Betterware de Mexico, S.A.P.I. de C.V.

Good afternoon. Thank you for joining us and welcome to BEFRA's third quarter 2025 earnings conference call. Before we begin, the company would like to 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 questionary language and safe harbor statement in today's earnings release. as well as the risk factors outlined in BELFRA's SEC filings. BELFRA undertakes no obligation to update any forward-looking statements. A reconciliation of and the other information regarding non-GAAP financial measures discussed on the call can also be found in the earnings release as well as the investor section of the company's website. Present on today's call are BELFRA's President and Chief Executive Officer, Andres Campos, and Chief Financial Officer, Rodrigo Munoz. I will now like to turn the call over to Balfour's President and CEO, Andres Campos.

Thank you, operator, and good afternoon, everyone. I am pleased to share our results for the third quarter of 2025, a quarter that once again demonstrates the strength, resilience, and agility of our business model. Before we begin our review, I would like to note that we are conducting today's webcast with a slide presentation to help better convey the relevant information that we want to share with you in our quarterly results conferences. Turning to slide four, let me begin by sharing some overall highlights for the quarter. Despite the softer consumer environment in Mexico and the U.S., We delivered another quarter of growth, solid profitability, and strong cash generation. Our operations continue to be executed with discipline, focus, and passion, while driving efficiency and reinforcing the foundations of our long-term strategy. During the quarter, revenue grew 1.4% year-over-year, and EBITDA grew 22%. with the margin expanding 362 basis points to 21.4% EBITDA. Our free cash flow conversion remains strong at 77% of EBITDA, reflecting our continued financial discipline and healthy balance sheet. These results were driven by strong execution across the group. Better World Mexico maintains solid profitability, Jafra Mexico continued to lead growth, Jafra U.S. delivered sequential improvement, and our startup operations in Ecuador and Guatemala exceeded expectations. It is important to highlight that we have continued to decrease inventories, freeing up space for future innovation, and our net leverage ratio decreased sequentially from 1.97 to 1.8 times. All of this confirms that our strategy is on the right track. We have built a strong and diverse business group, one that is not only positioned to capture long-term opportunities, but also resilient in the face of short-term challenges. To talk about our results and progress on slide five, I am very excited to share with you what we have defined as BEFRA's five strategic pillars, which will guide our growth and transformation over the next years. As you know, in the past four years, we have transformed the BEFRA group from being one single company in one country to becoming a diverse group of companies with multiple brands and categories, and a diverse geographic footprint. Accordingly, these five pillars represent the next stage of BEFRA's evolution through which we will capitalize on opportunities that lay ahead of us. For today's call and future ones, we will discuss our results in this context to explain the progress that we are making across these pillars. On slide six, the first pillar is strengthening our leadership in the Mexican market. It is important to remember that both BetterWear and Jafra hold around 4% market share in each of the home solutions and beauty markets, which means there is still substantial room for growth. Turning to slide seven, Third quarter 2025 sales at BetterWear decreased 5.3% year over year, as Mexico's software demand has had a more significant impact on discretionary items in particular. That said, we remain focused on fine-tuning our internal strategies to mitigate these effects and to get BetterWear back on track to consistent growth. Our focus this quarter was on optimizing pricing reducing inventories, which fell 17% versus last year's quarter, and refreshing our catalog's merchandising techniques. These actions are strengthening the commercial fundamentals and set the stage for future volume recovery. On slide eight, we've showcased some of BetterWear's most relevant innovations during the third quarter of 2025. Innovation remains an important driver for our success, and this slide provides just a few examples. This quarter, we continue to advance product innovation across all of our major categories, ensuring our portfolio remains at the forefront of evolving customer needs, including stellar new innovations such as the limited edition Barbie Katrina we launched during the quarter with Mattel, which sold out in just two weeks. On slide nine, behind BetterWare's revenue and profitability strength, we'd also like to point out three actions implemented during the quarter that showcase our continuous advancements. First, we reconfigured our catalog, decreasing our total SKU count to 370 including decreasing the products in our promotional portfolio. This move seeks to make our SKUs more productive and our products more visible, with direct improvements in revenue, margins, and inventory management. Second, Better Work has launched a new VIP program for its associates, which segments them according to their performance level. The new program better motivates associates by rewarding top sellers with more benefits. Finally, we launched an idea section in our proprietary BetterWear Plus app, which all associates and distributors can now use to send us product ideas or reviews. We expect this new feature to have a significant impact on ongoing innovation at BetterWear. Turning to slide 10, the Jafra Mexico business continues to be one of our key growth engines. Revenue increased 8% year over year, and EBITDA grew 31%, reaching a margin of 24%. Although we expect a run rate margin of 20% to 21%, this reflects our ability to strengthen profitability while driving growth. Our consultant base expanded 2% quarter over quarter, while the average order increased by roughly 10%. We continue to show how our business model proves highly effective when applied to new brands and product categories. Almost four years since its acquisition, Jafra is set to close the year with almost 50% of higher revenues than the year before we had acquired it, which is particularly relevant when compared to its almost 15 previous years without growth. Turning to slide 11, we highlight several of Jafra's most relevant product innovations for the third quarter. We launched our first collaboration with Disney, the Evil Queen Splash Collection. which delivered outstanding consumer engagement and strong sales performance. We also continued to expand our successful new Biolab dermocosmetic brand with the introduction of our first dark spot removing product line, which performed exceptionally well from the outset. In additional, we completed the revamp of our royal body line featuring updated packaging and a refreshing brand image, resulting in a more than 50% increase in volume compared to prior versions. Importantly, by year end, we expect to have revamped approximately 80% of Jafra's portfolio under the new brand image, with full completion anticipated by the first half of 2026. Finally, on slide 12, we would like to highlight two relevant operational advancements for Jafra, mainly the success of the new printed purple guide for Mexico, which explains Jafra's incentive program in a much simpler way than it used to. Jafra also adopted BetterWare's outbound messaging system to associates, which we use to remind them of specific actions they can take to win more customers and orders, according to their individual context. We continue to make other advancements to Jafra's model to make it more modern and effective. Please see slide 13. Our second pillar is regional expansion. which we are executing by having BEFRA's successful business model replicated across the U.S. and Latin American markets. On the following slide, starting with the U.S., Jafra achieved a quarter of stability versus last year. After a couple of quarters of decline, we see the trajectory of Jafra U.S. continues to improve each quarter. While the third quarter usually has a seasonal decline in revenue versus second quarter, this year it remains stable, demonstrating the strength of the trajectory. It is important to highlight that in September, the business recorded its strongest month in the last three years, including 30% year-over-year growth in revenue. With regard to profitability, Jafra U.S.' 's losses reflect extraordinary legal expenses related to cases and issues that had begun before we acquired the company. Without those expenses, the company operates at a break-even point and is getting close to generating profits. On slide 15, as we've mentioned before, we have implemented three main measures to achieve Jafra U.S.' 's positive trajectory. First, the adoption of Shopify Plus platform, which is now complete and an important source of growth for all associates and distributors. In addition, we implemented a profound change in Jafra US's incentive program, now called the Purple Guide, which we launched in May and which has started to kick in with good results. Finally, on slide 16, we redesigned the product catalog to make it more attractive and yield higher sales conversion rates. On the next slide, you will note that since its launch in May, BetterWear Ecuador has exceeded expectations, reaching almost 6,000 active associates, 380 distributors, and revenue growing around 20% month over month. In BetterWear Guatemala, sales grew 32% year over year, following the appointment of a new management team that has been in place since September of last year. Encouraged by the promising results in both countries, we are moving forward with plans to launch BetterWear in Colombia in the beginning of 2026, with the aim of strengthening our presence across Latin America.

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