BeFra 3Q26 Conference Call - BETTERWARE DE MEXICO SAPI DE CV

Financial Performance:

• Consolidated revenue grew 43.1% year-over-year to 4,832 million pesos; organic revenue (Betterware and Jafra) increased 2.3%.
• Consolidated EBITDA rose 39.6% to 1,008 million pesos with a margin of 20.9% (down from 21.4% prior year).
• Net income surged 24.2% to 390 million pesos, impacted by a higher effective tax rate expected to normalize to the mid-30s by year-end.
• Free cash flow reached 1,059 million pesos (105% of EBITDA); year-to-date FCF was 1,871 million pesos (78% EBITDA conversion).
• Net debt to trailing 12-month EBITDA improved to 1.65x following 431 million pesos in debt reduction; interest coverage ratio reached 6.91x.
• Cash conversion cycle improved significantly to 50 days from 78 days a year ago.
• Average associate base grew 23.7% YoY to 1.46 million; organic associate base remained stable.

Guidance and Future Outlook:

• Organic revenue growth guidance for the full year narrowed to 4%–5%.
• Post-acquisition net revenue growth guidance raised to 24%–26%.
• Full-year EBITDA margin expected to remain at 19%, accounting for growth investments at Tupperware and integration costs.
• Management projects mid-single-digit organic growth for Jafra and high-single-digit growth for Betterware in Q4 2026.
• Long-term focus remains on leveraging the person-to-person commercialization model and disciplined financial management to drive future expansion.

Business Segments and Product Lines:

• Betterware: Mexico revenue up 8.5% YoY; Latin America continues growth trajectory, with recent openings in Ecuador and Colombia.
• Jafra: Mexico revenue declined 2.8% YoY due to World Cup-related consumer shifts and summer holidays; CEO Andres Campos assumed interim Managing Director role to accelerate turnaround. Jafra U.S. posted its second consecutive EBITDA-positive quarter.
• Tupperware: Direct selling revenue grew 14% globally; Mexico direct sales surged 23% YoY, while Brazil decline moderated to 3.3%.
• Strategic Shifts: Tupperware is discontinuing business-to-business sales to refocus on the person-to-person channel.
• Innovation & Tech: Plans to launch "Tupperware Plus" app, "Jafra Plus" app (expected early next year), and assemble a dedicated innovation team including former global R&D director David Kusuma.
• Geographic Mix: Mexico accounted for 87.5% of revenue; Latin America (excluding Mexico) rose to 8.2%, driven by Tupperware's Brazil operations.

Market and Competitive Landscape:

• Market Trends: Consumer attention shifted due to the World Cup, negatively impacting summer sales across segments, particularly Jafra.
• Product Strategy: Tupperware is expanding beyond plastic into glass, stainless steel, and ceramics for the Latin American market, including kitchen utensils and appliances, adapting products to regional cooking needs rather than replicating US/EU designs.
• Competitive Positioning: Management emphasizes the strength of the expanded three-brand portfolio in diversifying revenue streams and mitigating single-brand risks.

Risks and Challenges:

• Supply Chain Pressures: Higher freight costs, exacerbated by geopolitical issues in the Hormuz region, negatively impacted Betterware's growth margins.
• Execution Risks: Inconsistent managerial decisions and delayed operational strategies at Jafra Mexico contributed to revenue shortfall; CEO intervention aims to correct this.
• One-Time Costs: Acquisition-related extraordinary expenses totaled 47 million pesos for the quarter, primarily booked at the consolidated holding level.
• Tax Rate Volatility: Current quarter's effective tax rate was higher than prior year, though normalization to mid-30s is expected.

Management Commentary and Tone:

• Tone: Confident and optimistic, characterizing the quarter as a "significant step" in the company's evolution and a "very strong" performance.
• Strategic Focus: Emphasis on the synergies of the three-brand portfolio, the successful integration of Tupperware, and the return to growth for Betterware.
• Leadership Changes: Andres Campos took a hands-on interim role at Jafra Mexico to ensure consistent decision-making and accelerate commercial execution.
• Shareholder Returns: Confirmed a dividend of 250 million pesos approved for Q4 payment, marking the 27th consecutive quarter of dividends since IPO.

Analyst Questions and Answers:

• Tupperware Innovation: Clarified that Tupperware will expand into non-plastic materials and new categories (drinking, kitchen utensils) specifically tailored for Latin American consumers.
• Jafra Turnaround Strategy: Attributed recent struggles to inconsistent management decisions rather than product failure; immediate focus is on operational alignment and accelerating the rollout of the Jafra Plus app.
• Margin Pressures: Explained Betterware's margin pressure is due to elevated global freight costs, whereas Tupperware benefits from local manufacturing in Mexico and Brazil.
• Synergies: No specific synergy quantification yet; focus remains on implementing the commercial model, with procurement and manufacturing synergies (e.g., shared manufacturing plants) under evaluation.
• Leverage Targets: No definitive long-term net debt target provided; commitment remains to disciplined operations, using cash flow to fund growth, dividends, and debt reduction.
• One-Time Expenses: Confirmed 47 million pesos in extraordinary acquisition costs were incurred but deemed non-material on a full-year basis.

Other Key Points:

• Betterware contributed 31.5%, Jafra 40%, and Tupperware 28.5% of consolidated revenue in Q3 2026.
• Tupperware has been profitable and cash-generating since the first day of integration under BEFRA.
• The group is actively assembling technology and business intelligence capabilities at Tupperware to match the standards of Betterware and Jafra.
• Pro forma revenue comparisons for Tupperware excluded significant B2B sales from Q3 2025, making current growth figures indicative of core direct selling performance.