Core Viewpoint - Betterware de Mexico SAPI de C (BWMX) is highlighted as a strong investment opportunity with a Zacks Rank 1 (Strong Buy) and an increase in the Zacks Consensus Estimate for next year's earnings by 1.5% over the last 60 days [1]. Group 1: Company Overview - Betterware de Mexico SAPI de C operates in the direct-to-consumer selling sector, focusing primarily on home organization and solutions in Mexico [1]. - The company has a price-to-earnings ratio (P/E) of 5.06, significantly lower than the industry average of 10.30, indicating strong value characteristics [2]. - Betterware de Mexico possesses a Value Score of A, further emphasizing its attractiveness to investors [2].

Summary of Betterware (BWMX) Conference Call - June 11, 2025 Company Overview - Betterware operates as a direct-to-consumer house of brands with two main brands: Betterware (household products) and Jafra (beauty products) [2][3] - The company has approximately 1,240,000 sellers and distributors, primarily operating in Mexico, with expansion plans into Latin America and the U.S. [3][8] - In 2024, Betterware reported revenues of MXN 14,000 million, achieving a 22% compound annual growth rate (CAGR) over the past 23 years [3][19] Financial Performance - Net revenues grew by 8.4% in 2023, with a 22.4% CAGR over 23 years [19] - EBITDA margin was reported at 19.7% in the previous year, with a 2% growth from 2023 to 2024 [4][20] - The company has maintained a strong cash flow conversion rate of 52% on average, excluding outliers from 2023 and 2024 [20][21] - Consistent dividend payments have been made for 25 consecutive quarters, totaling USD 5.2 million with an average yield of 10.55% [22] Market Position and Growth Opportunities - Betterware holds a 4% market share in the fragmented household goods market in Mexico, with Walmart being the largest player at 20% [12][36] - The company has a dominant position in the direct selling space, owning 65% of the market for household goods in Mexico [12] - Jafra has seen a significant turnaround, achieving a net revenue CAGR of 12.1% and an EBITDA CAGR of 17.2% since its acquisition [24][47] - The direct selling model is growing in Mexico at a CAGR of 4.6%, with Betterware outpacing this growth [15] Strategic Initiatives - The company focuses on three main pillars for growth: business intelligence, product innovation, and technology [16][17] - Betterware aims to expand the Jafra brand and introduce new product categories in both beauty and household markets [25][26] - Geographic expansion plans include entering the U.S. market with Jafra and expanding Betterware into Guatemala and Ecuador [27][28] Competitive Landscape - Betterware differentiates itself through innovative products and strong marketing strategies, targeting middle and low-middle-income markets [10][11] - The company has successfully modernized its direct selling model, leveraging technology and business intelligence to enhance seller efficiency [6][17][46] - Jafra's growth strategy includes focusing on brand development and innovation, which had been lacking prior to its acquisition [44][45] Additional Insights - The company emphasizes its asset-light model and strong cash flow generation capabilities [30] - Betterware's management team consists of experienced professionals with a focus on replicating successful business practices across brands [31] - The company does not classify itself as a multilevel marketing firm, focusing instead on direct sales and customer satisfaction [58][59] This summary encapsulates the key points discussed during the conference call, highlighting Betterware's business model, financial performance, market position, growth strategies, and competitive advantages.

It has been almost 5 years since the COVID-19 pandemic, during which drastic shifts were expected regarding work and consumer behavior. People were in the house more than they ever expected and started looking into ways toI have been involved in investing for the last 10 years, having studied a finance undergraduate, followed by a Master's in international finance, and finally getting the CFA designation. My current job focuses on advising Ultra High Net Worth individuals on how to construct their long-term ...

Q1 2025 Performance Overview - BeFra Group's net revenue decreased by 2.9%[2] - EPS decreased significantly by 48.7% due to lower sales, profitability, and higher taxes[3] - Gross Margin declined by 353 basis points, primarily due to FX pressures in Betterware Mexico and Jafra Mexico[3] Betterware Mexico - Betterware Mexico revenues declined by 9.8%, marking the first decline since Q3 2023[6] - The distributor base decreased by 6.0%, and the associate base declined by 10.4%[6] - Gross Margin contracted by 473 basis points due to increased costs driven by the depreciation of the Mexican Peso, with costs increasing from $18 to $20[7] - EBITDA for Betterware Mexico declined by 31.6%[7] Jafra Mexico - Jafra Mexico's net revenues increased slightly by 1.1%[10] - Gross margin declined by 398 basis points due to volume-price initiatives and a shift toward lower-priced products[10] - EBITDA decreased by 25.2%, impacted by the decline in Gross Margin and increased promotional activities[10] Jafra US - Jafra US net revenues decreased by 4.7% in USD[13] - EBITDA declined by 9.3%, impacted by one-time legal settlements[13] Financial Position and Outlook - The board of directors has proposed a Ps 200 million dividend for Q1 2025, subject to approval[28] - Management maintains its 2025 financial guidance, projecting high single-digit growth in net revenue and EBITDA[26, 27]

Financial Data and Key Metrics Changes - Consolidated net revenues decreased by 2.9% year over year, primarily due to a challenging macroeconomic environment [16] - The Mexican peso depreciated approximately 20% year over year, impacting gross margins and profitability [16][22] - Consolidated EBITDA decreased by 29.1%, with Betterware Mexico EBITDA falling by 31.6% and Jafra Mexico EBITDA decreasing by 25.2% [19][20] - Consolidated EPS decreased by 48.7%, reflecting lower sales and overall profitability [22] - The net debt to EBITDA ratio increased to 2.08%, compared to 1.83% in Q1 2024, but remains in line with internal policy [23] Business Line Data and Key Metrics Changes - Betterware Mexico revenue declined by 9.8% year over year, while Jafra's growth slowed from double digits to single digits [17] - Consolidated gross margin contracted by 303 basis points, driven by peso depreciation and increased costs of imported goods [18] - Jafra Mexico experienced margin compression due to investments in volume-driving promotions [20] Market Data and Key Metrics Changes - Consumer trends in Mexico showed significant softening, particularly in discretionary categories like household goods [7] - Disruption in consumption was noted in both the US and China, affecting overall sales [8] Company Strategy and Development Direction - The company is focusing on strategic pricing, increased promotional activity, and deeper engagement with the sales force to drive growth [26][29] - Plans to monitor sourcing options due to tensions in China, with potential manufacturing alternatives being evaluated [29] - The company is halting expansion into the US market for Betterware, while continuing to invest in Jafra US [63][65] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the current macroeconomic challenges but expressed confidence in the long-term growth fundamentals of the business [35][72] - The company maintains its full-year guidance for 2025, expecting net revenue and EBITDA growth in the range of 6 to 9% [24][60] Other Important Information - The board of directors proposed a 200 million peso dividend for Q1 2025, reflecting a commitment to shareholder returns despite current economic uncertainties [23][24] - Free cash flow was negative for the quarter, attributed to increased working capital and higher tax payments [21] Q&A Session Summary Question: Inventory levels and future cash flow - Management noted that the increase in inventory was a one-time event related to product renovations and innovations, expecting a decrease in the future [40] Question: Opportunities from China - Management acknowledged a decrease in container prices as a potential advantage but could not confirm improved pricing from Chinese manufacturers yet [44] Question: FX impact and future comparisons - Management confirmed that Q1 was the hardest comparison due to significant peso depreciation, with expectations for more stable comparisons in the coming quarters [48] Question: Quarter performance and trends - Management observed a softening in consumption as Q1 progressed, with expectations for stabilization rather than a rebound in the near term [54][60] Question: Halting US expansion - Management clarified that the halt refers specifically to Betterware US, while Jafra US will continue to operate and invest in growth [63][65]

Financial Data and Key Metrics Changes - Consolidated net revenues decreased by 2.9% year over year, primarily due to a challenging macroeconomic environment [8][10] - Consolidated gross margin declined by 353 basis points, impacted by the depreciation of the Mexican peso and increased costs of goods [10] - Consolidated EBITDA decreased by 29.1%, reflecting weaker sales volumes and compressed gross margins [10][12] - Consolidated EPS decreased by 48.7%, driven by lower sales and overall profitability [12][13] - Free cash flow was negative for the quarter, with historical conversion rates affected by seasonality and increased working capital [11][12] Business Line Data and Key Metrics Changes - Better World Mexico revenue fell by 9.8% year over year, with a significant decline in associates [9][10] - Jafra's growth decreased from double digits to single digits due to margin compression and promotional expenditures [9][10] - EBITDA for Better World Mexico fell by 31.6%, while Jafra's Mexico EBITDA decreased by 25.2% [10] Market Data and Key Metrics Changes - The Mexican peso depreciated around 20% year over year, affecting import costs and overall profitability [8][9] - Consumption trends in Mexico showed signs of softening, particularly in discretionary categories [3][4] - Disruption in consumption was noted in the US and China, impacting overall sales [4][5] Company Strategy and Development Direction - The company operates with a low fixed expense and asset-light model, allowing for better cash flow management during challenging times [4][5] - A focus on pricing strategies, promotional activities, and sales force engagement techniques to drive growth [16][18] - Plans to monitor and adapt sourcing strategies in response to geopolitical tensions, particularly regarding manufacturing in China [18][20] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the current macroeconomic challenges but expressed confidence in the long-term growth fundamentals of the business [3][24] - The company maintains its full-year guidance for 2025, expecting net revenue and EBITDA growth in the range of 6% to 9% [15][24] - Management emphasized the importance of internal strategies and market share growth opportunities to navigate economic uncertainties [44][45] Other Important Information - The Board of Directors proposed a MXN 200,000,000 dividend for Q1 2025, reflecting a commitment to shareholder returns [14][13] - The company is taking proactive steps to protect revenue and margins while ensuring financial health [21][53] Q&A Session Summary Question: Inventory management and future cash flow - Management noted that the increase in inventory was due to branding renovations and innovation preparations, expecting a decrease in inventory levels going forward [26][27] Question: Opportunities from China - Management confirmed that container prices are decreasing, which could be advantageous, but could not confirm improved pricing from Chinese manufacturers at this time [28][33] Question: Q1 performance and future trends - Management observed a softening in consumption as Q1 progressed, with expectations for stabilization rather than a rebound in the near term [39][40] Question: Confidence in guidance despite challenges - Management highlighted strong internal fundamentals and market share growth opportunities as reasons for maintaining guidance, despite economic uncertainties [44][45] Question: US expansion pause - Management clarified that the pause in US expansion refers specifically to Betterware, while continuing to operate and invest in Jafra U.S. [46][47]

Financial Performance - Net revenue for Q1 2025 decreased by 2.9% year-over-year, totaling $3,499,151, primarily due to a 9.8% decline in Betterware Mexico's sales[12][14] - Gross margin contracted by 353 basis points to 66.2%, influenced by higher supply costs and a 20.3% depreciation of the Mexican peso against the U.S. dollar[12][14] - EBITDA fell by 29.1% year-over-year to $535,265, with an EBITDA margin of 15.3%, reflecting lower sales and increased administrative expenses[12][14] - Net income decreased by 48.7% to $151,394, impacted by lower sales and EBITDA, despite a positive effect from reduced interest expenses[12][14] - Free cash flow was negative at -$55,841, primarily due to extraordinary cash outflows and increased working capital requirements[12][14] - Net revenues decreased 9.8% YoY in Q1 2025, marking the first YoY decrease since Q3 2023, primarily due to economic uncertainty and softening demand in Mexico[29] - Gross margin decreased by 473 basis points YoY, with COGS increasing from $18.0 to $20.0, driven by the depreciation of the Mexican peso[29] - EBITDA declined by 31.6%, resulting in a contraction of the EBITDA margin by 594 basis points, reflecting external macroeconomic pressures[29] - Net revenue for Q1 2025 was $3,499,151, a decrease of 8.0% compared to Q4 2024's $3,778,468[46] - Net income for Q1 2025 was $150,728, down 48.0% from $295,263 in Q1 2024[46] - EBITDA for Q1 2025 was $535,265, reflecting a decline in EBITDA margin to 15.3% from 20.4% in Q4 2024[46] Associate and Sales Metrics - The average Associate base decreased by 6.3% to 1,138,418, while the end-of-period base fell by 7.0% to 1,122,047[12][14] - The average base of associates for Betterware Mexico decreased to 645,359 in Q1 2025 from 693,666 in Q4 2024[43] - The average monthly order for Betterware Mexico in Q1 2025 was $2,152, a slight decrease from $2,158 in Q4 2024[43] - Monthly growth rate for Betterware Mexico in Q1 2025 was 18.7%, an increase from 14.3% in Q4 2024[43] - The average monthly order for Jafra Mexico in Q1 2025 was $2,419, a slight increase from $2,439 in Q4 2024[44] - Monthly churn rate for Jafra US in Q1 2025 was 11.8%, a decrease from 14.7% in Q4 2024[45] Strategic Initiatives - Betterware is targeting a 52% reduction in excess inventory for the year, from $529M to $252M, with inventory at $483M as of Q1[29] - Strategic pricing adjustments and increased promotional activities are being implemented to enhance sales engagement and balance affordability with margin protection[29][33] - New compensation plans and catalogue redesigns are set to launch in Jafra US to improve consultant recruitment and sales conversion[36] Future Outlook and Guidance - The company maintains its 2025 financial guidance, projecting net revenue growth of approximately 6.0% to 9.0%[26][25] - Jafra's forward-looking statements indicate potential variability in actual results due to various factors, with no obligation to update these projections[64] Cash Flow and Liquidity - The current ratio declined by 11.9% to 0.92, indicating reduced liquidity[16] - Cash flows from operating activities in Q1 2025 resulted in a net cash outflow of $42,898, compared to a net inflow of $384,223 in Q1 2024[42] - Total cash and cash equivalents at the end of Q1 2025 were $344,073, down from $425,177 at the end of Q1 2024[42] - The proposed dividend for Q1 2025 is Ps. 200M, reflecting management's commitment to shareholder value despite negative free cash flow[24] International Expansion - Betterware's international expansion includes signs of recovery in Guatemala and the launch of operations in Ecuador[32] Jafra Performance - Jafra Mexico's net revenue rose 1.1% YoY, with a gross margin of 73.5%, despite a decline of 398 basis points[30] - Jafra US experienced a 14.6% increase in net revenue in MXN, but a 4.7% decrease in USD YoY, with a strong sales rebound of 27.0% in March[34][36] - EBITDA for Jafra US declined by 9.3% to a negative $633,000, impacted by extraordinary legal settlement expenses of $300,000[36] - Jafra Mexico reported Q4 2023 net revenue of $1,668,956, with a gross margin of 78.8% and an EBITDA of $532,780, resulting in an EBITDA margin of 31.9%[48] - Jafra US experienced Q4 2023 net revenue of $260,256, with a gross margin of 74.4% and an EBITDA of $36,361, leading to an EBITDA margin of 14.0%[49] - Jafra Mexico's Q4 2024 net revenue is projected to increase to $2,038,993, while the EBITDA is expected to rise to $440,630, with an EBITDA margin of 21.6%[48] - Jafra US anticipates a slight decrease in Q4 2024 net revenue to $244,620, with an EBITDA of $891 and an EBITDA margin of 0.4%[49] Reporting Changes - The company will start reporting salesforce metrics under unified terminology for all business units beginning Q2 2024, with no adverse effect on reported results[55] - The company emphasizes the importance of non-IFRS financial measures like EBITDA and EBITDA margin for internal analysis and comparison with industry peers[54] Upcoming Events - The next conference call for Q1 2025 is scheduled for April 24, 2025, at 3:30 pm Mexico City Time[65]

Group 1 - Betterware de Mexico (NYSE: BWMX) reported strong Q4 results with significant growth, although margins were affected by external factors [1] - Jafra Mexico experienced impressive growth, increasing by 22% year over year during the quarter [1] Group 2 - The performance in the Betterware segment contributed positively to the overall results, indicating a robust operational performance [1]

Financial Data and Key Metrics Changes - The company reported a double-digit revenue growth of 11.1% in Q4 2024 compared to the same period last year [4] - Consolidated net revenue for the full year increased by 8.4%, driven by Betterware Mexico's 4.6% growth and Jafra Mexico's 13% growth [19] - EBITDA increased by 2% to MXN 2.8 billion, slightly below the low end of the guidance range of MXN 2.9 billion [6][26] - Adjusted earnings per share grew by 10.5% in Q4 and 17.3% for the full year [26] Business Line Data and Key Metrics Changes - Jafra Mexico achieved a remarkable 22.2% revenue growth in Q4, contributing significantly to overall performance [5][17] - Betterware Mexico demonstrated resilience with a 1.5% net revenue growth in Q4, despite challenges [18] - Jafra U.S. experienced a revenue decrease of 17.6% in U.S. dollars, primarily due to implementation issues with Shopify Plus [18] Market Data and Key Metrics Changes - Betterware Mexico holds an estimated 4% market share in the household product market, with a goal to deepen market penetration [8] - Jafra Mexico aims to become the number one direct sales beauty brand in Mexico, currently holding a 4% market share [37] Company Strategy and Development Direction - The company plans to focus on five priority fronts: conquering Mexico, international expansion, inorganic growth, centralized services, and sustainability [33][39][45] - The strategy includes enhancing operational efficiency, expanding product offerings, and improving sales force engagement [35][38] - The company aims to lower its net debt to EBITDA ratio to 1.5 times or below by 2025 [26] Management's Comments on Operating Environment and Future Outlook - Management acknowledged unexpected external headwinds affecting profitability, including supply chain disruptions and currency depreciation [6][7] - The outlook for 2025 includes expectations of mid to high single-digit growth for both net revenues and EBITDA [27] - Management expressed confidence in the company's growth trajectory and commitment to delivering long-term shareholder value [28][46] Other Important Information - The company has proposed a dividend of MXN 250 million for Q4, marking the 20th consecutive dividend since its IPO [27] - Adjusted EBITDA for the full year increased by 2%, despite a decline in Betterware Mexico's EBITDA [24] Q&A Session Summary Question: Inventory levels and future expectations - The company experienced inventory shortages in the first half of the year and built up inventory in the second half due to rising freight costs and supply chain disruptions [49] - Normalized inventory levels are expected to be around MXN 2,000 million instead of MXN 2,500 million by the end of 2024 [55]

Financial Data and Key Metrics Changes - The company reported a revenue growth of 11.1% in Q4 2024 compared to the same period last year, driven by strong performance in Jaffra Mexico [3][11] - For the full year 2024, consolidated revenue increased by 8.4% compared to 2023, with Jaffra Mexico achieving a 13% increase and Better World Mexico a 4.6% increase [4][14] - EBITDA increased by 2% to RUB 2.8 billion versus 2023, although it was slightly below the low end of the guidance range [4][18] - Adjusted earnings per share grew by 10.5% in Q4 and 17.3% for the full year, supported by lower interest expenses and gains on derivative instruments [20] Business Line Data and Key Metrics Changes - Jaffra Mexico experienced a remarkable 22.2% revenue growth in Q4, while Better World Mexico showed resilience with a 1.5% growth [3][12] - Jaffra U.S. saw a revenue decrease of 17.6% in U.S. dollars, primarily due to challenges with the implementation of Shopify Plus [13] - Better World Mexico's EBITDA surged by 31.8% in Q4, with a margin expansion of 508 basis points [18] Market Data and Key Metrics Changes - Better World Mexico holds an estimated 4% market share in the household product market, with plans to deepen market penetration [5] - Jaffra Mexico's gross margin improved significantly, rising to 76.3%, driven by a favorable product mix and pricing strategy [17] Company Strategy and Development Direction - The company aims to consolidate its operations in Mexico, focusing on expanding market share and enhancing operational efficiency [25][26] - Plans for international expansion include positioning brands in the U.S. market and entering Latin America, starting with Ecuador [29][30] - The company is committed to inorganic growth by exploring acquisitions that complement existing brands [32] Management's Comments on Operating Environment and Future Outlook - Management acknowledged external challenges, including supply chain disruptions and rising costs, but expressed confidence in the company's resilience and growth potential [19][21] - The target for 2025 includes mid to high single-digit growth for both net revenues and EBITDA [21] Other Important Information - The company plans to launch a new online training program for its sales force and enhance digital capabilities [28] - A dividend of Ps. $250,000,000 for Q4 has been proposed, marking the twentieth consecutive dividend since the 2020 IPO [20][21] Q&A Session Summary Question: Inventory levels and normalization - Management indicated that inventory levels rose due to previous shortages and rising costs, with expected normalized levels around MXN 2,000 million for 2024 [37][44]