completed, leading to expected sequential growth in the sales force [6] Market Data and Key Metrics Changes - Household penetration increased to approximately 24% as of May 2021, up from an estimated 20% at the end of fiscal 2020 [17] - The company aims to reach 40% household penetration by 2025 [6][17] Company Strategy and Development Direction - The company focuses on three strategic pillars: Product Innovation, Technology, and Business Intelligence [11][12] - Plans to increase the number of catalogs from 9 to 12 per year to enhance product exposure and purchase frequency [12] - Expansion of e-commerce platform to capitalize on low penetration in the home solutions category, which is less than 1% of the total market [14] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in business prospects for the second half of the year, supported by a strong balance sheet and cash flow generation [9] - The company is positioned to capitalize on M&A and international expansion opportunities [9] - Management raised revenue guidance for 2021 to a range of MXN 10,800 million to MXN 11,300 million, implying growth of 49% to 56% [25] Other Important Information - The company plans to propose an annual dividend of MXN 1,400 million, with the third installment of MXN 9.38 per share subject to approval [8] - The company has a low leverage ratio of 0.02 times net debt to EBITDA, indicating strong financial health [24] Q&A Session Summary Question: Inventory levels and changes - Inventory increased by MXN 48 million from 2020 to 2021, reflecting low inventory levels in Q2 2020 due to unexpected demand [27] Question: Impact of currency fluctuations and shipping costs - The stronger peso this year compared to last year has been hedged, and shipping costs are expected to remain stable due to contracts with shipping companies [28] Question: Product innovation and new categories - The increase to 12 catalogs will lead to more products and innovation within existing functional categories [31] Question: Delivery times with new distribution center - Current delivery times of 48 to 72 hours in Central and South Mexico will be reduced by 24 hours with the new distribution center [33] Question: Input cost inflation and pricing strategies - The company has mitigated raw material and freight cost increases through higher volumes and favorable contracts, expecting to maintain margins [37][38] Question: Household penetration target and category expansion - The 40% household penetration target focuses on increasing the sales force and distributor base without needing to expand product categories [46]