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

Thank you and welcome to BEFRA's Third Quarter 2026 Earnings Conference Call. Before BEFSA's management begins their prepared marks, please note the disclaimer regarding forward-looking statements on slide 2. We 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 these statements alongside the Cautionary Language and Safe Harbor Statement in today's earnings release. As well as the risk factors outlined in BEFRA's SEC filings, BEFSA undertakes no obligation to update any forward-looking statements. A reconciliation of and other information regarding non-GAAP financial measures discussed on this call can also be found in the earnings release published earlier today, as well as the investor section of the company's website. Present on today's call are BEFRA's President and Chief Executive Officer Andres Campos and Chief Financial Officer Raul de Villar. I will now turn the conference over to Mr. Campos. Please go ahead, sir. Thank you, operator, and good afternoon, everyone. The third quarter marked a significant step in Befra's evolution, as we substantially increased our scale, brand diversification, geographic reach, and financial strength. It was also our first full quarter with Tupperware as part of the group. We are very pleased with the progress we are seeing across our businesses. Better Work delivered its third consecutive quarter of year-over-year growth, and we are encouraged by the progress of Topper Work. At Jafra, we experienced a slight revenue shortfall, which we are addressing head-on through stronger promotional planning, faster commercial execution, and a change in management. with our strong cash generation and continued leveraging, this quarter's results reinforce our long-term strategy of building a unique house of brands supported by our person-to-person commercialization model and disciplined financial management. Let's move to slide four and review you the highlights of the quarter. Consolidated revenue increased 43.1% year over year to 4,832 million pesos. On an organic basis, meaning Betterware and Jafra, revenue increased 2.3%, supported by another strong quarter at Betterware, and partially offset by lower revenue at Jafra. Both brands faced a more challenging summer period as World Cup related shifts in consumer attention affected commercial activity. BetterWear offset these pressures through higher associated productivity while Jafras commercial execution did not fully compensate for it. The addition of Topperware also expanded our commercial networks. Our consolidated average associate base reached approximately 1.46 million during the quarter, an increase of 23.7% year-over-year, while the organic associate base was broadly stable. These results demonstrate the greater scale of the group, while also highlighting the importance of discipline execution across each brand. Turning to slide five, the addition of Tupperware has meaningfully expanded and diversified BEFRA's revenue base. In the third quarter, BetterWear represented 31.5% of consolidated revenue, Jafra represented 40%, and TupperWare represented 28.5%. Our geographic mix also broadened. Mexico remained our largest market at 87.5% of revenue, while Latin America increased to 8.2%, primarily reflecting the addition of Tupperware's Brazil operations. This broader portfolio provides BFRA with multiple avenues for growth across brands, categories, and markets both in Mexico and abroad. Turning to slide six, consolidated EBITDA increased 39.6% year over year to 1,008 million pesos, reflecting Tupperware's contribution and continued profitability at Betterware, partially offset by lower EBITda at Jafra. The consolidated EBITDA margin was 20.9% compared with 21.4% in the prior year quarter as operating expense discipline helped mitigate profitability pressures across the portfolio. For the first nine months, EBITD margin expanded to 19.2% from 18.5% in a prior year period. Net income increased a strong 24.2% year-over-year to 390 million pesos. Net income in the quarter was affected by a higher effective tax rate than the prior year period. Based on our current expectations, the full-year effective tax rates is expected to normalize, landing in the mid-30s by year-end. Even with that tax effect, net income growth remained substantial and reflected the earnings contribution of our expanded portfolio. Turning to slide 7, the strength of our three-brand portfolio is coming into focus, with each brand contributing differently to our results and shaping our opportunities for growth. On the left, at Better Wear Brands, Mexico revenue increased 8.5% year-over-year, demonstrating strong commercial momentum. Better Wear Latin America also remained on a continued growth trajectory, with the region developing into a second growth engine for the brand. Turning to Jaffa in the middle, the brand faced a more difficult quarter, with a total revenue down 2.8 percent in mexico as i mentioned before lower associate activity related to the world cup and the extended summer holiday period affected sales and unlike better where jaffa was not able to fully offset this effect through higher productivity following several quarters of inconsistent growth, I have taken on the role of Interim Managing Director of Jafra Mexico for the short term. My immediate priority is to reverse Jafras revenue trajectory by reinforcing alignment with the group's commercial model and accelerating commercial execution as we unlock the full potential of the brand. In the United States, Jafra delivered its second consecutive EBITDA-positive quarter under its linear expense structure, an encouraging sign of the progress being made there. At Tupperware, on the right, for direct selling revenue increased a strong 14%, demonstrating the renewed growth momentum of the business as Tupperwa continues its integration into VEFRA. In Mexico, direct selling revenue grew 23% year over year, while in Brazil, the decline moderated to 3.3%, a substantial improvement from the 10 to 15% decline experienced before the acquisition. At the brand level, reported revenue declined 6.8% on a pro forma basis. As the third quarter of 2025 included a significant amount of exports and business-to-business sales, the latter of which we have chosen to strategically discontinue to focus on our person-to person channel. Because a significant portion of these business-to-business sales occurred in the third quarter of 2025, the reported comparison does not fully reflect the strong growth of the core direct-selling business. This impact will not carry into the fourth quarter, as there were no significant retail sales in the fourth corner of 2025. With that, I'll hand the call over to Raúl to cover our key financial metrics, dividends, and guidance. Thank you, Andrés. Turning to guidance, as we approach year end, we are narrowing organic next revenue growth guidance to 4% to 5% within our original range. At the same time, based on Topperware's first full quarter contribution and our performance through the first nine months, we are raising post-acquisition net revenue growth guidance to 24 to 26 percent. We continue to expect a full-year EBITDA margin of 19 percent. That assumption incorporates a prudent view of the growth investments required at TopperWare and the cost associated with expanding the scale of the group. We believe this balance reflects the strong progress we've achieved to date while preserving the flexibility to invest in long-term opportunity. Slide 9 highlights the earnings and shareholder return benefits of our expanded portfolio. For the first nine months of the year, Performa EPS increased 114% to 45.4 pesos, reflecting the inclusion of Tupperware's net income for the full nine-month period and demonstrating the strong accretive nature of the acquisition. A dividend of 250 million Mexican pesos was approved at the October shareholders' meeting and will be paid in the fourth quarter of this year. This will represent BEFRA's 27th consecutive quarter of dividend payments since the IPO. This continuity reflects our commitment to shareholder value while maintaining the financial discipline required to invest in the group and strengthen the balance sheet. Slide 10 shows the strength of our balance sheet and cash generation. Performant net debt to trailing 12 months EBITDA improved to 1.65 times, supported by debt reduction of 431 million pesos, while interest coverage increased to 6.91 times. As we continue the leveraging and generating strong EBITda. Turning to cash flow, reported free cash flow reached $1,059 million, or 105% of EBITDA. Strong cash generation across all three brands supported continued balance sheet strengthening during the quarter. Through the first nine months, reported free cash low reached $1871 million, representing 78% conversion of year-to-date EBITDA, with contributions from both the organic businesses and Tupperware. Tupperwares has been profitable and cash-generated since day one as part of BEFRA. Our cash conversion cycle improved to 50 days from 78 days a year ago. This reflects a stronger working capital efficiency across the group, including improved supplier terms at Tupperware. Taken together, these results demonstrate the strength of Befra's business model, as well as our capacity to produce leverage while continuing to invest in growth and, as I said, continue enhancing shareholder value through dividends. I will now hand the call back to Andrés for closing remarks. Thank you, Raúl. In conclusion, this was a very strong quarter for VEFRA. We delivered substantial consolidated growth. Better work continued to build momentum. Jafra U.S. remained EBITDA positive for the second consecutive quarter. And Tupperware's core direct selling business grew strongly while contributing attractive profitability and cash generation. At Jafra Mexico, as we mentioned, our focus is on building upon the brand's strong foundation and taking the actions necessary to help the business reach its full potential. The quarter also demonstrated the value of our expanded portfolio and the financial discipline behind it. We generated strong cash flow, reduced leverage, strengthened interest coverage, and continued to return capital to shareholders. We believe VEFRA is stronger, more diversified, and better positioned than ever. This was a very successful quarter, and the best is yet to come. With that, operator, we would be happy to take your questions. Thank you. Thank you, we will now begin the question and answer session. To ask a question, dial in by phone and press star then 1 on your telephone keypad. Make sure your mute function is turned off, and if you are using speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then 2. At this time, we'll pause momentarily to assemble our roster. Your first question comes from Eric Better with SCC Research. Please proceed with your question. Eric Better Good afternoon. Congratulations on the quarter. I want to talk a little bit about Tupperware. Eric Better Hi, Eric. Thank you. Eric Better Thank you, I want talk a little bit of Tupper where we've owned it out for about four months. I know you're a very innovative company in terms of new products and other pieces. Betterware's almost 80% of that, which offers a very high number. While Tupperware, for various reasons not related to you, has not been as high. I guess the question is, should it be higher? And yes, it should. What do you see going forward in terms of the opportunities at Tupperwares to increase the level of innovation? Eric, sorry, just to clarify the question, is your question should the revenue be higher? No. The question is what are the opportunities in terms of new products and categories at Tupperware? Okay, yeah. Thank you, Eric. This is Andres here. Well, we believe the opportunities are very important. You know that, on one hand, Tupperware has been, in history, very focused in plastic material products. We are considering other materials beyond plastic. In the container category, there's new materials like glass or stainless steel or ceramics or other kinds of material that we are obviously considering to continue to expand the brand in its core category, which is food containers. But at the same time as managing other materials in that category, we are also looking to expand other categories within software that are not fully exploited, such as drinking where it's a category that can be more highly exploited. Another one is kitchen utensils or kitchen appliances in general for cooking. So there are, you know, different avenues for growth in Tupperware, I would say, beyond plastics and beyond containers. So we think that there is a lot to do there. We are,you know, assembling a very strong innovation team. As we announced, we brought in David Kusuma, who used to be, back in the time, Topperware's global R&D and innovation director. We are, together with that, we're assembling a whole innovation team and process, and we think there's a lot of interesting things to come for TopperWare there. Okay. Betterware, you've done a great job turning it around with the associates and the revenue coming back. How sustainable do you see that, and what do you the opportunities there at the Betterware division, both in Mexico and for potential expansion outside of Mexico right now? The BetterWear division? Mm-hmm. Yeah, so we are, you know, as you can see in the report, we're very glad at the results of BetterWears Mexico and BetterWearts in general. BetterWeart has started to come back to growth. We have our third quarter of consecutive growth year over year, and now almost reaching double digits, no? So Better Words Growth is strengthening both in Mexico and abroad. So, you know, this was our first brand, and it had a huge CAGR in the last 10 years, then became flat two or three years, but now we're, you Know, starting to regain growth. from all the different strategies, commercial strategies that we've laid forward before. And we're happy for that to be happening. We still have a lot of room to grow in Mexico, as we've said before. And then at the same time, we opened Ecuador last year. We just opened Colombia this year. So, with our focus in the Andean region, we think that the brand, in general, will continue to expand at a very good pace. Great. I guess a question for Raul. You know, the net debt, even after the acquisition, has remained pretty steady in terms of net debt to EBITDA. You know, what should we be looking at here longer term as a use, A, for free cash flow? What kind of ratios should we thinking as goals longer term for the company in terms of debt and kind of, again, use for the free cash law? Thank you. Hi, Eric. Thank you for your question. I don't think we are ready at this point to provide a long-term guidance on where we want to be in terms of net debt, but what I want to convey, the message I want to convey is that we will continue executing disciplined operations, disciplined finance, and we'll continue the leveraging as we have in the past. All of our three businesses are cash-generated. All of them are performing well. And as you can see, we are generating enough cash to invest in expansion, invest in CapEx, and at the same time, continue paying dividends and the leveraging. So that's what you would expect. I don't think we have a definite guidance on where we want to be in terms of leverage, but we will continue performing as we have as of today. Great. Thank you, and good luck on the holiday season. Thank you very much. Your next question comes from Linda Bolton-Weiser with Water Tower Research. Please proceed with your question. Hi. Hi, how are you? So, I just wanted to ask about the narrowing of the organic sales growth guidance range because in the quarter, you know, even though JASRA was below expectations, I guess, BetterWear did really well. I mean, it was quite a bit above where I would have expected it to grow and Tupperware's revenue was quite a bit higher than I would have thought so it seemed to me that the whole thing kind of put together was you know net net it was better than I would have expected so I guess I'm wondering even with Jasper having problems it's better where is kind of doing well on the top line why did you feel the need the need to narrow that guidance or kind of actually lower it at the midpoint you lowered it what what is the real reason is it the jaffa more than anything that is the issue thanks hi lena this is andres thank you for your question and we you know we we believe that we can turn jaffra around fairly quickly but obviously we don't want to over to overreach on that expectation, but we do believe we can reach mid-single-digit growth in Jafra for the fourth quarter. So with that, plus BetterWear growing stronger and TopperWear performing well, And obviously, our guidance contemplates that for the fourth quarter and for the year round. So, we should expect, you know, high single-digit organic growth in a combination of mid-single-digits for Jafra and high single digits for Better World. Okay, so that's in the fourth quarter you were just saying. Yeah, in the, in, in in the four quarters. okay okay gotcha um so secondly on the cost side i just wanted to ask you about um you mentioned and it's appearing in the numbers that better where's growth margin did seem a little pressured i guess you mentioned supply chain pressures and yet tupperware's growth marginal was was actually quite strong it was better than i would have expected. So is this just a difference of where you're sourcing BetterWear, you're bringing it in from outside, and Tupperware, you are sourcing more regionally? Or what is the difference in terms of why those two businesses are experiencing different effects on the growth margin? Yeah. Well, what you mentioned is exactly right. It's where we source from. So as you So, remember, Tupperware manufactures most of its products in our plants, both in Mexico and in Brazil. So, we manufacture locally. And BetterWear manufactures mostly in China, no? So, what made the difference in BetterWears was mainly the freight prices. So freight prices have gone up and have stayed higher than we expected for a longer period of time because of the whole supply chain issues in Hormuz, et cetera. So it's mainly the freight prices that affected better wear and which are not affecting top wear. Okay, that makes sense. So, are you considering different pricing actions then in BetterWear to try to offset? Or, like, what is your plan in terms of trying to improve the BetterWears growth margin? Yeah, well, we, you know, we were waiting a little bit to see if this corrected in the short term. because freight prices have been a little bit volatile because of all the global situations. They have eased a little bit, but not as much as we expected. So we are taking the strategic actions to recover either through pricing, promotions, or certain strategies to compensate for that in Better World Mexico. So we are, you know, taking actions to recover our gross margin, not expecting this tariff to decrease highly in the short term. Okay. Okay. I guess just going back, I was interested in your comment that you thought Jafra, you could turn it around and have growth, your growth in the fourth quarter. I mean, what is it that you think you can do so quickly? Is it just a particular product launch or promotions? Or what do you think you can so quickly to improve Jafla? I think, Linda, the angle is more, I would say, on two things. The first thing is for short-term results. The inconsistency was more from inconsistent operating decisions that affected our short- term results. And it's more about taking the correct decisions, the operating decisions. So taking the current decisions, you can see a very quick rebound. And we saw it, for instance, in the second quarter of this year. It's just that we have been taking inconsistent decisions managerial-wise in Jaffa, Mexico. So this is the reason why the board and I decided that I would take over directly to make sure that we start making more consistent decisions in the short term. Now, the other part is kind of more in the midterm, is that, you know, after five years that we've had Jafra, we started implementing the more low-hanging fruit of our commercial model at Befra, but now we need to go into the mid-hangings fruit. And we were not going into the mid-hanging fruit strategies as quickly as we wanted to. So this is also the reason why I'm taking over to accelerate strategies. When I'm talking about this, I'm Talking About New Technologies. We are, you know, working to launch the new app, the new Jafra Plus app next year. We've had some delays in the launch, and now we are set to launch it at the beginning of next year. More complex innovation into more complex products in skincare. You know, some ways of making it easier for consumers to buy and sellers to execute. And so we are, you know, rolling out this second phase of strategies within our model, and we have had some delays in them, and now we're going to accelerate. So I think these things together can bring the short-term back to growth and then the mid-term continued consistent growth. Okay, that sounds good. I just have two more questions. One of them has to do with, I think you mentioned that in the Tupperware financials there are maybe some unusual integration charges or expenses because the OPEX did look pretty high for the Tuipperware piece. Is there any way to quantify that in terms of how much one-time type expenses there were in the third quarter under the Tupperware? Let me pass the word to Raul to clarify exactly. So what we mean with the extraordinary expenses for the Tupperware acquisition actually sits at the consolidated base, and actually are reflected in... Keep in mind that our holding company is also the operating company of BetterWear. So when you look at the BetterWears results, they include some extraordinary expenses that we incurred for the acquisition of Tupperwares. So that's what we mean. Those expenses are reflected in the consolidated books, but not necessarily in Tupperware standalone books. I don't know if that's, what you refer to. Well, it's, da, da da da. Well, OK. If you want to, and just to give you And just to give you the number, those expenses accounted for 47 million pesos. So it's significant for the quarter, but it's really non-material on a full-year basis. Okay, I got you. Thank you. And then, so my last question is, you know, the question of innovation and other categories for Tupperware, Latin America, you know, I used to follow the U.S., well, all of Tupperwares, but in the U!S., Tupperwares certainly had many kitchen utensil items. They were very diversified. They even had cutlery and all kinds of things. So are you saying that those innovations were purely sort of more developed markets like the U.S. and they were never taken into Latin America? And do you have the rights to any of those designs or products or innovations that Tupperware U.F. had? Or do you Have to start all over again and redesign certain of their items? Yeah, Linda. So, you know, in the past, Topperware did go into some of these categories, but in our view and from our standpoint, it did not go in enough depth into the categories or with the correct strategy. This includes the fact that some of these products cannot be designed for a worldwide success because each market has specific cooking needs and even specific economic needs that you cannot satisfy worldwide markets. with one same product no so now one of the important and and very interesting things is that we are going to start innovating specifically specifically for the latin american markets in these categories with understanding the the consumer in brazil understanding the consumer in mexico and this makes a huge difference uh because not necessarily what works for the us or Europe is going to work for Latin America. So even though we can have access to past innovations or to products that are in the worldwide organization or the new party, we are thinking more about innovating products, new products, completely new products specific for the Latin American markets. And we think that that's going to make a huge difference for the success and for the depth and breadth into which we can go into these categories. Okay. That makes complete sense. Thank you very much for explaining all that. I'll leave it at that. Thank you. Thank you, Lina. Thank you. Again, if you have a question, please press star, then 1. Your next question comes from Christina Fernandez with Telsey Advisory Group. Please proceed with your question. Good afternoon, and thanks for taking my questions. I have a few on Better Work. I wanted to see if you can give an update of what you've learned in the last 90 days since the last call and What changes you've made to drive the 14% growth you saw in Mexico? You mean in Tupperware? Hi, Christina. This is Andres. You mean... Yes, in Tuppwerware. In Tuppwareware, yes. Ah, okay, okay. Sorry, I thought you had said Tupperwerware, but yeah. So, you know, a little bit similar to within our commercial model, we have some low-hanging fruit strategies that we started implementing in Tupperware Mexico. Some of that has to do with, for instance, catalog organization and catalog design. You know, our catalog is a store, but the benefit we have is that we can do a whole revamp of the design of our store very quickly. So we launched the new design of the Tupperware catalog, both design and merchandising techniques in the catalog such that it becomes a lot more attractive. And this is really, you know, starting to help us to grow. At the same time, you know, our sales force, distributors and associates, they have, you know, kind of lost a lot of confidence from what was going on and the fact that they did not know what was gonna happen with Tupperware. And we did a whole tour to make sure to communicate that now Tupperwares Latam was part of that its future was secure and that its future had great possibilities and this brings a lot of confidence to the sales force who are now investing time and investing effort again into expanding their businesses. This together with some promotional techniques that we also applied. So, you know, this is kind of the first run in Tupperware since it has, you know, come from a long period of very unfavorable results. And, you know, we think that, you know, these strategies have a higher impact in the short term as we are seeing now. So, we, you know, are happy with the start. I would also say, and it's very important to know, that the Tupperware management in general is a great management. And the thing is that they needed to have, you know, the foundation on which they could invest and the correct guidance in order to, or the correct direction in order to execute correctly. They were a little bit tight in hands before of what they could do and what they would not. But, you know, something very important to stand out is that management is great, and so we are able to execute very fast on what we need to execute with them. So I think all of this combination, you know, good management, better confidence and trust of our distributors and associates, plus some of the first strategies such as catalog design and promotional techniques are all coming together to start taking the business in the short term. thank you and then also on topper where you mentioned that you were going to make some investments in the brand and in scaling the group could you provide more detail into what those investments are yeah well we are you know first of all and i think the most important is we're investing in the innovation team, no? You know, Topperware has no innovation team and we are assembling the team, the processes, the capabilities, everything we need in terms of innovation. So I think that that's going to be, you know, the main thing, no. Another capability, a couple of capabilities that we're building is technological capabilities, no? You know, we have in Better World, the Better World Plus app. In Jafra, as I mentioned before, we're about to launch the Jafla Plus app, and obviously we are aiming to build the Topper World Plus apps, which are all built on the same technology, on the same platform. And so we're building on the technology team to expand the technological capabilities of Topperware. And finally, the third thing in which we're investing is business intelligence. You know, we have talked a lot about the great impact of business intelligence in our model, and Topperwares did not have that capability built in it. So we are building that capability, and we think that, you know, we've talked a lot about these three pillars in our model, innovation, technology, and business intelligence. So we're building on those three, which were basically at zero, and we thing these three things together are going to bring a lot of value in the medium and long term. And then the last one I had was, in the past, you've talked about some synergies from the acquisition, primarily in procurement, in manufacturing. Any update there or quantification of what the synergies could be? we do not have an update yet there christina we're still evaluating uh you know the the reality is that our first priority is implementing the commercial model and everything that i just talked about in innovation technology etc to accelerate revenue uh we are uh analyzing the the potential synergies of, for instance, bringing some BetterWare products to be manufactured in the Tupperware plant in Mexico, or helping TupperWare develop other material products with BetterWares supply chain capabilities. We are assessing all of that, but still early to tell. We have not quantified them yet. Thanks so much. Thank you, Christina. Thank you. That concludes our question and answer portion of today's conference call. I would like to turn it back over to management for closing remarks. Thank you again to all for joining us today. We are very pleased with this strong quarter, which demonstrates the strength of our expanded portfolio and the financial discipline behind it. BEFRA is stronger, more diversified, and well-positioned for the future. Thank you again, and we look forward to speaking to you in the next quarter. Thank You. Ladies and gentlemen, this concludes BEFSA's third quarter 2026 earnings conference call. We would like to thank you again for your participation. You may now disconnect.