Betterware de México(BWMX)2024-10-24 22:48Financial Data and Key Metrics Changes - Net revenues increased by 6.6% year-over-year and 7.4% over the first nine months of 2024 [3] - Adjusted EBITDA grew by 11.7%, reaching MXN 592 million, with an EBITDA margin expanding by 81 basis points to 17.8% [17] - Adjusted net income decreased by 8.4% year-over-year, totaling MXN 180.5 million, primarily due to increased tax provisions [17] Business Line Performance - Betterware Mexico's net revenue grew by 3.2% in Q3 and 5.7% year-to-date, marking its fourth consecutive quarter of growth [7] - Jafra Mexico's revenue increased by 9.2% in Q3 and 9.8% year-to-date, driven by successful product innovations [9] - Jafra U.S. showed promising results with net revenue up 11.7% in Q3 and 1.9% year-to-date, moving closer to breakeven [11] Market Data and Key Metrics Changes - The depreciation of the Mexican peso negatively impacted gross margins, which fell to 54.8% compared to 56.2% last year [19] - Freight costs increased significantly, affecting gross margins by approximately 150 basis points [19] Company Strategy and Industry Competition - The company is focused on expanding its product portfolio, increasing SKUs from approximately 370 to 420 to capitalize on new categories while maintaining core categories [8] - Strategic investments in international expansion are ongoing, with MXN 8.2 million invested in expanding Betterware into the U.S. and Peru [20] - The company aims to maintain a net debt-to-EBITDA ratio of 1.5 to 2.5 times, depending on acquisition prospects [24] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in finishing the year strongly, with a solid pipeline of new product launches and strategic initiatives [4][44] - The company remains committed to delivering shareholder value, announcing its 19th consecutive dividend payment [4][24] - Management acknowledged challenges from macroeconomic factors but emphasized operational resilience [3] Other Important Information - The sale of Jafra's former headquarters resulted in a non-cash accounting loss of MXN 435 million, which does not impact operational performance [18] - The company is evaluating the potential application of hedge accounting to better reflect the impact of foreign exchange hedges [21] Q&A Session Summary Question: Increase in SKUs and Pricing Strategy - Management explained that the increase in SKUs targets both new categories and core categories, with a focus on introducing lower-priced items to balance growth [26][28] Question: Inventory Levels - Management confirmed that inventory levels are prepared for the holiday season, addressing previous stock-outs and ensuring readiness for Q4 [29] Question: U.S. Expansion and Peru Rollout - Management indicated that Betterware U.S. is in the piloting phase, with operations already launched, and plans to launch in Peru by Q1 or Q2 of next year [30][31] Question: Cost Structure Changes - Management noted that the cost structure has shifted to be more variable, reflecting growth and optimization efforts in fixed expenses [35][36] Question: Future Inventory Investments - Management stated that additional inventory investments will depend on the stabilization of the supply chain and prices, indicating no need for further buildup if conditions remain stable [40][41]