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

Thank you and welcome to BetterWear's second quarter 2021 earnings conference call. On the call today are BetterWear's executive chairman, Louis 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 could cause actual results to differ materially from expectations. Any such statement should be considered in conjunction with the cautionary statement and safe harbor statement and the earnings relief and risk factors discussed in reports filed with the SEC. Betterware assumes no obligations 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 yesterday, as well as the investor section of the company's website. Now, I would like to turn the call over to the company executive chairman, Luis Campos. Please proceed.

Luis Campos, Executive Chairman, Thank you, operator. Good morning, everyone, and thank you for joining us today. I will begin my remarks by providing a summary of our second quarter performance. Then Andres will discuss the progress we have made against our three strategic pillars to increase efficiency and elevate our operating platform in support of the significant growth we see for the company. Diana will then review our financial results and our 2021 outlook. We are pleased to share another quarter of outstanding results with a strong double digit growth, even as we anniversaried the surge in demand in last year's second quarter. I will share some highlights of the quarter and first half of the year that we are particularly proud of, including revenue growth of 81% from Q2 2020 and EBITDA growth of 92% from Q2 2020. For the first half of the year, revenue grew 130% and EBITDA grew 166% from the first half of 2020. We ended the quarter with a strong balance sheet and strong cash flow generation, which gives us the opportunity to invest in our organic growth, evaluate possible M&A opportunities, and expand internationally. after the initial positive results of our operations in Guatemala. We are also pleased to be in a position to invest in our growth while returning value to our shareholders through our ongoing payment of a quarterly dividend. Also, at the end of the first half of the year, I am pleased to announce that BetterWear is the largest active sales force in the direct-to-consumer market in Mexico, and we expect to continue to grow. We also continue to grow our household penetration, moving toward our goal of reaching 40% household penetration by the year 2025. As it relates to our sales force, we are pleased to have ended the second quarter retaining the majority of the distributors and associates we added over the past year. With average distributor growth of 109% over the second quarter of 2020 and average associates increasing 110% over the second quarter of 2020. During the quarter, we completed the consolidation of our sales force and by quarter end, our distributor and associate base returned to growth. With our consolidation complete, we expect to deliver increases in our sales force sequentially going forward as we remain a highly attractive organization for which work in Mexico. During the quarter, we remain focused on executing against our three strategic pillars of product innovation, technology, and business intelligence. Andres will expand on our progress from the second quarter in a moment. Regarding capital allocation, as I mentioned, we remain committed to returning value to shareholders, and our strong balance sheet, including cash and cash equivalence balance of 520 million pesos as of quarter end, afforded us the opportunity to propose an annual dividend of 1,400 million pesos to be paid in four installments, of which the first two were already paid in March and May. We are proposing the payment of the third installment of this dividend, which implies a dividend of 9.38 pesos per share for this quarter. which is subject of approval at the next ordinary general shareholders meeting to be held on August 13, 2021. In summary, we are pleased to finish the first half of the year above our expectations of revenue, EBITDA and our distributors and associates base. As we enter the second half of the year, we are confident about our business prospects. Our strong results year to date that reflect the success of our growth pillars combined with the flexibility and liquidity of our balance sheet has us well positioned to capitalize on M&A and international expansion opportunities that may come our way. Our differentiated business model has driven consistent results to date, and we believe we are poised to capture additional share as we increase our household penetration and our share of wallet over the near and long term. I will now turn the call to Andrés, our Chief Executive Officer, who will highlight our progress on our three growth initiatives, and plans for 2021.

Thank you, Luis, and good morning to everyone. We are very pleased with our strong results in the second quarter and the first half of 2021, and the continued progress we have made towards increasing our two avenues of organic growth. household penetration and share of wallet. This year's challenge was clear. Consolidate our sales force to ensure we have an efficient platform and the process in place to service the significant growth we have achieved over the past year and continue to drive strong rates of sales and earnings growth as people go back to normal. We are proud to have accomplished this objective as we sustained our sales force and activity levels, which means we have successfully consolidated 2020's gain penetration. This confirms a new level on which we can continue to drive penetration and share of wallet going forward. That said, I would like to give more insight on the strength of the strategies that support future growth. To do so, I will elaborate on our three strategic pillars, namely product innovation, technology, and business intelligence. Starting with our first pillar, product innovation, we have two key initiatives. Starting in September 2021, we will increase the number of catalogs per year from nine to 12. Having a monthly catalog will help us increase the purchase frequency from our customers, increase the amount of product innovation, and increase our ability to adapt to seasonality throughout the year. This means more total and new SKUs exposed to the consumer, increasing our consumers' need to purchase better work products. Second, we are reorganizing our product categories by functionality rather than by areas of the home. This new categorization will take our home solution score into a whole new level. On one hand, it increases our innovation capabilities as it expands our product range potential, thus increasing our total market potential. At the same time, it will make it easier for customers to understand our product offering, thus increasing their need to buy. The new categories under this new functional dimension include, number one, home organization and simplicity. Number two, home improvement. Three, home comfort. Four, food preparation and conservation. five, cleaning and hygiene solutions, and six, commuting solutions. Regarding our second pillar, technology, we view our investments in two buckets, commercial initiatives and service initiatives. On the commercial side, we are on track to launch by the end of the year the third version of our proprietary Salesforce app, BetterNet 3.0. This new version will be more user-friendly, which should drive associate and distributor motivation and loyalty. It will also have new features such as better word points calculator and simulator, quick buttons and personalized indicators, timely personalized notifications, among many other new functions. We are also expanding our chatbot capabilities, integrating natural language processing technology. Betty, as we call commercially our bots, has been instrumental to efficiently serve and motivate our Salesforce and will continue to differentiate us from traditional Salesforce management systems. We will also launch the second version of our innovation platform, Pipeline 2.0, later this year. This new platform will make a key difference as we embark into a new era of more and faster innovation with our expansion to 12 catalogs per year. Finally, we continue to roll out and improve our recently launched e-commerce platform. A recent study shows that while e-commerce is growing fast in Mexico, its penetration is still very low in the home solutions category, representing less than 1% of the total market. This confirms we started this front on time, giving us the opportunity to lead the growth of e-commerce in our category. With this in mind, we expect the sales from the platform to be increasingly relevant over the next three to five years. On the service side of our technology initiatives, after some delays due to the worldwide shortage of chips and semiconductors, our new pick and pack tower will start operations in the fourth quarter of this year. This new tower will be almost 100% automated and will double our pick and pack in salt capacity. Regarding capacity expansion, we have reached the decision to open a new distribution center near Mexico City. This new distribution center will almost double our capacity as we continue to scale the business. It will also reduce delivery times for central and southern regions, which represent approximately 40% of the total market. Finally, it will give us resiliency by having two distribution centers instead of one. We will work towards starting operations during the first quarter of 2022, and it is worth noting that we will operate this new distribution center in a rented warehouse. Thus, it will not lead to a significant increase in capex. To improve our service, We have also introduced driving, our new technology that provides real-time shipment updates to our distributors, providing a two to three hour window of order arrival. This new technology has been received well by our distributors, who are now able to free up time during their days that they receive the orders. Moving on to our third pillar, business intelligence. Our BI team is constantly analyzing data from 2.4 terabyte database generated from 1.3 million active associates and distributors and more than 6 million associates and distributors historically to make the best decisions focused on increasing our household penetration and share of wallet. They analyze more than 430,000 weekly transactions and 4 million weekly units sold in more than 5 million households and 25,000 neighborhoods. In terms of household penetration, we received a recent study noting our household penetration was approximately 24% as of May 2021, up from our estimated 20% at the end of fiscal 2020. We remain confident that we will increase our household penetration to 40% in the next five years as we capitalize on our category leadership positioning in Mexico and strong associate and distributor base. To achieve this objective, our business intelligence team has segmented the country in more than 63,000 neighborhoods and estimated we have presence in approximately 40% of those neighborhoods, which indicates we have good room to expand our neighborhood penetration and a clear roadmap on how to do it. Furthermore, based on what I have already mentioned regarding our three strategic pillars, we feel confident on our strategies, which have us poised for sustainable growth in the years to come. after a first half of 2021 of consolidation and setting the stage to revamp growth in household penetration and share of wallet. We are confident in our outlook, which is reflected in our increased guidance. I will now turn the call over to Diana to review our second quarter financial results.