Betterware de Mexico SAPI de CV Q3 FY2024 earnings call

• Luis Campos noted BeFra delivered strong results despite macroeconomic challenges, with adjusted EBITDA up 11.7%, and announced 19th consecutive dividend. - Andres Campos discussed business unit performance: Betterware Mexico had 3.2% QoQ growth, Jafra Mexico and U.S. showed growth, with Jafra U.S. launching Shopify Plus; Betterware Mexico to expand SKUs to 420, prepare for Q4 holidays, and improve merchandising; Jafra U.S. to focus on skincare innovation, Shopify site growth, and building physical presence. - Alejandro Ulloa addressed adjusted EBITDA, margin impacts from peso depreciation and freight costs, Q4 margin guidance of 58%-59%, strategic investments in international expansion, and financial position including net debt and dividend proposal.

BeFra's net revenues grew 6.6% Y-o-Y and 7.4% over the first nine months of 2024. Adjusted EBITDA increased 11.7%. The three business units all saw net revenue growth. Betterware Mexico: net revenue grew 3.2% this quarter and 5.7% YTD, with innovation accounting for 26% of net revenue (up from 18% same quarter last year). Jafra Mexico: revenue up 9.2% QoQ and 9.8% YTD. Jafra U.S.: net revenue up 3.4% QoQ in USD and 3.3% YTD in USD; launched Shopify Plus in Sept, though initial user adoption affected associate activity in Sept.

• BeFra expects gross margin in Q4 to be 58%-59% assuming freight and exchange rates stay as of end-Sept. - Full year net revenue guidance on track. - Strategic investments in international expansion made YTD, with adjusted EBITDA excluding investments showing stronger margins. - Board proposed a MXN250 million dividend for Q3, subject to approval.

• Macroeconomic factors like depreciation of the Mexican peso and rising freight costs impacted margins. - Volatility in gross margin due to sharp fluctuations in exchange rates and freight costs in recent years. - Strategic investments in international expansion are in initial phases, carrying some risk.

Q: How much of the increase in SKUs is for new categories and lower-priced items?

A: The increase in SKUs attacks new categories while keeping core categories, and introduces lower-priced items to balance volume and prices.

Q: Are you comfortable with inventory levels now? How is inventory in Europe for holidays?

A: Inventories are set for holiday season, prepared to avoid stock-outs like in Q2, with inventory new and for 4Q.

Q: Update on Betterware USA and Peru rollout?

A: Betterware U.S. is in piloting phase, Peru setup ongoing with launch expected by end of Q1 or Q2 2025.

Q: Learnings from US expansion, cost structure shift?

A: Hispanic market reaction positive, cost structure more variable with growth and fixed expense optimization; Jafra fixed expenses reduced post-acquisition.

Q: Acquisition strategy with 30%-40% free cash flow for acquisitions?

A: Look to add categories/companies in same category or expand internationally instead of starting from zero.

Q: Inventory for 2025?

A: Inventory buildup was for Q2 stock-out shock and freight cost disruptions; if supply chain stabilizes, no need for additional inventory investments in future quarters