Betterware de Mexico, S.A.P.I. de C.V.

Thank you, and welcome to BetterWear's fourth quarter and fiscal year 2020 earnings conference call. With me on the call today are BetterWear's Executive Chairman, Luis Campos, Chief Executive Officer, Andres Campos, and Chief Financial Officer, Diana Jones. Before we get started, I would like to remind you that this call will include forward-looking statements, which are subject to various risks and uncertainties, that can cause actual results to differ materially from expectations. Any such statement should be considered in conjunction with the cautionary statements and the safe harbor statement in the earnings release and risk factors discussed in reports filed with the SEC. FedAware assumes no obligation to update any of these forward-looking statements or information. A reconciliation and other information regarding non-GAAP financial measures discussed on the call can be found in the earnings release issued earlier today, as well as the investors section of our website. Now, I would like to turn the call over to the company's Executive Chairman, Mr. Luis Campos. Luis Campos Thank you, Operator.

Good morning, everyone, and thank you for joining us today. I will begin my remarks by providing a summary of our performance for the fourth quarter and 2020. In address, we discuss the progress we have made against our strategic pillars to increase efficiency and elevate our operating platforms. in support for the continued growth we see for the company. Diana will then review our financial results and our fiscal 2021 outlook. Before turning to our results, I want to start by thanking the entire Better Work team for their hard work and contributions all year. I am so proud of all that they accomplished in 2020 amidst the challenges presented by the global pandemic. Their hard work and determination in a difficult operating environment allowed us to maintain continuity of our operations and meet our customers' changing needs. The COVID pandemic demonstrated even more clearly the strength of our people, business model, and operating platform. Indeed, we delivered record results and made significant progress on our strategic growth pillars. And while the pandemic caused families to change the budget preferences which benefited us, Our strength in the fourth quarter was achieved with families resuming more normal lifestyles in the markets we serve. And we remain confident in our ability to continue double digit rates of growth in 2021. Turning to a review of the full year. For the full year, we achieved record sales and EBITDA growth, exceeding the increased guidance that we provided last November. The year marked significant milestones for better work, including growing revenues over 135% to 7.3 billion pesos, and EBITDA over 154% to 2.16 billion pesos, achieving record annual EBITDA margin of 29.8%. This growth was driven by 180% increase in distributors and 195% increase in associates during 2020. as we leverage our technology that allows our distributors and associates to conduct business remotely. As of year end, we have more than 59.7 thousand distributors and 1.23 million associates, another record achievement. We are confident in our ability in continuing to grow our distributor and associate network and expect our larger and stronger team will drive our business forward in the near and long term. Equally exciting for our company is that we entered the public markets trading on the NASDAQ exchange in March 2020. and we launched our new web marketing platform in December 2020. In addition, we made significant strides to strengthen our financial health and positioning during the year. We reduced our leverage ratio of net debt to adjusted EBITDA to minus 0.01, from 0.5 at the end of 2019 and increased our liquidity to 650 million pesos at year end. Turning to our four-quarter results, we had an outstanding finish to a strong year of growth for our company. record sales growth of 229% and an EBITDA increase of 254% year-over-year. While our results continue to benefit in part from COVID as consumers spend more time at home, the continued momentum from the first three quarters into the final quarter of the year especially into December, is a testament to the strength of our business and the significant progress we have made against our four strategic pillars. Finally, returning value to shareholders is a top capital allocation priority for us. And we, again, have proposed an annual dividend of one point to be paid in four installments. This implies a dividend of 9.57 pesos per share for this quarter. This dividend was approved in the ordinary general shareholders meeting held on February 18, 2021. So in summary, we are very pleased with a strong end to the year and the underlying momentum of the business. Despite the challenges the pandemic presented, our distributors and associates successfully conducted business from home and capitalized on the increased demand of our products. At the same time, we remain focused on our strategic pillars, invested in key areas of the business to improve our efficiency and made a stride to strengthen our financial position. As we begin 2021, we believe we are poised for continued growth, including double-digit sales and profit growth, which Diana will discuss in more detail. I will now turn the call to Andrés, our Chief Executive Officer, who will highlight our progress on our four growth initiatives and plans for 2021.

Thank you, Luis, and good morning to everyone. Before I review our strategic initiatives, I would like to also personally thank our team for their grit and determination this year as we navigated a challenging environment. Their continued dedication to our customers and our brand drove results for the year that exceeded our expectations from a sales and profitability perspective. In addition to the record growth for both the fourth quarter and full fiscal year. I will now discuss the progress made in 2020 on the four strategic pillars, as well as our plans to advance these priorities in 2021. As a reminder, these pillars are centered on market penetration, category expansion, business intelligence and technology investments, and geographic expansion. These initiatives, along with our web marketing and the new campus, which I will discuss momentarily, are expected to support our future growth and increase efficiency. Starting with market penetration. In 2020, we significantly increased our household penetration to 20%, driven by our deliberate actions to drive growth with high-impact innovation combined with the increased demand for household and cleaning products as a result of the COVID-19 pandemic. This growth is a testament to our strong competitive positioning as the category leader in Mexico and the deep expertise that drives customer loyalty. As we look ahead, we believe we can continue to increase our market share and doubled our household penetration from 20% to 40% in the next five years as we focus on innovative products that continue to resonate with our customer base. Our second strategic pillar is category expansion. In the fourth quarter, we launched three catalogs and introduced 98 new products. customers continue to be receptive to our new products, and we are excited about our product launches for 2021. Before the end of the second quarter of 2021, we will introduce our new category of home renovation solutions that will let our customers improve their homes at low costs, including products such as curtains and tapestries. This new category will allow us to increase our share of wallets of our customers, which we currently estimate to be at 20%. In the coming quarters, we will announce more new categories that we plan to enter to achieve our growth goals. Next, business intelligence and technology investments. Within business intelligence, we started using Power BI, one of the most advanced platforms of data visualization available in the market. This tool allows us to optimize day-to-day monitoring of the business and transform millions of data points into business strategies. We also made great strides using NIME, our artificial intelligence and data science platform. Additionally, we started working together with Bain & Company to improve our forecasting methodologies. This project will help us optimize our service and inventory levels, allowing us to allocate capital in a more efficient way. Within technology, we launched our new web marketing platform in December 2020. Although it's still early, new customer sales have been increasing weekly since the launch. We also consolidated our new WMS platform, Blue Younger, and launched our new AI-enabled bot. This year, we plan to launch our 3.0 version of our proprietary Salesforce app, BetterNet, and develop strong natural language processing capabilities with our bots. We also plan to launch a 2.0 version of Pipeline, our proprietary product innovation platform. Finally, we will consolidate all technologies within our new campus, which should yield productivity gains in our day-to-day operations. Our last pillar is geographic expansion. In 2020, we ran a successful pilot test in Guatemala, where we saw consistent sales, editor, distributor, and associate growth. While Guatemala is a relatively small market, with its total market representing only 5% of Mexico's market size, our pilot test proved that we can successfully replicate our business model in other geographies. we see continued opportunity to expand into other countries, mainly Colombia and Peru. In the coming years, both organic and inorganic growth as we assess M&A opportunities in these countries. Going deeper into our web marketing, we launched our new and improved transactional website, betterwork.com, in the fourth quarter. We are very pleased with the early results of our new site, which acts as a tool for distributors and associates to grow their sales and earnings by continuing to reach additional customers. They are able to do this by, number one, connecting new customers based on location to a distributor if they don't already have an existing relationship with one, and two, The new platform allows the distributors and associates to share a personal link that will ultimately assign them any purchase completed through the link. It is relevant to highlight that penetration of e-commerce in Mexico remains low, representing less than 6% of total retail transactions, but is rapidly increasing. With this new platform, we are ready to offer customers the most convenient way for them to buy our products, while giving our distributors and associates the opportunity to increase their earnings. Touching briefly on our new campus. The new campus opened in the fourth quarter in Guadalajara, Jalisco. Currently, almost all of our operations staff which is approximately 70% of our collaborators, is working from there, and the rest of our people will move by the beginning of March 2021. This will give us operational efficiency, including consolidation of all warehousing and distribution processes, optimization of space usage and inventory management efficiency backed by new technology, and allow increased collaboration and therefore quicker decision making across our organization. After the triple digit growth in volume during 2020, the new campus will reach full capacity sooner than expected. We decided to keep a 24,000 square meter rented warehouse to complement our capacity. And we are currently analyzing together with Bain & Company, the most efficient way to expand our capacity to support our growth. This could mean an expansion of our campus or a new distribution center located near Mexico City. We will keep you posted on any new developments in this regard. Lastly, on January 15, we launched our biggest marketing campaign to date. This campaign includes paid and open TV video advertisements, radio commercials, out-of-home media and social content, which all highlight BetterWars' vast array of easy-to-use and accessible products for organization and practicality. We are excited to share our values and product solutions for the home with more families and individuals across Mexico through these advertisements. Overall, we expect the new marketing campaign to expand our customer base as we showcase how customers can benefit from our line of products. So, overall, I am very pleased with the significant progress made in 2020 against our key strategies. As we begin 2021, we enter the new year from a position of strength and remain confident in our ability to drive strong double-digit sales and profit growth. Our priorities remain the same. We are focused on executing against our four growth pillars while also continuing to invest in key areas of the business and returning value to shareholders to our quarterly dividend program. Similar to 2020, we will continue to take a strategic approach to expand our household penetration and our share of wallets as we focus on further strengthening our marketing position in 2021 and beyond. I will now turn the call over to Diana to review our fourth quarter and 2020 financial results.