Betterware de Mexico SAPI de CV
NYSE:BWMX
US |
Fubotv Inc
NYSE:FUBO
|
Media
|
|
US |
Bank of America Corp
NYSE:BAC
|
Banking
|
|
US |
Palantir Technologies Inc
NYSE:PLTR
|
Technology
|
|
US |
Uber Technologies Inc
NYSE:UBER
|
Road & Rail
|
|
CN |
NIO Inc
NYSE:NIO
|
Automobiles
|
|
US |
Fluor Corp
NYSE:FLR
|
Construction
|
|
US |
Jacobs Engineering Group Inc
NYSE:J
|
Professional Services
|
|
US |
TopBuild Corp
NYSE:BLD
|
Consumer products
|
|
US |
Abbott Laboratories
NYSE:ABT
|
Health Care
|
|
US |
Chevron Corp
NYSE:CVX
|
Energy
|
|
US |
Occidental Petroleum Corp
NYSE:OXY
|
Energy
|
|
US |
Matrix Service Co
NASDAQ:MTRX
|
Construction
|
|
US |
Automatic Data Processing Inc
NASDAQ:ADP
|
Technology
|
|
US |
Qualcomm Inc
NASDAQ:QCOM
|
Semiconductors
|
|
US |
PayPal Holdings Inc
NASDAQ:PYPL
|
Technology
|
|
US |
Ambarella Inc
NASDAQ:AMBA
|
Semiconductors
|
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
52 Week Range |
11.398
19.9947
|
Price Target |
|
We'll email you a reminder when the closing price reaches USD.
Choose the stock you wish to monitor with a price alert.
Fubotv Inc
NYSE:FUBO
|
US | |
Bank of America Corp
NYSE:BAC
|
US | |
Palantir Technologies Inc
NYSE:PLTR
|
US | |
Uber Technologies Inc
NYSE:UBER
|
US | |
NIO Inc
NYSE:NIO
|
CN | |
Fluor Corp
NYSE:FLR
|
US | |
Jacobs Engineering Group Inc
NYSE:J
|
US | |
TopBuild Corp
NYSE:BLD
|
US | |
Abbott Laboratories
NYSE:ABT
|
US | |
Chevron Corp
NYSE:CVX
|
US | |
Occidental Petroleum Corp
NYSE:OXY
|
US | |
Matrix Service Co
NASDAQ:MTRX
|
US | |
Automatic Data Processing Inc
NASDAQ:ADP
|
US | |
Qualcomm Inc
NASDAQ:QCOM
|
US | |
PayPal Holdings Inc
NASDAQ:PYPL
|
US | |
Ambarella Inc
NASDAQ:AMBA
|
US |
This alert will be permanently deleted.
Earnings Call Analysis
Summary
Q2-2024
In Q2 2024, BeFra reported a 5.3% revenue increase year-over-year and achieved an 8% growth in net revenue for the first half. Despite challenges such as a 7.5% peso depreciation and rising shipping costs, BeFra maintained its resilience. The Jafra U.S. unit showed its first year-over-year revenue increase since 2022, while Jafra Mexico saw an 8.7% rise in Q2 revenue. BeFra remains committed to enhancing shareholder value, evidenced by its 18th consecutive quarterly dividend. The company affirmed its 2024 revenue growth guidance of 6.1% to 10.7% and EBITDA growth of 6.6% to 13.9%.
Thank you, and welcome to BeFra's Second Quarter 2024 Earnings Conference Call. Speaking on today's call are BeFra's Executive Chairman, Luis Campos; Chief Executive Officer; Andres Campos; and Chief Financial Officer, Alejandro Ulloa. Before they begin their remarks, the company would like to remind you that today's call will include forward-looking statements, which are subject to various risks and uncertainties that could cause actual results to differ materially from expectations.
Any such statements should be considered in conjunction with the cautionary statements and the safe harbor statement in the earnings release issued yesterday, and risk factors discussed in reports filed with the SEC. BeFra assumes no obligation to update any of these forward-looking statements or information. A reconciliation of other information regarding non-GAAP financial measures discussed on today's call can also be found in the earnings release as well as the Investors section of the company's website. Now, I would like to turn the call over to the company's Chairman, Luis Campos. Please proceed, Mr. Campos.
Thank you, operator. Good morning, everyone, and thank you for joining us today. In the second quarter, BeFra maintained its growth momentum, and the underlying fundamentals remain strong. We achieved 5.3% year-over-year revenue growth with Betterware Mexico, marking its third consecutive quarter of growth.
And Jafra U.S., recording its first year-over-year revenue increase since the acquisition of Jafra in 2022. First-half results show an 8% growth in net revenue, while EBITDA increased 3%, primarily driven by Jafra Mexico, which has maintained a steady growth pace and a strong performance. Positive results in the period happened on the ongoing global supply chain disruptions and temporary market volatility in Mexico experienced after the federal election process.
Nevertheless, we remain confident in achieving our 2024 revenue and EBITDA targets as we will explain. Looking ahead, we remain positive about the second half of the year. Our performance in the second quarter underscores BeFra's resilience and our ability to effectively navigate challenges. Additionally, we remain firmly committed to increasing shareholder value as evidenced by our 18th consecutive quarterly dividend payment, representing a yield of 10.7% at the end of the quarter. Now, I will pass the call to Andres to provide more details on BeFra's business unit performance in the second quarter of 2024.
Thank you, Luis, and good morning, everyone. As Luis noted, our second-quarter results demonstrate our ability to navigate volatile market dynamics. Mexico's recent presidential election introduced temporary volatility during the second quarter, with the peso depreciating 7.5% in June alone.
Existing global supply chain disruptions were further exacerbated by geopolitical tensions in the Middle East and by an increasing demand for shipping containers traveling from China to Mexico, causing container prices to surge 11.6% on average during the second quarter. Despite these challenges, BeFra achieved a 5.3% increase in net revenues for the quarter, contributing to a 7.8% growth for the first half of 2024.
Over the past 25 years, BeFra has delivered outstanding performance, boosting a net revenue CAGR of 23% and 24.5% for EBITDA as of 2023. These remarkable growth rates underscore our status as a highly profitable growth company. Looking ahead, we are confident on our ability to sustain and build upon our impressive track record.
Turning to Betterware Mexico. Net revenue increased 2.2% year-over-year in the quarter, achieving 7% growth for the first half of 2024. Growth was achieved despite the following factors: number one, key product sellouts impacted order fulfillment and sales force activity levels, primarily due to cautious demand estimation. However, these sellouts underscore our ability to develop innovative offerings that resonate with consumers, and we expect the growth trend to continue. Number 2, import taxes on 160 SKUs, averaging a 17% increase pressured profitability. However, our margins remain within historical average. Additionally, we're strategically increasing some prices to be aligned to the market.
And number 3, the associate base experienced a slight decline, prompting target incentives for recruitment and retention. Offsetting this, we saw an 8% increase in average order size for associate, reflecting higher productivity and continued market share gains. Looking ahead, we are focused on product innovation and enhancing demand forecasting to prevent future sellouts.
Improved pricing structures will also be implemented to bolster market share and sustain momentum. Jafra Mexico capitalized on favorable trends in the beauty market, achieving 8.7% revenue growth in the quarter. This growth was driven by robust performance across all categories. For the first half of 2024, Jafra Mexico posted a 10.1% year-over-year revenue increase, underscoring our effective product strategies and market positioning.
We anticipate sustaining double-digit growth at Jafra over the medium and long-term. In October, we will launch a completely redesigned catalog featuring a cleaner, more emotionally engaging design to boost purchases. Additionally, a more effective merchandising plan with enhanced pricing and promotional strategies will further strengthen our market position in Mexico growing beauty market.
Now, Jafra U.S. achieved year-over-year growth for the first time since the acquisition, with revenue increasing by 1.2% in Mexican pesos and by 4.4% in U.S. dollars, and a 3.7% expansion in the associate base. We expect the expanding associate base to be the primary growth driver, given our current low penetration levels in the U.S. market.
The positive momentum at Jafra U.S. reflects successful market penetration strategies and effective implementation of our business model under a new leadership. This includes a newly designed catalog launched this month, expected to drive additional growth momentum and positively impact the second half of the year.
The rollout of Shopify Plus platform in August will also bolster Jafra's digital presence in the U.S. Additionally, we are revamping our field strategy to empower and equip our sales force with better training and greater motivation. The strategic acquisition of Jafra has been instrumental in diversifying our product portfolio and providing BeFra with exposure to a rapidly growing market.
This move not only mitigate temporary challenges but also enhances the group's resilience to market disruptions, thereby bolstering our ability to sustain growth and making BeFra a more economically resilient company. Our various strategic initiatives underline our commitment to adopting and driving in dynamic market environments. We remain confident in achieving our full-year guidance and look forward to leveraging these initiatives to drive sustained growth and profitability. I will now hand over to Alejandro to provide a detailed review of our financial results.
Thank you, Andres, and good morning, everyone. My remarks will focus on BeFra's second-quarter profitability and cash flow. Please note that all figures and projections that we are discussing today are in Mexican pesos, our functional currency. Additional details can be found in yesterday's earnings press release.
BeFra's consolidated gross margin contracted by 103 basis points due to Betterware's less favorable product mix, higher freight costs, new import taxes, and the peso depreciation experienced in June. It is important to note that periodic volatility in BeFra's quarterly performance is normal in our business. Over the past 10 years, we have consistently maintained an average gross margin of 59%.
We anticipate that our performance during the remainder of the year will compensate for this quarter's results and maintain our historical average by year-end. Free cash flow, defined as operating cash flow minus CapEx decreased by 39% during the quarter due to a 30% year-over-year reduction in operating cash flow, resulting from an unrealized gain in the valuation of the financial hedging instruments and an extended supplier payment period for Jafra Mexico in 2023.
Higher capital expenditures for the new Jafra office in Mexico City and software development also impacted cash flow. Despite the decrease, the free cash flow to EBITDA ratio remained consistent with BeFra's reference historical levels at 70%. The completed sale of the former Jafra Mexico offices in Mexico City or MXN 385.7 million will result in additional MXN 34.1 million in cash flow for the third quarter of 2024, with MXN 350 million to be collected over the next 3 years as follows: MXN 140 million the first year, MXN 125 million the second year, and MXN 50 million the third year.
We also plan to sell another property in Mexico City, previously used as an employee parking lot valued between MXN 40 million and MXN 50 million. All proceeds from these property sales will be allocated to servicing BeFra's outstanding debt. Our financial position continues to strengthen with a 2.1% reduction in total net debt compared to the second quarter of 2023.
We closed the quarter with a net debt-to-EBITDA ratio of 1.8x, down from 2x a year ago, and we are targeting a ratio of at least 1.5x by year-end. Reflecting our financial strength and growth prospects, BeFra's Board of Directors approved a quarterly dividend payment of MXN 250 million, marking our 18th consecutive quarterly dividend since our IPO in March 2020.
We affirm our full-year 2024 guidance, expecting consolidated net revenue growth between 6.1% and 10.7% and EBITDA growth between 6.6% and 13.9%. We remain confident in our ability to capitalize on growth opportunities, generate robust cash flows, and enhance shareholder value over the long term. I will now turn the call back to the operator for any questions. Thank you.
We will now begin the question-and-answer session. [Operator Instructions]. Our first question comes from the line of Cristina Fernandez with Telsey Advisory.
I wanted to ask about the product availability at Betterware. Have you been able to catch up with those products as you move through the third quarter? And how long do you think it will take to get back on track with having the inventory to meet the demand?
This is Andres. So, the temporary sellout was a temporary thing during the second quarter. We launched some innovations that were beyond our expectations. And so, in the second quarter, we had -- we weren't able to fill the demand as we had it, but this is all okay for the rest of the year. It's something that it hasn't impacted us before in any quarter in history, and we arrange everything so that it doesn't impact us from the third quarter on. So, we don't expect this to continue going forward.
That's good to hear. And then also on Betterware on the profitability side, it seems like the higher ocean fleet cost and the import taxes will recur in the back half, if that's correct. So, what gives you confidence that the growth -- the EBITDA margin for Betterware can increase to 26% in the second half versus what you did in the first half?
Yes, it's a very good question because on that, we do expect for the tariff, on the import tariffs and the freight costs to continue during the second semester. So, we did basically 3 things, I would say, to compensate for those higher import taxes and freight costs. Number one is that we negotiated with all of our factories and our suppliers to compensate in price for what is happening. China in general, have experienced lower demand. And so, we were able to negotiate better costs with our suppliers. Additional to that, we also impacted prices in some of the items that we see that -- in which we can impact prices.
So, we did impact prices starting in July and a little bit more in August in order to also compensate for this. And we believe this type of volatility in the past, either from freight costs or from exchange rates, et cetera. So, it's something that we have did before, and we know the elasticity of demand of the product. So, we were able to detect which products could help the price increases. At the same time, final but not least, is we are working on optimizing our expense structure in general as a company, so as to compensate also and maintain our strong EBITDA margins that we have at Betterware.
That's very helpful color. Last question is on Jafra. I guess, Jafra Mexico in particular, can you talk in more detail about the innovation pipeline for the back half? And any specific product categories that will benefit more than others? I know skincare has been an area of focus. But anything else that you can share from a product perspective?
Yes, sure. So, we have a very strong pipeline for the second semester across all the categories, obviously, as we do. Some of them are out already today in the July and now in the August catalog. We have a very strong skincare prospects that we just launched. It's called Jafra Biolab. This is a dermo-cosmetics line in skincare that we think will be pretty impactful, both in the Mexico and U.S. market. And the only thing about skincare is that skincare is a category where it takes a little bit more time normally, plus Biolab will strengthen that category going forward. And apart from that, we are continuing to launch in all categories, fragrances power, and body care.
[Operator Instructions]. That concludes the question-and-answer portion of today's conference call. I would like to turn it back over to management for closing remarks.
Thank you, operator, and thank you once again to everyone for joining today's call. We are thrilled with the ongoing growth of Betterware and Jafra Mexico, and excited to see Jafra U.S. entering a growth phase. With a robust commercial strategy, we have implemented for the second half of the year, we are confident in achieving our full-year guidance set at the beginning of the year. This positions us well to continue our trend of growth and profitability into 2025. We look forward to seeing you on our next earnings call and to meeting you at upcoming investor engagements. Have a great day, everyone. Thank you.
Ladies and gentlemen, this concludes BeFra 's Second Quarter 2024 Earnings Conference Call. We would like to thank you again for your participation. You may now disconnect.