BeFra Reports First Quarter 2025 Results

Betterware de México, S.A.P.I. de C.V. (NYSE:BWMX) ("BeFra" or the "Company"), announced today its consolidated financial results for the first quarter 2025. The figures presented in this report are expressed in nominal Mexican Pesos (Ps.) unless otherwise noted, presented and approved by the Board of Directors, prepared in accordance with IFRS, and may include minor differences due to rounding.

Message from the President and CEO

Reflecting on the first quarter of 2025, I want to provide a comprehensive overview of our performance amid an increasingly complex macroeconomic environment, the short-term challenges that we are currently navigating, and the progress that we continued making toward our long-term goals.

During the first quarter, we faced revenue pressure across our business, particularly in Mexico. The broader economic environment—characterized by deteriorating consumption trends, lower consumer confidence, and reduced household discretionary spending—resulted in a decline in volumes sold and ultimately weighed on our revenues, which ended the quarter with a 2.9% decrease versus last year. These economic factors impacted Betterware Mexico's revenue, which decreases 9.8%, while Jafra Mexico posted a 1.1% increase. The macroeconomic landscape in Mexico not only reduced demand for our products but also led to a reduction in our Associate and Distributor base, alongside lower activity levels across both brands.

Profitability was also impacted by a prevailing environment of uncertainty, particularly because the depreciation of the Mexican peso led to higher costs of imported products and some raw materials. This cost pressure affected our profitability in two ways primarily - an immediate impact on gross margin and, to protect profitability, the implementation of price increases for certain SKUs. The price adjustments, while necessary, created additional pressure on customer demand.

Despite the current macroeconomic challenges, our agile business model and financial strength provide resiliency, as BeFra has consistently demonstrated during adverse economic cycles in the past. We believe that BeFra's flexible and low fixed-cost structure, financial discipline, a now diversified business portfolio, as well as steps we have taken to more actively engage our salesforce, will continue giving us the agility needed to respond to the rapidly changing conditions in our markets today.

While we are acting with caution in the short term, we remain fully committed to our long-term vision and growth strategy, continuing to advance on key strategic initiatives that position us for stronger performance when the macroeconomic landscape stabilizes and improves. Our international expansion remains a priority, and we are confident in the potential of our core business in Mexico as well as our entry into new markets in Latin America and the United States.

Jafra US had a slow start to the year, especially in January and February, amid cautious consumer sentiment—particularly within the Hispanic community. However, we saw a meaningful recovery in March. With the Shopify+ platform now fully implemented and other operational improvements in place, we are seeing the first signs of this business's recovery. Although we remain cautiously optimistic, due to current macro uncertainty, we believe it has strong mid to long-term potential, given the size and growth of the US beauty market.

The expansion of Betterware in Latin America is progressing well, with Guatemala showing encouraging signs of growth, and Ecuador on track to launch in May of this year. Betterware US is currently facing uncertainty due to recent policies introduced by the country's new administration. Accordingly, we have decided to pause operations for the time being.

Across our businesses, we are executing with operational discipline, preserving financial flexibility, and focusing our resources on areas with the highest strategic potential. BeFra's brands remain strong, our sales model is effective - particularly in challenging operating environments such as the current one - and we believe that our Company is well-positioned to capture renewed growth when economic and market conditions improve. We will continue to operate with caution in the near term—remaining vigilant and agile—while steadfastly advancing toward our long-term goals.

Andrés Campos Chevallier

President and CEO BeFra Group

Q1 2025 Select Consolidated Financial Information

• Net revenue decreased 2.9% year over year, primarily driven by a decline in sales from Betterware Mexico and slower-than-expected, yet still positive, growth at Jafra Mexico. Sales for both brands were tempered by weak consumer spending amid widespread macroeconomic uncertainty. A corresponding decrease in sales volume was also due to a reduced Distributors and Associates base at both brands in Mexico during the quarter, a decrease that was a result of the aforementioned macroeconomic environment.
• Gross margin declined 353 basis points compared to the prior year, mainly due to margin pressure in Betterware Mexico and Jafra Mexico that resulted from higher supply and raw material costs related to the depreciation of the Mexican Peso, which fell an average of 20.3% year over year (YoY) versus the U.S. dollar from $16.98 to $20.42 in the quarter.
• EBITDA decreased 29.1% YoY, primarily at the Betterware and Jafra Mexico business units, reflecting lower sales and compressed margins. Of the 567 bps EBITDA margin contraction, ~350 bps came from the reduction in gross margin explained above; ~150 bps was due to lower sales; and ~60 bps came from an increase in administrative expenses related to one-time expenses at Betterware and Jafra Mexico. As with revenue, given the ongoing economic uncertainty and persistent weakness in consumption levels, the Company remains cautious about its revenue and EBITDA performance for the remainder of the year.
• Negative Free Cash Flow (FCF) for the quarter was primarily due to extraordinary cash outflows. Historically, BeFra has converted ~60% of EBITDA to FCF, and ~40% in the first quarter due to seasonality. Based on this trend, the Company would have generated ~$215M of FCF. However, during the quarter there were extraordinary uses of cash, mainly by Jafra Mexico, resulting from increases in working capital. The increase in working capital was primarily driven by higher inventory levels related to product investments of ~$190M under rebranding and innovation strategies, although these levels are expected to decrease during the remainder of the year. FCF was also impacted by a ~$90M tax payment related to the difference between total taxes incurred versus provisional tax payments by Jafra, which did not occur in Q1 2024.
• Net Income decreased 48.7% in Q1 versus last year's quarter, reflecting the combined impact of lower sales and the decrease in EBITDA explained above. In addition, financial costs had a positive ~$26M impact on net income, due to a decrease in net interest expenses that resulted from lower interest rates, as well as a positive ~$21M in net currency effects related to the implementation of hedge accounting. Also impacting net income was higher taxes paid, which had a negative effect of ~$33M in the quarter.

For more details, please refer to the results of each business unit.

Financial Strength and Performance

Balance sheet at the end of Q1 2025.

Capital Allocation

Strategic Focus on the Balance Sheet: BeFra's balance sheet remains a priority. As of March 31, 2025, Net Debt-to-EBITDA was 2.08x, an increase from 1.78x at the end of Q1 2024 but within the targeted range of the Company's deleveraging policy.

Quarterly Dividends and Shareholder Value: Despite BeFra's results year-to-date, management remains committed to enhancing shareholder value through quarterly dividends. Given the current uncertainty related to economic and consumption levels in both Mexico and the U.S., the Company has a cautious short-term outlook. Accordingly, it is taking a more conservative approach to cash management. As part of management's strategy to strengthen FCF to help ensure that BeFra remains well-positioned to seize any organic and inorganic growth opportunities that may emerge, the Board of Directors has proposed a Ps. 200M dividend for Q1 2025, pending approval at the Ordinary General Shareholders' Meeting on April 30, 2025. This dividend is being proposed despite the negative free cash flow in the first quarter, as management and the board believe this situation was temporary and expect free cash flow to normalize in the short term.

2025 Guidance and Long-Term Growth Prospects

Looking ahead, management maintains its 2025 financial guidance and is closely monitoring how economic and market conditions evolve in Mexico and the U.S. in the coming months. Although BeFra remains well-positioned to reach high single-digit growth in net revenue and EBITDA for 2025, the current operating environments introduce a level of uncertainty that could influence management's outlook as the year progresses. Management continues to carefully assess the situations in BeFra's markets and intends to provide quarterly updates as market conditions develop and key decisions are made.

Q1 2025 Financial Results by Business

Betterware Mexico

Key Financial and Operating Metrics

• Net revenues decreased 9.8% YoY in Q1 2025, mainly as a result of the challenging consumer environment in Mexico, one marked by economic uncertainty as well as softening demand and consumption levels, mainly those related to discretionary purchases and exacerbated by the FX headwinds described above. As explained, the depreciation of the Mexican peso resulted in higher supply costs and necessitated price increases that pressured demand for Betterware's products. This marked the first YoY decrease in quarterly revenue since Q3 2023.
• Distributors and Associates bases declined 6.0% and 10.4%, respectively, with activity rates also declining, mainly due to the impact of the price increases, economic uncertainty, and lower consumption in Mexico. Lower-than-expected performance of innovative and promotional products also impacted the bases and activity levels.
• Gross margin decreased 473 basis points year over year, primarily as a result of the abovementioned upward cost pressures. The cost increases were mainly due to the depreciation of the Mexican peso, with COGS increasing 3.5 percentage points, as a result of the change in Betterware's standard cost, which increased from $18.0 to $20.0. In addition to the FX impact, gross margin was affected by heavier reliance on promotional flyers to drive sales volume.
• EBITDA decreased 31.6%, driven by both top-line weakness and lower gross margins. Falling consumer demand and rising operational costs contributed to the decline in profitability. As a result, the EBITDA margin contracted 594 basis points. The decrease in profitability reflects the external macroeconomic environment, FX rate pressure, and consumer uncertainty explained above.
• Reducing excess inventory remains a key operational focus in the coming quarters. Betterware is targeting a 52% decrease in excess inventory for the year, from $529M to $252M. As of Q1, inventory stood at $483M, but is broadly on track with the year-end goal. Continued improvements in catalog planning are expected to support this effort.

Q2 2025 Priorities

• Strategic Pricing and Merchandising. Betterware is adjusting prices across all price levels and implementing new merchandising techniques to better balance affordability with margin protection.
• Promotions. An increase in promotional activity is being implemented to keep the salesforce more engaged and active.
• Salesforce Engagement. Enhancing salesforce coaching and communication through segmentation and data-driven insights to rebuild sales momentum.
• Innovation and Cost Optimization. Strengthening innovation pipeline while reviewing product cost structures to improve accessibility.
• Sourcing Diversification. Monitoring China tensions and advancing alternative sourcing options in Mexico, Southeast Asia, and other geographies.

International Expansion

• Betterware's international expansion strategy continues to make steady progress. In Guatemala, there were signs of a sales recovery in Q1 2025, and the launch of operations in Ecuador this May remains on track.
• Regarding Betterware US, management has decided to place this growth initiative on hold, due to the recently imposed tariffs and weakening consumer sentiment in the U.S.

Jafra Mexico

Key Financial and Operating Metrics

• Net revenues rose 1.1% YoY, a positive outcome considering the difficult macroeconomic backdrop and geopolitical tensions affecting consumer confidence in Mexico. To help offset the impact of lower consumption levels in Mexico, Jafra implemented volume and price promotions that caused a shift in the sales mix toward product categories that have lower price points, affecting both sales and margins.
• Gross margin declined 398 basis points, primarily due to a tough comparison against the unusually high margin in Q1 2024. Despite this YoY decline, the gross margin of 73.5% remained within Jafra Mexico's historical range, although near the lower end of this range. The margin decrease also reflected a strategic pricing investment of ~120 basis points that was aimed at driving volume growth in the Skin Care and Color categories.
• EBITDA declined 25.2%, in line with the impact of lower pricing and increased promotion expenditures. The Company planned this trade-off as part of its growth strategy, with a focus on gaining market share amid the abovementioned economic uncertainty in Mexico.

Q2 2025 Priorities

• Product Mix Optimization. Adjusting product mix and pricing strategies to recover margins while sustaining volume in resilient product categories.
• Brand Renovation and Innovation. Continuing brand renovations and launching new products to enhance brand relevance and appeal.
• Ease of Doing Business. Applying Betterware's playbook to simplify processes and improve the experience of Distributors and Associates, helping attract younger generations while retaining Jafra's core base.
• Queretaro Manufacturing Advantage. Leveraging Jafra's plant to support both the Mexican and U.S. markets efficiently.

Jafra US

Key Financial and Operating Metrics

• Net revenues decreased 4.7% in USD YoY. Despite early challenges in the quarter, due to political transitions in the U.S. and technical issues with Shopify+ that had disrupted sales operations, the business saw a strong sales rebound in March of 27.0% YoY. It was the largest monthly sales increase since 2023 and was the strongest month for reactivation. The late-quarter surge helped close the performance gap and significantly boosted overall quarterly results. In Mexican pesos, sales increased by 14.6% in the quarter, as a result of the currency's 20.3% depreciation versus the prior year's quarter.
• Gross margin declined slightly by 18 basis points, reflecting increases in some promotional and operational costs. Nevertheless, Jafra US managed to sustain strong product-level margins, even amid disruptions earlier in the quarter. A change in Jafra's shipping policy helped offset some costs — by charging for shipping, it has been able to recover more through order fees.
• EBITDA declined 9.3% to a negative $633,000 U.S. dollars. However, Jafra U.S. maintained disciplined expense controls, in addition to benefiting from the strong recovery in sales later in the quarter. It is important to note that EBITDA for the quarter was impacted by extraordinary expenses resulting from legal settlements that totaled $300,000 USD in March. When excluding these one-time costs, EBITDA for the quarter would have been -$333,000 USD, a 42.5% improvement versus last year's quarter.
• EBITDA margin decreased by 73 basis points only, reflecting operational resilience and the March recovery in sales.

Q2 2025 Priorities

• New Compensation Plan. The new plan will be launched in May to strengthen consultant recruitment and retention.
• Catalogue Redesign. Introducing a refreshed catalogue with improved merchandising, to enhance product visibility and drive sales conversion.
• Shopify+ Enhancements. Upgrading platform functionality to improve usability and provide better access to performance data.

Appendix

Financial Statements

Key Operating Metrics

Betterware Mexico

Jafra Mexico

Jafra US

Key Financial Metrics

Consolidated

Betterware Mexico

Jafra Mexico

Jafra US

BeFra will hold a conference call to discuss its results at 17:30 p.m. (Eastern Time) on Thursday, April 24, 2025. To participate in the conference call, please dial:

Toll-Free US:

1-877-451-6152

Toll International:

1-201-389-0879

Webcast:

https://viavid.webcasts.com/starthere.jsp?ei=1714682&tp_key=cee0675057

Passcode:

13753063

About Betterware

Founded in 1995, Betterware de Mexico is the leading direct-to-consumer company in Mexico focused on offering innovative products that solve specific needs related to household organization, practicality, space-saving, and hygiene. Through the acquisition of JAFRA on April 7, 2022, the Company now offers a leading brand of direct-to-consumer in the Beauty market in Mexico and the United States where it offers Fragrances, Color & Cosmetics, Skin Care, and Toiletries. The combined company possesses an asset-light business model with low capital expenditure requirements and a track record of strong profitability, double digit rates of revenue growth and free cash flow generation. Today, the Company distributes its products in Mexico, and with its recent acquisition, it now has gained presence in the United States through JAFRA's portfolio of products.

Cautionary Statement Regarding Forward-Looking Statements

Matters discussed in this press release may constitute forward-looking statements. Forward- looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements, which are other than statements of historical facts. The words "believe," "anticipate," "intends," "estimate," "potential," "may," "should," "expect" "pending" and similar expressions identify forward- looking statements. The forward-looking statements in this press release are based upon various assumptions. Although we believe that these assumptions were reasonable when made, because these assumptions are inherently subject to significant uncertainties and contingencies which are difficult or impossible to predict and are beyond our control, we cannot assure you that we will achieve or accomplish these expectations.

View source version on businesswire.com: https://www.businesswire.com/news/home/20250424588804/en/

Company:

BeFra IR

[email protected]

+52 (33) 3836 0500 Ext. 2011

InspIR:

Investor Relations

Barbara Cano

[email protected]