Betterware de México(US:BWMX)2025-10-23 22:32Financial Data and Key Metrics Changes - Revenue grew 1.4% year-over-year, while EBITDA increased by 22%, with the margin expanding by 362 basis points to 21.4% [4][19] - Free cash flow conversion remained strong at 77% of EBITDA, reflecting financial discipline and a healthy balance sheet [4] - Adjusted net income increased by 71% compared to Q3 2024, driven by higher operating profits and lower net interest expenses [20] - Free cash flow increased by 32.6% year-over-year, expected to reach an annual rate of 60% free cash flow to EBITDA by year-end [21] Business Line Data and Key Metrics Changes - Betterware Mexico's sales decreased by 5.3% year-over-year due to softer demand, but profitability remained solid [6][7] - Jafra Mexico's revenue increased by 8% year-over-year, with EBITDA growing by 31% and a margin of 24% [10] - Jafra US showed sequential improvement, with stable revenue and a strong month in September, achieving 30% year-over-year growth [12][13] Market Data and Key Metrics Changes - The Mexican consumer market has shown volatility, with consumption growth lessening and trends declining [41][42] - The Andean and Central American direct selling markets are estimated to be MXN 4.5 billion in total size, presenting significant growth opportunities [15] Company Strategy and Development Direction - The company has defined five strategic pillars for growth: strengthening leadership in the Mexican market, regional expansion, new brands and categories, activating digital person-to-person selling, and maintaining financial strength [5][17][18] - The focus is on optimizing pricing, reducing inventories, and refreshing product catalogs to strengthen commercial fundamentals [7][8] - Plans to launch Betterware in Colombia in early 2026 to strengthen presence in Latin America [15] Management's Comments on Operating Environment and Future Outlook - The external environment remains challenging, but the company is confident in its business model's resilience and profitability [25] - Management aims to maintain strong profitability and cash flow while pursuing growth and market share [42] - The company is investing in technology advancements, including generative AI, to enhance operational efficiency [46] Other Important Information - The company has reduced total debt from MXN 6,700 million to MXN 5,200 million, with a net debt to EBITDA ratio falling from 3.1 times to 1.8 times [23][24] - A dividend of MXN 200 million was proposed, marking the 23rd consecutive quarter of dividend payments since going public [22] Q&A Session Summary Question: Inventory reduction and free cash flow - Management aims to reduce inventory to around MXN 2,100 million by year-end, down from MXN 2,500 million at the start of the year [32][33] Question: Impact of stronger peso on margins - The company is benefiting from a strong peso and lower freight costs, allowing for more aggressive pricing to drive demand [35] Question: Jafra's expansion strategy - Jafra is focusing on direct ownership for expansion, hiring experienced management for new regions [37] Question: Insights on the Mexican consumer - The Mexican consumer has been sluggish, with volatile spending patterns, but the company remains focused on profitability and market share [41][42] Question: Sustainability of EBITDA margins - The strong gross margin in Jafra Mexico is not expected to be fully sustainable, but reinvestment will continue to drive growth [44] Question: Technology transformation opportunities - The company is investing in technology, particularly in AI and digital selling platforms, to enhance efficiency and adapt to market trends [46]