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

Explicit Guidance:

• Organic Revenue Growth: Narrowed guidance for FY2026 organic revenue growth to 4%–5%, down from prior wider ranges, incorporating Q4 expectations for both Betterware (high-single-digit growth) and Jafra (mid-single-digit growth).
• Post-Acquisition Revenue Growth: Raised full-year FY2026 net revenue growth guidance to 24%–26%, based on Tupperware's first full quarter contribution and performance through the first nine months.
• EBITDA Margin: Maintained full-year FY2026 EBITDA margin expectation of 19%, assuming prudent growth investments at Tupperware and cost scaling for the group.
• Effective Tax Rate: Expects the full-year effective tax rate to normalize by year-end, landing in the mid-30s, following a Q3 anomaly driven by one-time acquisition charges.
• Dividends: Confirmed a dividend of 250 million Mexican pesos approved in October, to be paid in Q4 FY2026; marks the 27th consecutive quarter of dividend payments since IPO.

Business-Segment Outlook:

• Betterware: Mexico revenue growth is strengthening, approaching double digits; Latin America (specifically Ecuador and Colombia) identified as a second growth engine. Management expects continued expansion in the Andean region.
• Jafra: Mexico faces near-term headwinds but targets a return to growth in Q4 FY2026, aiming for mid-single-digit growth. Immediate priority is reversing revenue trajectory via alignment with the group model and accelerated execution. U.S. operations remain EBITDA-positive for the second consecutive quarter.
• Tupperware: Direct selling revenue grew 14% globally; Mexico grew 23% YoY, while Brazil's decline moderated to 3.3%. Strategic shift involves discontinuing B2B/retail sales to focus on the person-to-person channel; this distortion is not expected to repeat in Q4.
• New Product & Category Expansion (Tupperware): Plans to expand beyond plastic containers into glass, stainless steel, and ceramics. New categories to target include drinking vessels, kitchen utensils, and cooking appliances. Innovation strategy will focus on products specifically designed for Latin American markets rather than global rollouts.
• Technology & Digital: Plans to launch the "Jafra Plus" app in early FY2027. Plans to develop the "Tupperware Plus" app on the same platform as Betterware to unify technological capabilities.

Market and Competitive Outlook:

• Supply Chain & Pricing: Acknowledged sustained higher freight prices affecting Betterware's gross margins due to supply chain issues (e.g., Hormuz). Betterware plans to recover margins through pricing adjustments, promotions, and strategic actions in Mexico, with no expectation of near-term freight cost relief.
• Integration Status: Tupperware integration is proceeding with a focus on "low-hanging fruit" (catalog revamp, associate confidence building) and moving toward "mid-hanging fruit" (tech, innovation, BI) to drive medium-to-long-term growth.
• Synergies: Procurement and manufacturing synergies (e.g., manufacturing Betterware products in Tupperware Mexico plants) are under evaluation but not yet quantified; commercial execution and innovation investments remain the immediate priority.

Macro / Industry Outlook:

• Operational Context: World Cup-related shifts in consumer attention and extended summer holidays negatively impacted Q3 commercial activity, particularly for Jafra, but are not expected to recur in Q4.
• FX: No specific FX guidance provided; however, the broadening geographic mix (Mexico at 87.5% of revenue, Latin America at 8.2%) suggests continued exposure to regional currency fluctuations, particularly Brazil.
• Regulatory/Tariffs: No specific regulatory headwinds mentioned beyond general supply chain pressures; management emphasizes discipline in financial management and leverage reduction as a buffer against macro volatility.

Strategic Initiatives:

• Innovation Team: Assembled a new global R&D and innovation team for Tupperware, led by former Global R&D Director David Kusuma, to replace the previously non-existent team.
• Leadership Changes: Andres Campos appointed Interim Managing Director of Jafra Mexico to ensure consistent decision-making and accelerate the turnaround.
• Investment Focus: Capital allocation directed toward building three core pillars at Tupperware: Innovation, Technology (app development), and Business Intelligence, which were previously at "zero" maturity.
• Financial Discipline: Continued leveraging and balance sheet strengthening; net debt to trailing 12-month EBITDA improved to 1.65x, with interest coverage at 6.91x. No long-term target leverage ratio provided, but commitment to disciplined finance and cash generation remains.

Risks and Headwinds to Outlook:

• Freight Costs: Volatile and elevated freight rates continue to pressure Betterware's growth margins; mitigation strategies are being deployed but success depends on market correction.
• Execution Risk: Jafra's turnaround relies on reversing inconsistent operating decisions; delays in Jafra Plus app launch previously occurred, though a Q1 FY2027 launch is now targeted.
• Integration Complexity: Potential delays in realizing synergies from manufacturing or procurement integration; full impact of Tupperware's strategic pivot (dropping B2B/retail) may take time to fully reflect in reported metrics.
• One-time Costs: Extraordinary acquisition expenses (47 million pesos in Q3) are non-recurring but impacted reported EBITDA; consolidated OPEX remains elevated due to integration efforts.

Management Tone on the Future:

• Confidence: Highly confident in the "expanded portfolio" strategy, describing the quarter as "very strong" and the "best is yet to come."
• Sentiment: Optimistic regarding Tupperware's immediate momentum and the synergistic potential of the three-brand model (Betterware, Jafra, Tupperware).
• Cautions: Hedges on Jafra's turnaround timeline, acknowledging the need for "mid-hanging fruit" strategies to sustain growth beyond the immediate Q4 rebound. Avoids providing specific long-term leverage targets, emphasizing a "disciplined" rather than "aggressive" capital allocation approach.

Miscellaneous:

• Cash Flow: Full-year free cash flow conversion expected to remain robust (105% in Q3, 78% YTD); Tupperware has been cash-generative since acquisition.
• Working Capital: Cash conversion cycle improved to 50 days (from 78 days YoY) due to improved supplier terms and efficiency.
• Financial Highlights: Consolidated revenue up 43.1% YoY to 4,832 million pesos; Net income up 24.2% YoY to 390 million pesos.