Betterware (BWMX) Sidoti's Small-Cap Virtual Conference summary

Company overview and business model

• Operates as a direct-to-consumer house of brands with Betterware (household) and Jafra (beauty), focusing on person-to-person direct selling with 1.24 million sellers, mainly in Mexico, expanding to Latin America and the U.S.

• Emphasizes brand building, product innovation, and marketing expertise; Betterware leads in household products and Jafra in fragrances in Mexico.

• Modernized direct selling model with significant investment in technology and business intelligence to support sellers and adapt to the gig economy.

• Betterware products are designed in-house and manufactured mainly in China; Jafra products are mostly produced in Mexico, with 90% of revenue from Mexico and 10% from the U.S.

• Differentiation is driven by product innovation, affordability, and strong value propositions targeting middle and low-middle income markets.

Market position and growth strategy

• Holds 4% market share in both household and beauty markets in Mexico, with significant room for growth due to market fragmentation.

• Outpaced major competitors like L'Oréal and Unilever in beauty market growth, doubling Jafra's market share from 2% to 4% between 2021 and 2023.

• Direct selling market in Mexico has grown at 4.6% CAGR over the past five years; company has outperformed this rate.

• Growth pillars include business intelligence, product innovation, and technology, with ongoing investment in data analytics and digital tools for sellers.

• Developed an in-house app to attract younger sellers and improve operational efficiency.

Financial performance and shareholder value

• Net revenues grew 8.4% year-over-year in 2023, with a 22.4% CAGR over 23 years.

• Betterware sales doubled since 2019, maintaining MXN 6 billion in sales post-COVID; Jafra achieved double-digit revenue growth since acquisition.

• EBITDA grew 2% from 2023 to 2024, with a 23.4% CAGR; strong EBITDA to free cash flow conversion averaging 52%.

• Maintains a low fixed cost structure and consistent dividend payments, with 25 consecutive quarters and a 10.55% average yield.

• Jafra's net revenue CAGR is 12.1% and EBITDA CAGR is 17.2% since 2022, demonstrating successful integration and replication of core business practices.