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01/11 16:21
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call reflects a positive sentiment overall, with strong financial performance, including significant EBITDA growth and improved margins. The company is making strategic expansions and product innovations, and has a solid financial health with reduced debt. The Q&A highlights effective cost management and strategic initiatives in technology and market expansion. The dividend resumption and positive guidance further enhance the outlook. Despite some concerns about consumer trends and unsustainable margins, the overall sentiment leans towards a positive stock price movement.
Revenue Revenue grew 1.4% year-over-year. This growth was achieved despite softer consumer trends in Mexico and the U.S., showcasing the strength and efficiency of the business model and strategies.
EBITDA EBITDA increased by 22% year-over-year, with the margin expanding 362 basis points to 21.4%. This improvement was driven by strong execution across the group.
Free Cash Flow Conversion Free cash flow conversion remained strong at 77% of EBITDA, reflecting continued financial discipline and a healthy balance sheet.
Betterware Mexico Revenue Sales at Betterware decreased 5.3% year-over-year due to softer demand in Mexico, particularly for discretionary items. Actions such as optimizing pricing, reducing inventories (down 17% year-over-year), and refreshing catalog merchandising techniques were taken to mitigate these effects.
Jafra Mexico Revenue and EBITDA Revenue increased 8% year-over-year, and EBITDA grew 31%, reaching a margin of 24%. This growth was driven by an expanded consultant base (up 2% quarter-over-quarter) and a 10% increase in the average order size.
Jafra U.S. Revenue Revenue in September grew 30% year-over-year, marking the strongest month in the last three years. This improvement reflects stability and a positive trajectory after a couple of quarters of decline.
Betterware Ecuador Revenue Revenue grew around 20% month-over-month since its launch in May, exceeding expectations.
Betterware Guatemala Revenue Sales grew 32% year-over-year, driven by the appointment of a new management team in September of the previous year.
Adjusted Net Income Adjusted net income increased 71% year-over-year, driven by higher operating profit, lower net interest expenses, and lower provisional income tax for the quarter.
Free Cash Flow Free cash flow increased 32.6% year-over-year and is expected to reach an annual rate of 60% free cash flow to EBITDA by the end of the year.
Total Debt and Net Debt-to-EBITDA Ratio Total debt decreased from MXN 6,700 million at the beginning of 2022 to MXN 5,200 million at the end of Q3 2025. The net debt-to-EBITDA ratio fell from 3.1x to 1.8x during the same period, reflecting effective debt management.
Product Innovation: Betterware introduced new products, including a limited edition Barbie Katrina in collaboration with Mattel, which sold out in two weeks. Jafra launched the Evil Queen's flash collection with Disney, a new BioLab dermo-cosmetic line for dark spot removal, and revamped its Royal Body line, increasing volume by over 50%.
Digital Tools: Betterware launched a VIP program for associates and an idea section in the Betterware Plus app for product suggestions. Jafra adopted Betterware's outbound messaging system to enhance associate engagement.
Regional Expansion: Betterware expanded operations in Ecuador and Guatemala, exceeding expectations with 20% month-over-month revenue growth in Ecuador and 32% year-over-year growth in Guatemala. Plans to launch in Colombia in early 2026 were announced.
U.S. Market Stability: Jafra U.S. achieved stability with September marking its strongest month in three years, including 30% year-over-year revenue growth.
Inventory Management: Betterware reduced inventories by 17% year-over-year, optimizing SKU count to 370 and improving revenue, margins, and inventory management.
Profitability and Cash Flow: EBITDA grew 22% year-over-year with a margin of 21.4%. Free cash flow conversion was 77% of EBITDA, and net leverage ratio decreased from 1.97x to 1.8x.
Strategic Pillars: BeFra outlined five strategic pillars: strengthening leadership in Mexico, regional expansion, new brands and categories, digital person-to-person selling, and financial discipline.
Digital Transformation: A new digital transformation team was formed to adopt technologies like generative AI to enhance the person-to-person selling model.
Softer consumer environment in Mexico and the U.S.: The company faces challenges due to weaker consumer demand in its key markets, particularly impacting discretionary items.
Decline in Betterware sales: Betterware's sales decreased by 5.3% year-over-year, attributed to softer demand in Mexico, which has affected discretionary spending.
Extraordinary legal expenses in Jafra U.S.: Jafra U.S. incurred extraordinary legal expenses related to pre-acquisition cases, impacting profitability and delaying breakeven.
Inventory management challenges: Efforts to reduce inventories by 17% year-over-year indicate ongoing challenges in managing stock levels efficiently.
FX effects on income: Income was negatively impacted by foreign exchange effects due to new hedge accounting guidelines, affecting gross margins.
Debt levels and leverage: Although debt levels have been reduced, the company still operates with a net debt-to-EBITDA ratio of 1.8x, which requires continued focus on debt reduction.
Regulatory and legal risks: Legal expenses in Jafra U.S. highlight potential regulatory and legal risks that could arise in other markets or acquisitions.
Strengthening leadership in the Mexican market: Betterware and Jafra hold around 4% market share in home solutions and beauty markets, respectively, with substantial room for growth. Actions include optimizing pricing, reducing inventories, and refreshing catalog merchandising techniques to set the stage for future volume recovery.
Regional expansion: Plans to launch Betterware in Colombia in early 2026, leveraging the scalable business model proven in Ecuador and Guatemala. The Andean and Central American direct selling markets represent a $4.5 billion opportunity.
New brands and categories: Actively seeking acquisitions to strengthen BeFra's market position and expand into new product categories. Jafra's acquisition success serves as a model for future acquisitions.
Digital transformation: Formation of a new digital transformation team to adopt emerging technologies like generative AI and agentic AI, enhancing the person-to-person selling model.
Financial strength and discipline: Focus on tight cost management, efficient working capital, and healthy leverage ratios to support growth without compromising financial health.
Revenue and profitability expectations: Expecting 1% to 5% EBITDA growth for 2025, driven by strong recovery after a challenging first quarter. Free cash flow to EBITDA is expected to reach 60% by year-end.
International expansion: Encouraged by results in Ecuador and Guatemala, with plans to expand into Colombia in 2026. Latin America represents a significant growth opportunity.
Jafra U.S. trajectory: Jafra U.S. recorded its strongest month in three years in September, with 30% year-over-year revenue growth. Profitability is expected to improve as extraordinary legal expenses are resolved.
Debt management: Net debt-to-EBITDA ratio expected to decrease to 1.6x by year-end, down from 1.8x in Q3 2025.
Product portfolio revamp: Jafra aims to complete 80% of its portfolio revamp by the first half of 2026, enhancing brand image and driving sales.
Dividend Payment: The Board proposed a MXN 200 million dividend that was approved at the General Stockholders' Meeting held on October 21. This represents the 23rd consecutive quarter of paying dividends since becoming public in 2020.
Dividend History: The 2021 and 2022 dividends were positively impacted by the pandemic demand surge, while 2023 was negatively impacted following the post-pandemic decline and the 2022 Jafra acquisition. The 2024 and 2025 dividends have resumed, representing between 30% to 40% of EBITDA.
The earnings call reflects a positive sentiment overall, with strong financial performance, including significant EBITDA growth and improved margins. The company is making strategic expansions and product innovations, and has a solid financial health with reduced debt. The Q&A highlights effective cost management and strategic initiatives in technology and market expansion. The dividend resumption and positive guidance further enhance the outlook. Despite some concerns about consumer trends and unsustainable margins, the overall sentiment leans towards a positive stock price movement.
The earnings call reveals strong financial performance with revenue and EBITDA growth, improved margins, and consistent dividend history, indicating a positive outlook. Despite some concerns about macroeconomic uncertainties and unclear management responses on the Chinese market, the company's strategic initiatives and optimistic guidance outweigh these issues. The stock is likely to experience a positive movement, driven by revenue growth, improved financial metrics, and shareholder returns.
The earnings call reveals several negative factors: a decline in revenues and EBITDA, increased net debt, and negative free cash flow. The Q&A session highlighted management's uncertainty about inventory and returns, and their vague responses failed to instill confidence. Despite a proposed dividend, the economic and competitive pressures, along with profitability risks, outweigh positive aspects. The market is likely to react negatively to the weak financial performance and cautious outlook, leading to a predicted stock price decline of -2% to -8% over the next two weeks.
The earnings call highlights several negative factors: revenue and EBITDA declines, gross margin compression, negative free cash flow, and a high net debt to EBITDA ratio. Economic volatility, consumer trend softening, and currency depreciation are significant concerns. The Q&A reveals management's uncertainty about improving returns and vague responses about deceleration timing. Despite a proposed dividend, the overall sentiment is negative, especially with weak financial results and economic challenges, suggesting a stock price decline of -2% to -8%.
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