Betterware de México(BWMX) - 2025 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Consolidated net revenues decreased by 2.9% year over year, primarily due to a challenging macroeconomic environment [8][10] - Consolidated gross margin declined by 353 basis points, impacted by the depreciation of the Mexican peso and increased costs of goods [10] - Consolidated EBITDA decreased by 29.1%, reflecting weaker sales volumes and compressed gross margins [10][12] - Consolidated EPS decreased by 48.7%, driven by lower sales and overall profitability [12][13] - Free cash flow was negative for the quarter, with historical conversion rates affected by seasonality and increased working capital [11][12] Business Line Data and Key Metrics Changes - Better World Mexico revenue fell by 9.8% year over year, with a significant decline in associates [9][10] - Jafra's growth decreased from double digits to single digits due to margin compression and promotional expenditures [9][10] - EBITDA for Better World Mexico fell by 31.6%, while Jafra's Mexico EBITDA decreased by 25.2% [10] Market Data and Key Metrics Changes - The Mexican peso depreciated around 20% year over year, affecting import costs and overall profitability [8][9] - Consumption trends in Mexico showed signs of softening, particularly in discretionary categories [3][4] - Disruption in consumption was noted in the US and China, impacting overall sales [4][5] Company Strategy and Development Direction - The company operates with a low fixed expense and asset-light model, allowing for better cash flow management during challenging times [4][5] - A focus on pricing strategies, promotional activities, and sales force engagement techniques to drive growth [16][18] - Plans to monitor and adapt sourcing strategies in response to geopolitical tensions, particularly regarding manufacturing in China [18][20] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the current macroeconomic challenges but expressed confidence in the long-term growth fundamentals of the business [3][24] - The company maintains its full-year guidance for 2025, expecting net revenue and EBITDA growth in the range of 6% to 9% [15][24] - Management emphasized the importance of internal strategies and market share growth opportunities to navigate economic uncertainties [44][45] Other Important Information - The Board of Directors proposed a MXN 200,000,000 dividend for Q1 2025, reflecting a commitment to shareholder returns [14][13] - The company is taking proactive steps to protect revenue and margins while ensuring financial health [21][53] Q&A Session Summary Question: Inventory management and future cash flow - Management noted that the increase in inventory was due to branding renovations and innovation preparations, expecting a decrease in inventory levels going forward [26][27] Question: Opportunities from China - Management confirmed that container prices are decreasing, which could be advantageous, but could not confirm improved pricing from Chinese manufacturers at this time [28][33] Question: Q1 performance and future trends - Management observed a softening in consumption as Q1 progressed, with expectations for stabilization rather than a rebound in the near term [39][40] Question: Confidence in guidance despite challenges - Management highlighted strong internal fundamentals and market share growth opportunities as reasons for maintaining guidance, despite economic uncertainties [44][45] Question: US expansion pause - Management clarified that the pause in US expansion refers specifically to Betterware, while continuing to operate and invest in Jafra U.S. [46][47]