Betterware de Mexico SAPI de CV (BWMX) 2025 Q3 法說會逐字稿

Good afternoon. Thank you for joining us and welcome to Betterware third quarter 2025 earnings conference call. Before we begin, the company would like to remind participants that this call may contain forward-looking statements which are subject to various risks and uncertainties that could cause actual results to differ materially from expectations.

Please consider. Statements alongside the questionary language and safe harbor's statement in today's earnings release as well as the risk factors outlined in Betterware SEC filings. Betterware undertakes no obligation to update any forward-looking statements.

A reconciliation of and the other information regarding non-GAAP financial measures discussed on the call can also be found in the earnings release, as well as the investor section of the company's website. Present on today's call are Belfer's President and Chief Executive Officer Andres Campos and Chief Financial Officer Rodrigo Munoz. I will now like to turn the call over Betterware President and CEO Andres Campos.

Thank you, operator, and good afternoon, everyone.

I am pleased to share our results for the 3rd quarter of 2025, a quarter that once again demonstrates the strength, resilience, and agility of our business model.

Before we begin our review, I would like to note. That we are conducting today's webcast with a slide presentation to help better convey the relevant information that we want to share with you in our quarterly results conferences.

Turning to slide form.

Let me begin by sharing some overall highlights for the quarter.

Despite the softer consumer environment in Mexico and the US, we delivered another quarter of growth, solid profitability, and strong cash generation.

Our operations continue to be executed with discipline, focus, and passion, while driving efficiency and reinforcing the foundations of our long-term strategy.

During the quarter, revenue grew 1.4% year over year and EBITDA grew 22%, with the margin expanding 362 basis points to 21.4% EBITDA.

Our free cash flow conversion remains strong at 77% of EBITDA, reflecting our continued financial discipline and healthy balance sheet.

These results were driven by a strong execution across the group.

Better World Mexico maintained solid profitability. JAR Mexico continued to lead growth.

JaAFA US delivered sequential improvement, and our startup operations in Ecuador and Guatemala exceeded expectations.

It is important to highlight that we have continued to decrease inventories, bring up space for future innovation, and our net leverage ratio decreases sequentially from 1.97 to 1.8 times.

All of these confirms that our strategy is on the right track.

We have built a strong and diverse business group, one that is not only positioned to capture long-term opportunities, but also resilient in the face of short-term challenges.

To talk about our results and progress on slide 5, I am very excited to share with you what we have defined as BEFRA's 5 strategic pillars which will guide our growth and transformation over the next years.

As in the past 4 years we have transformed the BEA Group from bringing one single company in one country to becoming a diverse group of companies with multiple brands and categories and a diverse geographic footprint.

Accordingly, these 5 pillars represent the next stage of BEA's evolution, through which we will capitalize on opportunities that lay ahead of us.

For today's call and future ones, we will discuss our results in this context to explain the progress that we are making across these pillars.

On slide 6, the first pillar is strengthening our leadership in the Mexican market.

It is important to remember that both Better and Jafra hold around 4% market share in each of the home solutions and beauty markets, which means there is still substantial room for growth.

Turning to slide 7, 3rd quarter 2025 sales at Better were decreased 5.3% year over year, as Mexico's software demand has had a more significant impact on discretionary items in particular.

That said, we remain focused on fine tuning our internal strategies to mitigate these effects and to get better we're back on track to consistent growth.

Our focus this quarter was on optimizing pricing, reducing inventories, which fell 17% versus last year's quarter, and refreshing our catalog's merchandizing techniques.

These actions are strengthening the commercial fundamentals and set the stage for future volume recovery.

On slide.

8, which showcased some of Better World's most relevant innovations during the 3rd quarter of 2025.

Innovation remains an important driver for our success, and this slide provides just a few examples.

This quarter, we continue to advance product innovation across all of our major categories, ensuring our portfolio remains at the forefront of evolving customer needs, including stellar new innovations such as the limited edition Barbie Katrina we launched during the quarter with Mattel, which sold out in just 2 weeks.

On slide 9.

Behind better, worse revenue and profitability strength.

We'd also like to point out 3 actions implemented during the quarter that showcase our continuous advancements. First, we reconfigured our catalog, decreasing our total SKU count to 370, including decreasing the products in our promotional portfolio.

This move seeks to make our SKUs more productive and our products more visible with direct improvements in revenue, margins, and inventory management.

Second, BetterWork has launched a new VIP program for its associates, which segments them according to their performance level.

The new program better motivates associates by rewarding top sellers with more benefits.

Finally, we launched an idea section in our proprietary BetterWork plus app, which all associates and distributors can now use to send us product ideas or reviews.

We expect this new feature to have a significant impact on ongoing innovation at Beware.

Turning to slide 10, the Japan Mexico business continues to be one of our key growth engines.

Revenue increased 8% year over year and EBITDA grew 31%, reaching a margin of 24%.

Although we expect a run rate margin of 20 to 21%, this reflects our ability to strengthen profitability while driving growth.

Our consultant base expanded 2% quarter over quarter, while the average order increased by roughly 10%.

We continue to show how our business model proves highly effective when applied to new brands and product categories.

Almost 4 years since its acquisition, Jafra is set to close the year with almost 50% higher revenues than the year before we had acquired it.

Which is particularly relevant when compared to its almost 15 previous years without growth.

Turning to slide.

11.

We highlight several of Jafra's most relevant product innovations for the 3rd quarter.

We launched our first collaboration with Disney, the Evil Queen's Splash Collection, which delivered outstanding consumer engagement and strong sales performance.

We also continue to expand our successful new biolab dermo cosmetic brand with the introduction of our first dark spot removing product line.

Which performed exceptionally well from the outset.

In addition, we completed the revamp of our royal body line featuring updated packaging and a refreshing brand image, resulting in a more than 50% increase in volume compared to prior versions.

Importantly, by year end, we expect to have revamped approximately 80% of Jaffra's portfolio under the new brand image, with full completion anticipated by the first half of 2026.

Finally, on slide 12.

We would like to highlight two relevant operational advancements for Jafra, mainly the success of the new printed purple guide for Mexico, which explains JAFRA's incentive program in a much simpler way than it used to.

Also adopted Better Wor outbound messaging system to associates, which we use to remind them of specific actions they can take to win more customers and orders according to their individual context. We continue to make other advancements to Jaffa's model to make it more modern and effective.

Please.

See slide 13. Our second pillar is regional expansion, which we are executing by havingERA successful business model replicated across the US and Latin American markets.

On the following slide.

Starting with the US, Jafra achieved a 25% of stability versus last year. After a couple of quarters of decline, we see the trajectory of Jafra US continues to improve each quarter.

While the 3rd quarter usually has a seasonal decline in revenue versus second quarter, this year it remains stable.

Demonstrating the strength of the trajectory.

It is important to highlight that in September, the business recorded its strongest month in the last 3 years, including 30% year over year growth in revenue.

With regard to profitability, thefra US's losses reflect extraordinary legal expenses related to cases and issues that have begun before we acquired the company.

Without those expenses, the company operates at a break even point and is getting close to generating profits.

On slide 15, as we've mentioned before, we have implemented three main measures to achieve Jafra's US's positive trajectory. First, the adoption of Shopify Plus platform, which is now complete and an important source of growth for all associates and distributors.

In addition, we implemented a profound change in Jafra US's incentive program, now called the Purple Guide, which we launched in May and which has started to kick in with good results.

Finally, on slide 16, we redesigned the Provo catalog to make it more attractive and yield higher sales conversion rates.

On the next slide You will note that since its launched in May.

Beta Ecuador has exceeded expectations, reaching almost 6,000 active associates, 380 distributors, and revenue growing around 20% month over month.

In Guatemala, sales grew 32% year over year following the appointment of a new management team that has been in place since September of last year.

Encouraged by the promising results in both countries, we are moving forward with plans to launch Better World in Colombia in the beginning of 2026 with the aim of strengthening our presence across Latin America.

We thought it would be important.

To clarify the opportunity that Latin America represents for.

On slide 18, you'll note that the Andean and Central American direct selling markets are an estimated 4.5 billion in total sizes, which is almost as big as Mexico's market.

We are confident that our scalable business model.

And proven playbook.

Will enable us to replicate our success in these markets, representing another significant level of growth for the group in the years to come.

Now I'd like to jump into our 3rd pillar, new brands and categories.

While we will not showcase any specific progress in this quarter, I would like to mention that this pillar will be a major avenue for growth going forward.

We are actively looking for potential acquisitions of new brands that can strengthen BA's position in our markets and enable us to expand into new product categories.

With the huge success of Jaffa's acquisition, which has demonstrated our ability to positively impact acquire brands, we are ready for possible new ones in the future.

Within the same pillar, we are also assessing new categories that could fall under the Better wear and Jafra brand umbrellas.

This includes analyzing opportunities that would strategically broaden our brand portfolio in the coming quarters.

Moving to slide 20.

Our 4th pillar activating digital person to person selling. I am very pleased to announce that last month we formed a new digital transformation team which will help us adapt more quickly to emerging consumer trends and digital capabilities.

Led by Latam digital commerce expert Maria Fernanda Hill, who reports directly to me, the digital transformation team will be crucial in adopting new technologies such as generative AI and agentic AI to further boost our successful person to person model.

More to come on this front in the quarters ahead.

Lastly, On the following slides, our fifth and final pillar, which is one that underpins everything we do.

Financial strength, discipline, and control.

This has been a hallmark of our company throughout the years. It enables us to grow without compromising company health and has also made us resilient in challenging times.

We continue to operate with tight cost management, efficient working capital, and healthy leverage ratios.

Financial discipline isn't just part of our strategy, it's part of our DNA.

With that strategic overview, I'll now turn the call over to Rodrigo Munoz, our CFO, who will walk you through the consolidated financial results for the quarter.

Thank you, Andres, and good afternoon, everyone. For starters, all figures I'll be referring to are in Mexican pesos, and all comparisons are year over year unless otherwise stated.

Additional details are available in our earnings release published earlier in our investor relation website.

Starting on slide 22 in terms of net revenue, we saw growth of 1.4% year over year.

Which means that despite software consumer trends, our business model and strategies remain strong and efficient.

For Evian, who had a great Q3, which saw an increase of over 22% versus last year's Q3.

While year-to-date Evida is still below last year's level due to a difficult first quarter in 25.

We are recovering strongly and expect to achieve 1 to 5% growth over the year.

On the next slide, it is also important to highlight that while maintaining a strong focus on profitability and continuous improvement across both Perver and JaA, we have continued to invest in our international expansion strategy.

Thanks to the solid performance and financial strength of our home market in Mexico, we are in good position to fund these investments.

As Andres mentioned earlier, our international strategy represents a significant growth opportunity for the future and a key pillar in rera's long-term vision.

Turning to July 24, our adjusted net income increased 71% versus third quarter 2024.

This was mainly due to higher operating profits, but there was also a positive impact from lower net interest expenses resulting from lower interest rates in Mexico.

As well as lower provisional income tax for the quarter.

Our income was negatively impacted by FXXs due to the fact that FX this year is recognized in our gross margin.

On the new hedge accounting guidelines.

While last year we had positive financial effects from our hedge positions, which used to be recognized under the EBITDA.

On July 25, you'll note that our free cash flow increased 32.6% year over year.

And it's expected to reach an annual rate of 60% free cash flow to EBITDA by the end of the year.

We also remain consistent in our commitment to generating value for our shareholders through dividends.

And the board proposed a 200 million peso dividend that was approved at our general stockholders meeting held on October 201.

This represents our 23rd consecutive quarter of paying dividends since we became public in 2020.

I'd like to highlight that the 2021 and 2022 dividends were positively impacted by the pandemic demand surge in relation to better, and 2023 was negatively impacted following the post-pandemic decline, as well as the 2022 Jafra acquisition.

As you can see in the last two years, the 2024 and 2025 dividends have resumed, representing between 30 to 40% of EBITDA.

On the following slide, you'll see our total debt and our net debt to ratio demonstrate our ability to manage debt for growth initiatives.

It is important to highlight that Bethran normally operates without debt.

As was the case before we invested in the new campus and in the Jafra acquisition.

Since our debt peaked in the beginning of 2022.

We have reduced total debt from 6,700 million pesos to 5,200 million pesos.

At the end of 3rd quarter of 2025.

During the same period, the net debt to EA ratio fell from 3.1 times to 1.8 times.

We expect to continue to drive down debt as quarters progress, including an estimate to close the year at around 1.6 times.

I will now pass the word back to Andres for final comments.

Thank you, Rodrigo.

Before we open the line for questions, let me conclude with a few remarks on slide 27.

While the external environment, particularly in Mexico and the US remains challenging, our results this quarter confirmed the resilience and viability of BEA's business model.

We are growing profitably, generating cash, spending our footprint in the US and Latin America, and strengthening our brands.

We are executing our strategy with discipline and focus, and the momentum we're building gives us great confidence as we prepare to close 2025 and enter 2026.

Pran today stands as a stronger, more diverse, and well positioned group with great brands, committed teams, and a clear roadmap for long-term growth.

I will now pass the call to our operator regarding any questions you may have.

Thank you.

Thank you. If you would like to ask a question [Operator Instructios] Our first question is from Eric Beder Small Cap Consumer Research, LLC Please proceed.

Good evening. Talk about a few different how are you? I'm good. How are.

You? Good, thank you.

Cool, we'll talk about inventory. So you reduced the inventory by almost I believe about 8% year over year, and the revenue went up, which is a great combination even despite the fact that tariffs probably raised some of the cost of goods sold there. How should we be thinking about the potential inventory targets going forward and will that provide extra free cash flow here to help drive expansion and pay down more debt?

Yeah, thank you Eric. So, I will, pass that question to Rodrigo so that so that he can give you our projection for year end on inventory how it looks like.

Hello Eric. Nice to nice to hear from you. I remember that in Q3 last last year we were up in inventories in in better world and we are aiming for the year to get it down. We do believe that expectation to close 2025 will be around 2,100 to 2,200 pesos in inventory from the 2. 500 pesos that we initiated the year so that would be the aim and the future for inventories in the company.

And just to clarify the exact number, it's 2,100 million where we aim to finish.

Okay, well, that's, that would be impressive.

When you look at A better catalog, I guess there's two things here. One is, how are you taking advantage of the stronger peso in terms of ordering and being able to maximize margins? Obviously we've already done part of that and you know what you would be thinking about is a more what we see now, kind of the focus on returns, lower inventory is kind of what we're going to see going forward. I should be thinking about the ability to drive potentially top-line growth from the Betaware catalog.

Thank you, Eric. That is a very good question.

As you say, we are benefiting now from a strong peso at around 1,850 to 19 pesos per dollar.

And then at the same time also, the freight costs have come down again near the the lowest levels that we have seen. So this is, coming together to benefit better where Mexico, and we are obviously our first line of attack is to pass these benefits on to the consumer to drive more demand, obviously all while protecting the profitability that we aim for, but it obviously allows us to be a a bit more aggressive, with consumer prices.

At these moments where consumption is, sluggish in Mexico, to have these benefits is very good so we can be more aggressive in prices.

And you mentioned, I guess this one I want for one more question about Zafra. So you talked about moving the business into new areas where consumers continually buying them skincare, I mentioned dark spot remover, and that takes time and it also has taken you, some of the changes you've done there. We kind of are we in that kind of Movement there in terms of that and in terms of expansion or is it a preference to do it as direct ownership, joint venture how should we be thinking about, the new expansion like Colombia and the other potential countries in South America as how you want to structure that.

Thank you.

Yeah, thank you, Erick. So your first question, from the Jafra side, still, fragrances for Jaffra Mexico, fragrance is still the main category, but in the last year and the years to come, the other categories was, we expect the other categories to start growing at a faster pace than fragrances and start. Building on that mix, of the revenue.

Now on the second question, about expansion, we are doing the expansion directly ourselves.

100% owned by us and we are hiring management, professional management on site that has experience in the country or the region that lives in the region and we're bringing them on board to manage the expansion to those regions, but it's by the moment and for the foreseeable future 100% owned by us.

Great. Thank you. Good luck for the holidays.

Thank you.

Our next question is from Christina Fernandez with Telsey Advisory Group. Please proceed.

Hi, good afternoon. A couple of questions. I wanted to see if you can talk more about what you're seeing with the Mexican consumer and your categories. It's been a pretty volatile year with a soft first quarter, but then the second quarter, it seemed like the consumer was spending more and now backtrack. So I guess what do you think is driving that and how much are our performance and you're seeing in your businesses versus the overall market.

Yeah, thank you, Cristina and Andres here. So yeah, I mean the Mexican consumer has been pretty sluggish, I would say. We, we're seeing consumption growth lessen and we're seeing consumption trends to come down, as you said.

Exactly now we saw a pretty rough first quarter then it picked up again in the second and then by the end of August, beginning of September, it came down again, so very volatile, no what we're seeing with the Mexican consumer and it's obviously not easy to operate in these conditions and. We believe that this may be temporary, no, as the Mexican economy as a whole, we think stand strong, but obviously these are very uncertain moments and we TRY to operate in these moments with, I would say two things in mind. One is Maintain strong profitability and cash flow, when we attack difficult times we TRY to make sure that our cash flow and profitability is very well positioned and that we remain as a healthy company and the. Second one is keep attacking growth and keep trying to gain market share even in these tough times. So this will be how we will maintain our mindset in the in the coming months and quarters.

And then another question I had was on the. the profitability, pretty strong it'd be that margin we saw this quarter. You mentioned a couple of factors like effects and lower transportation costs that, might be sustainable and continue to see those benefits going forward, but I guess how should we think about this level is, I mean, is it a level you want to stay or you want to reinvest back in the business to drive growth, and were there any one time, benefits that's still this quarter higher?

Yeah, so no, there's no relevant like one time benefits. Nevertheless, we obviously saw a pretty strong gross margin, especially in Jaffra, Mexico. We saw pretty like a 76 plus gross gross margin.

Mexico, which is not the normal margin we have in Jafra, Mexico, the normal growth margin we shoot for is like 74.5 to 75%. So we did have a little bit of a high margin in Jaffra, Mexico, which we do not expect to sustain, but reinvest that to continue driving JaFR's growth. So more or less that's where I would say our mindset would be at.

And then the last question I had was on the. On the technology transfer transformation that you call out, if as you look across the businesses, where do you see the most opportunity to, Embed greater technology or make it more efficient as you look out over the next couple of years.

Yeah, it's a very good question. As we have been investing in technology and in technology advancement for quite a while. It's one of our pillars of growth, and today we're, we are at a, I would say a pretty good spot with our own proprietary app and the new Shopify Plus platform that we launched in all of our businesses and all of that. But technology continues going, so.

We see going forward, with the whole surge of generative AI agentic AI, there will be a lot of transformation that we can use, no, and we want to be, at the forefront of these techno technological advancements.

So, this department, one of the things that's going to be working at is our evolution within AI. We're also looking at the fact that person to person selling is also evolving towards some more and more digital landscape where you see platforms such as social selling starting to explode, life shopping starting to. In the US with TikTok Shop or with others, so you know all these spaces we need to move very fast and be at the forefront of all these technological advancements. So those are some of the ones I would mention and It's become so relevant and so important that that's why we decided to, make a specific department of this and bring a specialist to help us, drive everything we do with the commercial technologies in order to evolve our channel.

Thank you.

Thank you, Cristina.

With no further questions, I would like to turn the conference back over to Andres for closing remarks.

Thank you.

Operator and thank you everyone once again for your trust and continued support. We look forward to updating you on the next quarter.

Thank you.

Thank you. This does conclude today's conference. You may disconnect your lines at this time and thank you for your participation.

Goodbye.