Thank you, and welcome to Betterware's First Quarter 2021 Earnings Conference Call. With me on the call today are Betterware's Executive Chairman, Luis Campos Chief Executive Officer, Andres Campos and Chief Financial Officer, Diana Jean. Before we get started, I would like to remind you that this call will include forward looking 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 on the Safe Harbor statement in the earnings release and risk factors discussed in their reports filed with the SEC. Betterware 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 company's Executive Chairman, 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 Q1 2021. Then Andres will discuss the progress we have made against our strategic pillars, increase efficiency and elevate our operating platform in support of the continued growth will see for the company. Liana will then review our financial results and our 2021 outlook.
We began the year strongly reporting Q1 results that reflect our ongoing ability to capitalize on the power of our operating platform, Advantages business model, commercial and technological strategies and compelling product innovation, which has led us to deliver consistent and Sustainable Growth. To this end, for nearly 2 decades, We have recorded robust sales and earnings growth. We expect a successful implementation of our strategic initiatives to enable us to continue our favorable performance in the near and long term. As it relates to the Q1, the period was highlighted by triple digit increases in revenue, EBITDA and net income, robust cash flow and significant accomplishments toward our strategy. The increase in our revenue was fueled by outstanding growth from our organic core business.
Our distributor and associate growth was strong year over year with significant increases in new distributors and associates and normal business attrition that is typical for the Q1. We expect the rate of expansion in distributors and associates to accelerate meaningfully as we begin Q2. The quarter included several accomplishments that we expect will add to our long term growth potential by leveraging our strengths and advantages. To that end, The Q1 saw our largest marketing campaign. The launch of the new web platform that seamlessly and efficiently allows consumers to purchase our products online.
Significant growth in revenue and margin in Guatemala and the acquisition of 60% of Glucom, a mobile virtual network operator and software developer, giving us the ability to expand our reach in mobile products and service sales. In terms of capital allocation, we remain committed to returning value to shareholders and our strong balance sheet, including cash and cash equivalents balance of MXN565 1,000,000 as of quarter end afforded us the opportunity to propose an annual dividend for ARS 1400,000,000 to be paid in 4 installments, of which the first was already paid in March. This implies a dividend of COP 0.57 per share for this quarter, which is subject of approval at the next ordinary General Shareholders Meeting to be held on May 12, 2021. In summary, We are very pleased with the very strong start to the year and Volvo's underlying momentum of the business. Our Q1 results are reflective of the strength and consistency of our business model.
Continued execution against our therapeutic dealers and continued demand of our innovative products. As we leverage the strength of our differentiated core business in combination with exciting new business initiatives, including Guracom, Guatemala Expansion, Business Intelligence and Technology Investments among others. We believe we are poised to continue to drive market share gains in the near and long term. I will turn now the call to Andres, our Chief Executive Officer, who will highlight our progress in our 4 growth initiatives and plans for 2021. Thank you, Luis, and good morning to everyone.
As Luis said, we are very pleased with our Q1 results. We delivered strong financial performance and continue to execute against our key growth initiatives. I will now discuss the progress made in the Q1 of 2021 on the 4 strategic pillars starting with market penetration. In the Q1, we saw continued growth of our household penetration due to our increase in distributors and associates' network. Given our strong competitive positioning as the category leader in Mexico and deep expertise that drives customer loyalty.
We believe we will continue to increase our market share over time with opportunity to double our market penetration from 20% to 40% in the next 5 years. During the Q1, We focus our commercial strategies towards consolidating and increasing the efficiency of our sales force. This activity was highly productive for us, driving an 11% increase in sales versus Q4 on a slight increase in our associates and distributors sales force. With this work behind us, We are now accelerating our sales force expansion and expect this to result in stronger rates of the future and associated growth going forward and assist us to penetrate the vast number of households we do not yet reach. Turning to our 2nd strategic pillar, which is category expansion.
In the Q1, We launched 2 catalogs that included the introduction of 50 new products, which were well received by our customers as reflected in our Q1 results. We have some exciting new product launches in the pipeline for 2021 and are on track to continue the expansion of our recently launched new category of home renovation solutions before the end of Q2 of 2021. This new category will provide low cost solutions for customers to through the aesthetics of their homes. This combined with other category expansion opportunities we have identified provides continued opportunity for us to increase our customers' share of wallet from its current 20%. We will share additional new category expansion plans throughout the year as we have news to share.
Next, Business Intelligence and Technology Investments. Our Business Intelligence initiatives and technology investments are aimed and improving the efficiency and elevate our operating platform of the overall business as we continue to scale. To that end, As previously announced, we successfully implemented Power BI, one of the most advanced platforms of data visualization available in the market. We have been pleased with the initial research of Power BI, which allows chose to optimize the day to day monitoring of the business and transform millions of data points into business strategies. We also are advancing our usage of 9, which is our artificial intelligence and Data Science Platform, which we are beginning to leverage across the business.
In an effort to improve our forecasting methodologies, we continue to work with Bain and Company to help us optimize our service and inventory levels, in turn, allocating capital more efficiently. We have seen initial positive reactions to our new e commerce platform so far. However, we expect to begin adding to our growth in the second half of twenty twenty one and become increasingly material to the business over the next 3 to 4 years. The new transactional site allows greater accessibility and ease of purchase to consumers by connecting them directly with Betterware distributors and associates. We are on track to launch our improved version of our proprietary sales force app for distributors and associates, named BetterNet 3.0 app along with the 2.0 version of pipeline, our proprietary flow accumulation platform all later this year.
In conjunction with our new Campos, we have begun consolidating all technologies, which we expect will yield productivity gains in our day to day operations. Last, with respect to our last pillar geographic expansion. Following our successful pilot test in Guatemala, which generated consistent sales, EBITDA, distribute and associate growth. We continued our entry into the region in the Q1. The early results of our expansion have been positive with sales growth of 3 82% year on year and a significant EBITDA margin expansion to 24.6% in the Q1, proving that we can replicate our business model in other geographies.
We continue to target international expansion to Colombia and Peru over the next 2 to 3 years through both organic and non organic growth as we assess and MA opportunities in these countries. In terms of new campus that opened in the Q4 in and La Reynard Jalisco. We officially moved all of our collaborators to the new campus at the beginning of March. With the move completed, we expect to begin to benefit from operational efficiencies from consolidation of all warehousing and distribution processes, optimization of stage usage and inventory management efficiency backed by new technology. Additionally, the consolidation allows for increased collaboration and therefore quicker decision making across our organization.
We continue to evaluate our options regarding capacity Tranchan, I expect to have a decision by the end of Q2 this year. We will keep you posted as we have updates to share. As Luis mentioned, we launched our largest marketing campaign to date across Mexico early in the Q1 of January 2015. We are very pleased with initial results and have attracted new customers as the campaign continues to drive brand awareness and showcase our how consumers can benefit from our unique household product solutions. Finally, as you are aware, On March 22, 2021, we announced that we acquired 60% of Vodacom, a mobile virtual network operator and Communications Software Development with an enterprise value of MXN 75,000,000 or approximately $3,500,000 With this acquisition, we are well positioned to leverage our commercial strength and brand awareness to grow our business in 3 new product categories, which are number 1, mobile and home Internet.
The MVNO market is still in its infancy in Mexico with only 2% share versus 20 plus percent share in more mature markets. The creation of Altam as a wholesaler in Mexico enabled BluCom to enter this market and this combined with our commercial and distribution strength has us poised to develop the market. 2nd, smart home. We plan to extend our home solutions offering into home tech solutions, given its natural extension and that technology is becoming more and more important for daily health functions. And 3rd, home applications.
Households are in need of home service solutions that can be solved direct to us more than and we want to be part of this solution. We believe we are uniquely suited to grow in these technology categories for the home, given that we possess a bad base of distributors and associates and customers that know us and are loyal to our business.
As such,
we expect a high return on investment given our low customer acquisition costs. The first phase of our service offering will begin in the Q3 of this year with a second phase to follow late 2022 and finally a 3rd phase coming in late 2023. In conclusion, I am very pleased with the progress made on many fronts operationally in this Q1 as our team continues to execute against our 4 strategic priorities of market penetration, categories function Business Intelligence and Technology Investments and Geographic Expansion. We are pleased to deliver against these strategies, while also making disciplined investments across the business and returning value to shareholders. As we look to the remainder of the year, we believe we are well positioned to continue building on our success to date.
I will now turn the call over to Guillermo to review our Q1 financial results.
Thank you, Andres. Good morning, everyone. I would like to take this time to review our Q1 2021 results. I will then share perspective on how we are approaching the remainder of 2021. Please keep in mind that the currency I will refer to when reviewing our results and guidance is the Mexican peso, which leads our functional and reporting competencies.
I will provide highlights of our results, which I detailed purely in our 6 ks by yesterday. For the Q1, Total net revenues increased 205 percent to $2,902,000,000 from 9 $152,000,000 in the prior year period. Gross profit increased 2 12% to dollars 1668,000,000 As a percent of sales, gross margin increased a 138 basis points to 57.5 percent, driven mainly by of the Mexican peso compared to the U. S. Dollar.
Selling expenses as a percent of sales declined to 10.2% of sales compared to 14.2% of sales in the year ago period, driven by leverage from strong sales growth. Tire sales, gross margin expansion and selling expenses leverage to a 296% increase in operating income to $908,000,000 from $329,000,000 Operating margin as a percent of sales increased 7 21 basis points to 31.3%. EBITDA for the Q1 of 2021 increased 2.87% year over year to $922,000,000 compared to $238,000,000 in the prior year and EBITDA margin expands 679 basis points to 31.8 percent due to the increase in operational leverage. Who reported $15,800,000 in adjusted non IFRS earnings per share. Now turning to the balance sheet.
As of March 31, 2021, we had BRL565,000,000 in cash and cash equivalents, a 103% increase versus the prior year period. Inventory increased 2 85% year over year with the increase in support of our sales expectations and compared to the Q1 last, when inventory was initially low driven by the initial surge in sales, driven by COVID-nineteen and the Chairman of Chinese New Year. At year end, our leverage ratio of net debt to EBITDA was 0.01x, down from 0.2x at the end of the Q1 of fiscal 2020. In the Q1, we had $177,000,000 of capital expenditures, of which $151,000,000 were invested in the new Campos and $9,000,000 in extraordinary technology investments. We continue to expect CapEx in 2021 to be $460,000,000 which includes additional equipment for our new campus, technology and other investments.
The new campus and extraordinary technology investment will represent approximately 81% of total traffic, which is down from 92% in 2020 and 88% in 2019. In terms of our outlook for 2021, As disclosed in our press release, we are reiterating our guidance of revenue for 2021 to be in the range of $10,100,000,000 to $11,100,000,000 and expect EBITDA to be in the range of $3,000,000 to $3,300,000,000 compared to $2,564,000,000 in 2020 and EBITDA margin to be approximately 29.7% versus 29.8% in 2020. We believe our strong XR to Q1 has us positioned to achieve results closer to the high end of our annual guidance range for both net revenue and EBITDA. Over the long term, we expect our stated growth strategy supported by a strong operating platform and San Antonio Tim will enable our company to deliver consistent growth in sales and EBITDA in Q3. I will now turn the call to the operator and we will take any questions you may have.
Thank you. We will now be conducting a question and answer One moment please while
we poll for questions.
Thank you. Our first question comes from Eric Beder with SBC Research. Please proceed with your question.
Good morning. Congratulations on a solid start to the year.
Hi, Eric. Hi. Hello, Eric.
I'm good. When you look at shipping and the shipping costs last year, I know you had some use of airfreight. I know you mentioned in Q1 that the shipping has been a little bit affected by COVID. How are you seeing the shipping kind of normalize? And how can you take advantage of that this year?
Eric, hi, this is Andres. Shipping has been normalizing. After the Chinese New Year, we have seen it normalizing and we expect it to remain normalized for the rest of the year.
Yes. We do not expect extraordinary age rates this year, okay, should be normal from Q2 to the end of the year, Not extraordinary.
And what are you guys seeing in terms of costs and other pieces. And what do you think is your ability if you have to raise prices on goods going forward?
Yes. So we are keeping a close look on costs, But we do not expect any impact from this. If there were to be increases, We are able to drive prices up in the coming catalogs. But I reiterate, we don't expect any significant impacts.
Great. And the last question, what are you seeing differently from your customers who are coming online to byproducts.
Sorry, is your question what are we seeing different? I'm sorry.
You rolled out the new online ordering system.
Yes. I think it's too early, Eric. As we were mentioning, we really expect the new online to become significant by the end of the year and the next year. So I think at the moment, Data points are twin significant to drive any conclusions.
Okay. Well, guys, congratulations again and good luck for the rest of the year.
Thank you. Thank you, Rick.
Thank you. Our next question comes from Joe Feldman with Telsey Advisory Group. Please proceed with your question.
Great. Thanks. Hi, guys. Congrats on the great quarter. Wanted to ask what do you think is driving the acceleration In the sales,
you seem to have picked up quite
a few new associates and distributors. And Just wondering if there's something going on in Mexico with the economy that we should be aware of or to come to you guys.
Yes. Not really, John Joe. In fact, We feel confident that economy in Mexico will thus be disruptive for our business. And I think In terms of economic growth this year in Mexico, This is going to be between 4.5% 5%, which is what we expect. Consumption It remains really strong in Mexico.
We believe that it will Main and strong for the rest of the year. What we are confirming is that this mentality, This set of mind in the people regarding organization, cleanliness, etcetera, is continuing, okay, which is something that we believe we will see in the years to come. And really the challenge for us is continue with a good streaming of Very good new products and new product categories. I think this is going to be the challenge and we are going to accomplish our objectives in that respect.
Got it. That's helpful. Thank you. And then another question I had was, I guess, what So I think that you've started to sell and when should we see the room come and How will that flow in? Like will that be the second half of this year?
Or is that next year?
We didn't hear very well because it was like Some interruptions. There are interruptions. Can you repeat the question?
I apologize. Yes, no, I was asking about new products and when the new how the new products that you introduced are selling And when you'll start to have more technology in the product, like when will we see those new products come in
Yes. I think we are in line with our expectations regarding the performance of the new products and the new category that we are going to reinforce in the Q2 this rental house renovation. And Regarding the technology products, it will take time. As we speak In the a few minutes ago, we will begin with of mobile voice and data and in Q3 of this year. And then probably by the end of last year, we would go to the 2nd stage.
By the end of 2020 3, we will go to the 3rd stage as we mentioned before, okay? Then our first objective To give all of our sales force, distributors and associates the opportunity to connect to Betterment Connect, older mobile phones. And then
This will allow us to
go into the second stage sometime in the second half of next year.
Got it. That's helpful. Thank you. And then I guess the last one for me. I wanted to ask with the new customers you're seeing, are they Buying different things or is it pretty similar to what the traditional customer buys?
The pattern of consumption has not changed, okay? We see the same pattern, but probably a little bit more intensive because of this new set of mind, okay? Both the taste of our sales in terms of product categories, etcetera, remain the same.
Got it. Thank you. That's great. Good luck with this quarter guys.
Thank you, Joe.
Thank you, Joe.
Thank you. There are no further questions at this time. I would like to turn the floor back over to management for any closing comments.
Well, thank you everyone for joining us today. We look forward to speaking with you when we report our Q2 results and meeting with many of you at upcoming investor conferences. Thank you. Have a good day.
This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.