Betterware de México, S.A.P.I. de C.V. Q3 FY2025 earnings call

Management Statement and Operational Highlights

• Overall Highlights: Revenue grew 1.4% YOY, EBITDA grew 22%, margin expanded 362bps to 21.4%, free cash flow conversion 77% of EBITDA, net leverage ratio decreased to 1.8x.
• Strategic Pillars:
  • Strengthening Mexican market leadership: Both Betterware and Jafra have room for growth in home solutions and beauty markets.
  • Regional expansion: Replicating business model in U.S. and Latin America; Jafra U.S. stabilized, Betterware Ecuador/Guatemala showed strong growth, plan to launch in Colombia in 2026.
  • New brands/categories: Actively seeking acquisitions and assessing new categories under existing brands.
  • Activating digital person-to-person selling: Formed a digital transformation team led by Maria Fernanda Hill to leverage generative AI and agentic AI.
  • Financial strength/discipline: Tight cost management, efficient working capital, and healthy leverage ratios.
• Operational Actions: Betterware Mexico optimized pricing and inventory, Jafra Mexico revamped portfolio, Jafra U.S. adopted Shopify Plus and new incentive program, Ecuador/Guatemala showed growth, digital team formed for tech advancements.

Segment Performance

• Betterware Mexico: Sales decreased 5.3% year-over-year. Optimized pricing, reduced inventories by 17%, reconfigured catalog to 370 SKUs, launched a VIP program for associates, and an idea section in the Betterware Plus app. Contributed to overall operations with disciplined execution.
• Jafra Mexico: Revenue increased 8% year-over-year, EBITDA grew 31% to a 24% margin. Consultant base expanded 2% quarter-over-quarter, average order up ~10%. Launched Disney collaboration, BioLab dermo-cosmetic brand, and revamped Royal Body line.
• Jafra U.S.: Achieved stability after prior declines, with September being the strongest month in 3 years (30% YOY revenue growth). Operates at breakeven without extraordinary legal expenses.
• Betterware Ecuador: Exceeded expectations with ~6,000 active associates, 380 distributors, and ~20% month-over-month revenue growth.
• Betterware Guatemala: Sales grew 32% year-over-year following a new management team appointment.

Guidance

• Revenue grew 1.4% YOY, EBITDA grew 22%, margin expanded to 21.4%, free cash flow conversion 77% of EBITDA.
• Expect to achieve 1%-5% EBITDA growth for the year.
• Aim to close 2025 with inventory around MXN 2,100-2,200 million.
• Net leverage ratio expected to close the year at ~1.6x.

Risks

• Softer consumer environment in Mexico and the U.S. impacting sales.
• Extraordinary legal expenses in Jafra U.S. affecting profitability.
• Volatile Mexican consumer trends leading to uncertain sales trajectories.

Question and Answer

Q: Talk about inventory targets and free cash flow.

A: Rodrigo mentioned aiming to close 2025 with inventory around MXN 2,100-2,200 million from MXN 2,500 at the start of the year, and free cash flow expected to reach 60% of EBITDA by year-end.

Q: Betterware catalog and peso impact.

A: Benefiting from a strong peso (~MXN 18.50-MXN 19 per dollar) and lower freight costs, using these to be more aggressive in consumer prices while protecting profitability.

Q: Jafra expansion and technology.

A: Jafra categories other than fragrances are expected to grow faster, expansion in Latin America is 100% owned, and focus on generative AI, agentic AI, social selling, and live shopping for digital transformation.

Q: Mexican consumer volatility and EBITDA margin.

A: Mexican consumer is volatile, EBITDA margin had a high in Jafra Mexico but expected to reinvest, margin not expected to sustain at that level.

Q: Technology transformation opportunity.

A: Focus on leveraging generative AI, agentic AI, and staying ahead in digital trends like social selling and live shopping to evolve the channel