Executive Summary / Key Takeaways

• Betterware de México (BeFra) has demonstrated significant operational resilience and strategic agility, achieving a robust return to top-line and EBITDA growth in Q2 2025 after a challenging first quarter, driven by internal initiatives and an expanding associate base.
• The company's diversified portfolio, anchored by Betterware (home goods) and Jafra (beauty and personal care), is a core strength, with Jafra Mexico consistently delivering strong growth and Betterware Mexico showing a recovery fueled by aggressive pricing strategies and product innovation.
• BeFra is strategically expanding its international footprint in Latin America, successfully launching Betterware Ecuador and assessing Colombia, while prudently halting further growth investment in Betterware U.S. due to tariff-related uncertainties.
• Despite ongoing macroeconomic headwinds and FX volatility, BeFra maintains its full-year 2025 guidance for 6-9% net revenue and EBITDA growth, supported by expected market stability, operational efficiencies, and a steadfast commitment to free cash flow generation and consistent shareholder dividends.
• Technological advancements, including enhanced sales applications, digital payment solutions, and business intelligence, serve as critical differentiators, empowering its direct selling force and bolstering operational efficiency, thereby fortifying its competitive moat.

The BeFra Story: A Direct Selling Powerhouse Forging Ahead

Betterware de México, S.A.P.I. de C.V. (BeFra), a leading direct-to-consumer company, has built a formidable presence in Mexico's home organization and beauty sectors, with an expanding footprint across Latin America. Celebrating its 30th anniversary in 2025, Betterware Mexico has a rich history of growth, achieving an 18% compound annual growth rate (CAGR) in revenue and 19% in EBITDA over 23 years leading up to 2024. This growth saw its associate base swell from 5,000 to 675,000, reaching an estimated 8 million Mexican households. The company's 2020 U.S. IPO marked a pivotal moment, accelerating its expansion and diversifying its portfolio with the strategic acquisition of Jafra in 2022. This move proved highly successful, with Jafra Mexico's sales multiplying by 1.4 times and profitability by 1.6 times under BeFra's leadership.

BeFra operates within the vibrant direct selling and consumer product goods industries, leveraging the growing gig economy trend. Its business model, centered on person-to-person selling, is inherently resilient, allowing distributors and associates to intensify efforts during challenging times without incurring additional costs to the company. This asset-light model provides a crucial advantage in protecting profitability and cash flow.

Competitive Landscape and Technological Edge

BeFra navigates a competitive landscape that includes both direct selling peers and the broader e-commerce market. Direct competitors such as Tupperware Brands Corporation (TUP), Natura &Co Holding S.A. (NTCO), and Herbalife Ltd. (HLF) operate with similar direct selling models, though with varying geographic and product focuses. BeFra's strength lies in its localized expertise and deep market penetration in Mexico, where Betterware holds an estimated 4% market share in household products and Jafra aims to become the number one direct sales beauty brand.

BeFra's technological differentiators are central to its competitive strategy, empowering its sales force and enhancing operational efficiency. The company consistently invests in its digital ecosystem, which includes:

• Enhanced Sales Applications: The Betterware sales app has seen improved functionality, streamlining the back order process and facilitating digital payments. This directly contributes to increased associate productivity, retention, and average ticket size.
• Personal Tagging System: Rolled out for Betterware Mexico, this system enables more targeted sales support and initiatives, further boosting associate productivity and retention.
• Jafra Plus Integration: For Jafra Mexico, this digital transformation initiative aims to increase and improve the sales force's digital capabilities, making it easier for distributors and associates to conduct business.
• New Catalog Design & Online Training: Jafra U.S. is launching a new catalog design in September 2025, while a new online training program with a renewed learning management system is being rolled out for the sales force across the group.
• Business Intelligence: BeFra leverages data analysis and segmentation for proactive and deeper engagement with its sales force, improving sales coaching and communication.

These technological advancements provide tangible benefits, such as improved sales force engagement, higher conversion rates from redesigned catalogs, and streamlined operations. They collectively create a competitive moat by making BeFra's direct selling model more efficient, attractive, and responsive to market demands, differentiating it from rivals and mitigating the threat from e-commerce platforms. While precise, directly comparable market share figures for all niche competitors are not publicly detailed, BeFra's strong performance in its core markets suggests its technological and operational focus is yielding results.

Operational Excellence and Strategic Pillars Driving Growth

BeFra's strategic direction is built upon five priority fronts, with a strong emphasis on consolidating its Mexican operations and expanding internationally. The "Conquer Mexico" strategy for Betterware Mexico focuses on expanding its 25% home penetration and 4% market share through refining its business model, agile product innovation, and revenue growth management. This includes expanding the product portfolio from approximately 370 to 420 SKUs, introducing lower-priced items to balance price and volume, and preparing for seasonal demand with innovative products. For Jafra Mexico, the strategy involves brand refreshes for core lines like Royal Jelly, Navigo, and Double Nature, product innovation (e.g., BioLab skincare, Galaxy fragrance line), refined pricing, and enhancing the monthly catalog.

International expansion remains a key growth pillar. Betterware Ecuador successfully launched in May 2025, exceeding its Q2 goal with 2,500 active associates by replicating the proven Mexico playbook. Betterware Guatemala also saw positive sales growth in Q2 2025, and BeFra is assessing the Colombian market for entry in 2026, recognizing Central America and the Andean region as significant growth markets. However, the company made a strategic decision in Q1 2025 to halt further investment in growth for Betterware U.S. due to a 45% tariff on Chinese manufactured products and broader U.S.-China trade uncertainties, opting to preserve cash while maintaining minimal operations for existing customers. Jafra U.S., conversely, is undergoing a deep transformation, including a revamped compensation plan and U.S. market-specific innovations like the "Around the World" fragrance collection, with an expectation to reach breakeven by year-end.

Financial Performance: Resilience in Numbers

Following a challenging Q1 2025, BeFra demonstrated significant financial resilience in Q2 2025. Consolidated revenue grew 5.1% year-over-year and 1.8% quarter-on-quarter, with all business units contributing. Consolidated EBITDA increased 3.5% year-over-year to MXN 679 million, achieving a 19.1% margin and returning to normal profitability levels after temporary Q1 effects. Free cash flow generation was strong, rising to MXN 592 million for the quarter, bringing year-to-date conversion to 44.2% of EBITDA.

Segment-specific performance in Q2 2025 was notable:

• Betterware Mexico returned to sequential growth, with revenue up 4% quarter-over-quarter, narrowing its year-over-year decline to negative 1.1%. Its EBITDA margin remained healthy at 19.9%. The associate base expanded by 3.3% quarter-on-quarter to 670,000, marking the first net associate growth since Q1 2021.
• Jafra Mexico delivered double-digit growth, with revenue up 10.9% year-on-year and its EBITDA margin expanding to 21.2%. Its associate base increased by 2.3%, and the average monthly ticket rose over 9%.
• Jafra U.S., despite an 8.9% year-on-year revenue decrease in U.S. dollars, rebounded 15.6% quarter-over-quarter, with its associate base growing 8.5% sequentially. Its gross margin improved to 76% due to a favorable mix of higher-margin products and procurement savings.

These Q2 results stand in contrast to Q1 2025, which saw consolidated net revenues decrease 2.9% year-over-year, a 303 basis point gross margin contraction, and a 29.1% EBITDA decrease, primarily due to a challenging macroeconomic environment and a 20% year-over-year depreciation of the Mexican peso. Full-year 2024 consolidated revenue was within guidance, but EBITDA of MXN 2.8 billion was slightly below the low end of the MXN 2.9 billion guidance, impacted by supply chain challenges, peso depreciation, and increased freight costs.

BeFra's consolidated gross margin in Q2 2025 was 67.1%. Betterware Mexico's gross margin was 55.2%, down 127 basis points year-over-year due to proactive pricing strategies, though a shift towards higher-margin line items is expected to improve margins in the second half of the year. Jafra Mexico's gross margin was 75.3%, down 167 basis points year-over-year due to pricing adjustments for underweighted categories, but remains above historical levels. The company anticipates a steady gross margin of between 58% and 59% for Q4 2024 and the coming years, assuming stable freight costs and exchange rates.

From a liquidity perspective, debt leverage improved in Q2 2025, with the net debt-to-EBITDA ratio at 1.97x, down from 2.08x in Q1 2025. The Board of Directors proposed a MXN 200 million dividend for Q2 2025, marking the 22nd consecutive dividend since its 2024 IPO, underscoring a commitment to shareholder returns. The company aims to lower its net debt-to-EBITDA ratio to 1.5 times or below in 2025.

Comparing BeFra's TTM financial ratios to its direct competitors reveals key insights. BeFra's Gross Profit Margin (TTM) of 67.90% is notably strong, exceeding Tupperware's 64% (2022) and Natura &Co's 65% (2024). Its Operating Profit Margin (TTM) of 10.44% and EBITDA Margin (TTM) of 14.00% also appear robust, especially when contrasted with Tupperware's 5% operating margin and Natura &Co's 4% operating margin, both of which reported negative net profit margins in their respective latest annual periods. BeFra's Net Profit Margin (TTM) of 4.15% further highlights its superior profitability. While BeFra's Debt/Equity ratio (TTM) of 4.64 is higher than Natura &Co's 0.52 (2024), it is important to note Tupperware's negative Debt/Equity ratio of -3.76 (2022), indicating negative equity. BeFra's ability to generate positive net income and maintain healthy margins in a challenging environment underscores its operational effectiveness and the resilience of its direct selling model.

Outlook and Shareholder Value Creation

BeFra remains steadfast in its full-year 2025 guidance, projecting net revenue and EBITDA growth in the range of 6% to 9%. This outlook is predicated on an expectation of macroeconomic stability, rather than a significant rebound in consumption, coupled with the continued success of its internal strategies. Management anticipates further gross margin improvement driven by a stronger Mexican peso, lower freight costs, and a strategic shift towards a higher mix of core line items over promotions. Jafra U.S. is specifically targeted to reach a breakeven point by year-end, supported by top-line growth and disciplined cost controls.

The company is committed to achieving its historical free cash flow conversion level of around 60% of EBITDA for the full year 2025. Analyst sentiment reflects confidence, with a recent upgrade to a "Strong Buy" rating and a 4.2% increase in the Zacks Consensus Estimate for 2025 EPS over the past three months. The average analyst price target of $22.5 suggests a potential 68.54% upside from the current stock price. BeFra's consistent dividend payments, with MXN 200 million proposed for Q2 2025, further demonstrate its commitment to delivering sustainable long-term shareholder value.

Risks and Mitigating Factors

Despite the positive outlook, BeFra acknowledges several pertinent risks. Macroeconomic uncertainty in Mexico and the U.S., characterized by weaker consumer demand and FX volatility, remains a challenge. Geopolitical tensions, particularly U.S.-China tariffs, directly impacted the decision to halt growth investments in Betterware U.S.. The direct selling model also faces competition from e-commerce and evolving consumer habits. Supply chain disruptions, including fluctuating freight costs and product import duties, have historically affected profitability.

BeFra, however, has demonstrated a robust ability to mitigate these risks. Its asset-light and resilient commercial model allows for flexibility in protecting profitability and cash flow. The company's agile internal culture enables swift adaptation to market volatility. Strategic initiatives include diversifying sourcing options beyond China to Mexico and Southeast Asia, and implementing calibrated forecasting and inventory plans to prevent stock-outs. Investments in digital platforms and business intelligence further enhance its ability to engage with its sales force and customers effectively, strengthening its competitive position.

Conclusion

BeFra stands as a compelling investment opportunity, characterized by its resilient direct selling ecosystem and strategic diversification. The company's ability to rebound strongly in Q2 2025, driven by focused internal strategies and an expanding associate base, underscores its operational agility amidst a challenging macroeconomic backdrop. With a diversified portfolio spanning home goods and beauty, underpinned by continuous technological enhancements, BeFra is well-positioned to capitalize on growth opportunities in Mexico and strategically expand across Latin America. The commitment to maintaining robust financial health, evidenced by improving debt leverage, strong free cash flow generation, and consistent shareholder dividends, reinforces its investment appeal. While macroeconomic headwinds and competitive pressures persist, BeFra's proactive strategies, technological leadership in empowering its sales force, and disciplined execution provide a solid foundation for achieving its 2025 growth targets and unlocking further value for investors.