GUADALAJARA, Mexico, April 27,
2023 /PRNewswire/ -- Betterware de Mexico
S.A.P.I. de C.V. (NASDAQ: BWMX), ("Betterware" or the
'Company"), announced today its consolidated financial results for
the first quarter of fiscal 2023. 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. The Company will host a conference call at
9:00 am (Eastern Time) on
April 28, 2023, to discuss its
results for the first quarter of fiscal year 2023.
1Q2023 Highlights
Group
|
- The acquisition of
Jafra proves accretive, creating a resilient consolidated group
with diversified and complimentary product lines, uniquely
positioned for growth in attractive markets in Mexico and the
United States.
- Solid progress
achieved during the period, with the behavior of the main variables stabilizing and in
line with the estimates for each business.
- Confirmed
flexibility of our business model and on our ability to adapt to
different market conditions, translates into improved profitability
through cost control and efficient expenses, which are mostly
variable.
- The implemented
initiatives at Betterware and Jafra, which represent a solid
foundation for growing revenue, profitability, and more value for
our shareholders, are already showing positive results.
- Strong Balance
Sheet, reducing total debt during the quarter and improving
leverage ratio due to high cash flow generation.
|
Betterware
|
- After a seasonal
decline in associate's base during the first four weeks of the
year, our base grew 2.6% during the last two months of the quarter,
confirming the positive trends.
- Distributor's EOP
base grows 1.5% relative to 4Q2022, which gives us strength to
boost growth in our associates base going forward.
- Improving
conditions in terms of international freight and input costs,
coupled with an improved expense structure, result in significant
improvements in terms of EBITDA and EBITDA margin relative to
4Q2022.
|
Jafra
Mexico
|
- JAFRA Mexico
delivers exceptional performance, ahead of our plans for the
quarter, boosted by a growing average consultant's base, coupled
with higher activity and productivity rates.
- New Jafranet
2.0 App, expected during May 2023, will improve leaders
and consultants' capabilities to better manage their own business
and become more efficient.
- Improved working
capital management significantly reduced cash conversion cycle,
increasing days payable and reducing inventory days in
1Q2023.
|
Jafra
USA
|
- Focused on business
turnaround, adapting our commercial strategies to improve client
and consultant opportunity with a goal to bring stability to the
business.
- Early progress from
reactivation and retention strategies allowed us to move from a
consultant activity rate of 37.1% in February to 53.8% in March.
Reactivation and retention will continue to be an important focus
of Jafra USA.
- Strong reactivation
strategy with reactivation 99% above expectations and 84% above
prior year.
|
1Q2023 Selected Financial Information
|
1Q2023
|
1Q2022
|
%
|
4Q2022
|
%
|
Net
Revenue
|
$3,268,948
|
$1,869,127
|
74.9 %
|
$3,229,328
|
1.2 %
|
Gross
Margin/
|
72.8 %
|
63.6 %
|
919-bps
|
69.7 %
|
306-bps
|
EBITDA
|
$658,956
|
$547,805
|
20.3 %
|
$566,281
|
16.4 %
|
EBITDA
Margin
|
20.2 %
|
29.3 %
|
(915-bps)
|
17.5 %
|
262-bps
|
Free Cash
Flow
|
$678,810
|
($141,093)
|
NA
|
$878,949
|
(22.8 %)
|
Net
Income
|
$191,669
|
$267,295
|
(28.3 %)
|
$209,331
|
(8.4 %)
|
EPS
|
$5.15
|
$7.16
|
(28.2 %)
|
$5.62
|
(8.4 %)
|
Net Debt / TTM
EBITDA
|
2.3x
|
0.4x
|
|
2.6x
|
|
Interest Coverage
Ratio (TTM)
|
2.6x
|
25.3x
|
|
3.4x
|
|
Message from Betterware's Chairman
The Group's results for the first quarter of the year closed in
line with our expectations. The behavior of the main variables
remained stable and in line with the forecasts for each business.
We are proud of the progress attained during the period, and we
know that we are on the right path implementing proven strategies
that are gaining traction and are expected to deliver increasing
progress as we move through the year.
I am equally pleased with our acquisition of Jafra. While only a
year since we have completed the acquisition, we have accomplished
so much and Jafra's results have surpassed our expectations. The
team has adapted very quickly to the culture and dynamics of
Betterware, injecting more energy and aggressiveness into the
commercial part of the business and products' innovation, both in
its process and in the renewal of some of its brands. Discipline,
coupled with administrative and financial control have managed to
improve the profitability of the company, reaching higher levels of
stability in the product cost, as well as in the direct and
operating expenses. It is important to highlight that, since 3Q
2022, Jafra's sales force in Mexico has been gradually recovering, both in
attracting new consultants, as well as in their retention and
activity. With the return to normality, we have brought back
in-person training and events with the sales force, which are
essential to keep them motivated and assisting them to grow their
business. Taking care of promotional cycles has helped us maintain
our sales force and the activity month after month. Jafra's
attractive and complimentary product portfolio has also helped us
diversify the Group, which favors cash flow generation and
maintains our financial strength in the face of an uncertain and
changing environment, both nationally and internationally.
For Betterware, our performance during the first quarter of 2023
was key, laying the foundation for us to achieve our expected
result for the year. We have several accomplishments to share,
during the quarter we stabilized the business by reversing the
downward trend in the sales force. In fact, in February and March
we had net growth in both Associates and Distributors, improving
the incorporation rate and reducing churn. This demonstrates the
strength of our reinforced Sales Staff who have begun to show
positive results; we are confident that this will be the basis to
start growing our platform in the coming months and, consequently,
enhance our sales. On the other hand, we have improved the catalog
since January, both in design and in the product offering (we
increased the number of SKUs, recovered the strength of our core
product line, incorporated new categories, and encouraged the use
of the digital catalog). All this effort helped to maintain sales
at an appropriate level. And, although there is still more work to
do, we were able to observe a different dynamic that allows us to
be optimistic about what we can achieve from here on. In addition,
I am pleased to remark that we returned to the margin levels we had
at the beginning of 2022, which helps us to be in line with the
EBITDA estimated for this period and for the year.
It is essential to remember that part of our success is based on
the flexibility of our asset-light business model and on our
ability to adapt to different market conditions, which translates
into preserving our profitability through cost control and
efficient expenses, which are mostly variable. This applies to both
Betterware and Jafra, and we will leverage this to achieve better
profitability and higher cash flow generation. Our solid business
model, our knowledge and experience in direct selling companies,
and our involvement in the business as the controlling group,
completely differentiate Betterware de México from other public
direct selling companies. We are proud of our track record of
success since we started this company, recently demonstrated by a
2019-2022 sales CAGR of 55% and EBITDA CAGR of 38%, considering
Jafra, and only considering Betterware's operations, a 2019-2022
sales CAGR of 27% and EBITDA CAGR of 18%. More impressively, from
2001 to 2022, Betterware achieved a 20% net revenue CAGR and a 22%
EBITDA CAGR.
Although the world's macroeconomic environment is still
uncertain, we are confident that our different business units are
heading in the right direction. The decisions made so far, and the
initiatives we are implementing at Betterware and Jafra represent a
solid foundation for growing revenue, profitability, and more value
for our shareholders. I am sure that we will achieve our 2023
objectives and maintain sustained growth in the long term.
Luis G.
Campos
Executive Chairman of the
Board
Group's Consolidated Financial Results
Consolidated net revenue for 1Q2023 increased 74.9% to Ps.
3,268.9M from Ps. 1,869.1M in 1Q2022, mainly attributed to the
inclusion of Jafra Mexico and Jafra USA results in this year's results, which
during the quarter accounted for 51% and 7% of consolidated net
revenue, respectively.
Comparable net revenue, which only includes Betterware's net
revenue, decreased 25.4% YoY mostly due to a lower average
associates and distributors base, partially offset by a higher
average associate order.
On a QoQ basis, consolidated net revenue increased by 1.2%.
Consolidated gross margin for 1Q2023 expanded 919-bps to 72.8%,
compared to 63.6% in 1Q2022. Margin expansion is mainly explained
by the inclusion of Jafra Mexico and Jafra USA results during 2022, partially offset by a
243-bps margin contraction in Betterware due to abnormally high
gross margin during 1Q2022.
On a QoQ basis, consolidated gross margin expanded 306-bps
mainly attributed to margin expansion in Betterware due to improved
conditions in international freight prices.
Consolidated EBITDA for 1Q2023 increased 20.3% to Ps.
659.0M from Ps. 547.8M in 1Q2022, largely attributed to the
inclusion of Jafra Mexico in this year's results, which during the
quarter accounted for Ps. 277.5M and
partially offset by a decline in EBITDA for Betterware and negative
EBITDA contribution from Jafra USA. Comparable EBITDA (only Betterware) for
1Q2023 decreased 23.9%.
Consolidated EBITDA margin for the quarter contracted 915-bps
mainly explained by the inclusion of Jafra Mexico and Jafra
USA to our results, partially
offset by a 59-bps margin expansion in Betterware due to increased
operating leverage related to the alignment of expense structure to
current operations.
On a QoQ basis, consolidated EBITDA increased 16.4% and
consolidated EBITDA margin expanded 262-bps.
Consolidated net income for 1Q2023 declined 28.3% to Ps.
191.7M from Ps. 267.3M in 1Q2022, essentially explained by a 617%
increase in interest expenses due increased leverage to complete
the Jafra Acquisition in April 2022,
coupled with higher interest rates in Mexico. Earnings Per Share (EPS) for 1Q2023
was Ps. 5.15, compared to Ps. 7.16 in 1Q2022.
On a QoQ basis, consolidated net income decreased 8.4%.
Consolidated cash flow from operations for 1Q2023 significantly
improved to Ps. 682.0M, from Ps.
(91.9M) in 1Q2022, due to efficient
inventory management, coupled with cost and expense savings related
to the corporate restructure to align to the new level of sales in
Betterware, and the inclusion of Jafra's operations in our
results.
Consolidated CAPEX for 1Q2023 decreased 93.5% to Ps.
3.2M in 1Q2023 from Ps. 49.2M in 1Q2022, explained by lower investment
requirements after the completion of Betterware's distribution
center during 2021 and low investment requirements in Jafra due to
the current installed capacity.
Consolidated free cash flow, measured as cash flow from
operations minus CAPEX, for 1Q2023 significantly improved to Ps.
678.8M from Ps. (141.1M) in 1Q2022, boosted mainly by a cash flow
generation improvement in Betterware.
As of the end of 1Q2023, the Company's balance sheet reflects
strength, reinforced by the main attributes of our differentiated
business model, namely high cash flow generation and asset-light
business model. These key attributes, coupled with financial
discipline and a special focus on the improvement of Jafra's cash
conversion cycle will allow us to reduce our leverage ratio to
below 2.0x net debt to EBITDA by the end of 2023.
YoY, Inventories rose 9.7% to Ps 1,832.2M by the end of 1Q2023, mainly reflecting
the incorporation of Jafra into our balance sheet. As mentioned in
our previous earnings release, we had excess inventories worth Ps.
300M in Betterware due to
lower-than-expected sales, and we have plans to gradually reduce
inventory to align with sales growth during 2023 and 2024, without
compromising sales of better-performing products and categories.
Excess inventories were reduced by approximately Ps. 65M during the quarter, slightly ahead of our
plans.
Net debt at quarter end was Ps. 5,388.1M, which represents a relevant increase
relative to 1Q2022, almost exclusively related to the Jafra
acquisition. Our leverage ratio increased in a YoY basis, from 0.4x
Net Debt to Trailing-Twelve-Month EBITDA ratio in 1Q2022 to 2.3x in
1Q2023, but improving in a QoQ basis, compared to 2.6x in 4Q2022,
which shows we are in the right track to reduce our leverage
ratio.
1Q2023 Financial Results by Business
Betterware
- Key Operating and Financial Metrics
|
|
1Q2023
|
1Q2022
|
% vs.
1Q2022
|
4Q2022
|
% vs.
4Q2022
|
Associates
|
Avg. Base
|
752,577
|
997,791
|
(24.6 %)
|
819,790
|
(8.2 %)
|
EOP Base
|
764,024
|
961,692
|
(20.6 %)
|
778,845
|
(1.9 %)
|
Weekly Churn
Rate
|
3.6 %
|
3.6 %
|
7-bps
|
3.7 %
|
(6-bps)
|
Weekly Activity
Rate
|
27.8 %
|
32.3 %
|
(448-bps)
|
25.0 %
|
282-bps
|
Avg. Weekly
Order
|
$1,002
|
$915
|
9.5 %
|
$1,009
|
(0.7 %)
|
Distributors
|
Avg. Base
|
39,028
|
48,133
|
(18.9 %)
|
41,109
|
(5.1 %)
|
EOP Base
|
39,991
|
46,829
|
(14.6 %)
|
39,413
|
1.5 %
|
Weekly Churn
Rate
|
2.0 %
|
2.0 %
|
(5-bps)
|
2.0 %
|
(2-bps)
|
Weekly Activity
Rate
|
79.3 %
|
82.1 %
|
(272-bps)
|
76.7 %
|
264-bps
|
Avg. Weekly
Order
|
$6,754
|
$7,451
|
(9.4 %)
|
$6,542
|
3.2 %
|
|
1Q2023
|
1Q2022
|
% vs.
1Q2022
|
4Q2022
|
% vs.
4Q2022
|
Net Revenues
|
$1,393,720
|
$1,869,127
|
(25.4 %)
|
$1,373,493
|
1.5 %
|
Gross
Margin
|
61.2 %
|
63.6 %
|
(243-bps)
|
56.0 %
|
517-bps
|
EBITDA
|
$416,752
|
$547,805
|
(23.9 %)
|
$213,235
|
95.4 %
|
EBITDA
Margin
|
29.9 %
|
29.3 %
|
59-bps
|
15.5 %
|
1,438-bps
|
We closed 1Q2023 in line with our expectations. Betterware's
network of distributors and associates continued to show positive
stabilization trends during 1Q2023, as it did during the second
half of 2022. On a QoQ basis, our associate's EOP base was
practically in line with the previous quarter, (1.9%) relative to
4Q2022, showing improving churn rates and weekly activity rates. It
is relevant to mention that after a decline in associate's base
during the first four weeks of the year, which was expected due to
seasonality, our base grew 2.6% during the last two months of the
quarter, confirming the positive trend.
In terms of distributors, even considering the seasonality
during the first weeks of the year, our EOP base has grown 1.5%
relative to 4Q2022, showing stable weekly churn rates and improved
weekly activity rates. Growth in our distributors base gives us
strength to boost growth in our associates base going forward.
Current trends reinforce our view that our commercial efforts are
having a positive impact in our topline.
In terms of our profitability, during the quarter we benefited
from improving conditions in terms of international freight and
input costs, coupled with an improved expense structure, which is
now in line with our current level of operations, and allowed us to
show significant improvements in terms of EBITDA and EBITDA margin,
which returned to the levels reached in previous years.
For 1Q2023, Betterware's net revenue declined 25.4% to Ps.
1,393.7M from Ps. 1,869.1M in 1Q2022, mainly explained by a lower
average associate and distributor base during the period, down
24.6% and 18.9%, respectively, coupled with a decline in
associate's activity levels, from 32.3% to 27.8%. This was
partially offset by a 9.5% increase in average associate's orders,
in line with the price increase last year.
On a QoQ basis, net revenue increased 1.5% relative to 4Q2022,
with the size of our network stabilizing while improving weekly
activity rates following the trends observed during the last two
quarters of 2022.
Betterware's gross margin for 1Q2023 contracted 243-bps to
61.2%, compared to abnormally high gross margin of 63.6% in 1Q2022.
On a QoQ basis, gross margin expanded 517-bps, mainly due to lower
international freight expenses, and a positive impact of the
appreciation of the Mexican Peso.
Betterware's EBITDA for 1Q2023 declined 23.9% to Ps.
416.8M from Ps. 547.8M in 1Q2022, in line with the decline in net
revenue due to lower associate's and distributor's base.
Despite gross margin contraction and lower net revenue, EBITDA
Margin expanded 59-bps to 29.9% during the quarter, compared to
29.3% in 1Q2022, which demonstrates that our operating expenses are
now aligned to our current operations, resulting in improved
profitability levels. Operating expenses were reduced 27% in
absolute terms compared to 1Q2022, and represented 33.6% of net
revenues in 1Q2023, compared to 34.5% in 1Q2022, showing positive
results of our expense control strategies.
Compared to 4Q2022, EBITDA increased 95.4% and EBITDA margin
expanded 1,438-bps, partly explained by a 517-bps gross margin
expansion, coupled with the absence of non-recuring expenses which
impacted our EBITDA margin in 4Q2022.
- Update on Business strategies 2023
As mentioned in our 4Q2022 earnings release, we have been
actively implementing different strategies to lay the foundation
for growth and profitability for the years to come. During the
quarter, we have made great advancements in these strategies, as
well as executed other initiatives, namely:
- Product offer: since the beginning of April, we have covered
most of our core product line, recovering core concepts that we
previously removed from our catalogue to adapt our portfolio during
the pandemic. We also increased the number of SKUs to 360 and the
number of pages to the catalogue by 8 pages.
- Product Innovation: during March we launched two new
categories, Wellness and Wipes. During 2Q2023 and 3Q2023, we will
launch other categories previously announced, namely: Baby &
Kids, Bedding, Hydration, Pets and Cleaning Consumables.
- New Catalogues: during 1Q2023, we improved design for our
digital and physical catalogues, which we expect to result in
increased excitement, engagement, and better sales conversion
rates. During May, we will be launching a new customizable digital
catalogue, along with a new digital marketing campaign, which
should increase our digital sales conversion rates. Downloads from
the digital catalog increased substantially, going from
58K in 4Q2022 to 284K in 1Q2023.
- Incentive programs: We reinforced our incentive programs to
focus on (1) increasing attraction of new associates and
distributors, improving their starting benefits and (2) improving
retention of associates, granting them better bonuses during their
first catalogues.
- Technology: during February, we successfully completed the
migration of our associates and distributors to Betterware+ App,
with enhanced capabilities to increase our sales network efficiency
and productivity. During the quarter, we incorporated a new
functionality to ease the onboarding new associates and
distributors. In April, we will launch a new functionality to
improve tracking and visualization of our sales network's
performance.
- Operations: we are set to start operations of our automated
pick-and-pack Tower in June 2023,
which should result in a productivity improvement of 5-10%. In
terms of product sourcing, we are actively evaluating different
geographies that could increase our diversification from
China, while maintaining our
costs. We will update investors on the developments in this front
during the coming quarters.
Jafra Mexico
- Key Operating and Financial Metrics
|
|
1Q2023
|
1Q2022
|
% vs.
1Q2022
|
4Q2022
|
% vs.
4Q2022
|
Consultants
|
Avg. Base
|
448,982
|
382,219
|
17.5 %
|
445,535
|
0.8 %
|
EOP Base
|
427,280
|
365,651
|
16.9 %
|
455,969
|
(6.3 %)
|
Monthly Churn
Rate
|
20.4 %
|
25.1 %
|
(470-bps)
|
16.8 %
|
360-bps
|
Monthly Activity
Rate
|
51.7 %
|
49.2 %
|
250-bps
|
53.8 %
|
(210-bps)
|
Avg. Monthly
Order
|
$2,063
|
$1,936
|
6.6 %
|
$2,006
|
2.8 %
|
Leaders
|
Avg. Base
|
19,030
|
20,848
|
(8.7 %)
|
19,387
|
(1.8 %)
|
EOP Base
|
18,952
|
20,750
|
(8.7 %)
|
19,290
|
(1.8 %)
|
Monthly Churn
Rate
|
0.6 %
|
0.6 %
|
2-bps
|
1.4 %
|
(79-bps)
|
Monthly Activity
Rate
|
94.3 %
|
91.4 %
|
290-bps
|
93.3 %
|
100-bps
|
Avg. Monthly
Order
|
$2,259
|
$2,195
|
2.9 %
|
$2,295
|
(1.6 %)
|
|
1Q2023
|
4Q2022
|
%
|
Net
Revenue
|
$1,662,405
|
$1,522,363
|
9.2 %
|
Gross
Margin
|
82.0 %
|
80.7 %
|
134-bps
|
EBITDA
|
$277,549
|
$333,417
|
(16.8 %)
|
EBITDA
Margin
|
16.7 %
|
21.9 %
|
(521-bps)
|
* Jafra's financial
results prior to the acquisition (April 7th, 2022) are
not fully comparable due to differences accounting methods. Before
the acquisition Jafra used German GAAP standards and since April
7th, 2022, we use IFRS Standards.
|
The successful replication of Betterware's three business
pillars of Product Innovation, Business Intelligence and Technology
in Jafra have already delivered positive results. We will continue
to recreate the key features of Betterware's asset-light business
model to improve Jafra's profitability and cashflow generation.
Jafra Mexico's results reflect positive trends since the
acquisition, especially since August
2022, where our base of consultants returned to growth, thus
resulting in revenue, EBITDA and cashflow growth. This exceptional
performance was ahead of our plans for the quarter, boosted by
higher activity and productivity rates. Our average base of
consultants continues growing steadily, expanding 17.5% compared to
1Q2022 and 0.8% compared to 4Q2022 despite normal
beginning-of-the-year seasonality, with increasing average. orders
since the return to in person dynamics.
For the rest of 2023, we remain focused on increasing the
consultant and leaders base, providing them with improved training
and tools to increase their online sales, which should result in
increased market share and better market position in all our
categories.
Jafra Mexico's 1Q2023 results reflect a strong performance ahead
of our plans as net revenue for the quarter reached Ps.
1,662.4M driven by a YoY increase of
17.5% in our average consultant base, coupled with higher activity
rates and higher average orders. We saw positive performance in all
our product lines, with our Fragrances line is the largest
contributor to sales, where we continue to strengthen our position
as market leaders.
On a QoQ basis, net revenue increased 9.2%, despite the normal
seasonality in our business, where the fourth quarter of the year
is usually stronger than the first quarter, due to higher activity
and productivity rates.
Jafra Mexico's gross margin for the quarter was 82.0%, above our
plans due to favorable promotional balance and the strong
performance of high contribution margin of top sellers in
Fragrances.
Compared to 4Q2022, gross margin expanded 134-bps mainly related
to favorable sales mix.
Jafra Mexico's EBITDA for 1Q2023 was Ps. 277.5M and EBITDA margin was 16.7%. Results were
ahead of our expectations, due to the increase in net revenue,
efficient expense control related to synergies and optimizations
after the acquisition.
Compared to 4Q2022, EBITDA declined 16.8% and EBITDA margin
contracted 521-bps. This was mainly due to the cancellation of some
provisions that we had in 4Q2022, related to certain contingencies
that were resolved at that time.
- Update on Business Strategies for 2023
During the first quarter of the year, extraordinary results were
achieved in terms of net revenue, mainly due to higher activity and
productivity, coupled with a growing consultant base. In terms of
costs and expenses, we achieved several efficiencies which led to
savings and improved profitability.
For the rest of the year, our strategies will remain focused in
sales network growth, executing our previously disclosed business
strategies where we continue to show progress, namely:
- Product Innovation: we continue focused on reinforcing and
updating our product offering to current global and local
consumption trends. Part of our strategy is focused on the process
of rebranding the Jafra brand to make it more current, attractive,
and profitable, expecting to complete it by de end of 2Q2023. With
our faster time-to-market, reduced from 18 to 8 months, we will
continue to be specially focused on color and skin care categories,
which we have already seen positive results. Innovation will be
disruptive; we are very confident that our business will benefit
greatly from product innovations in these categories.
- Business development: our strategies are focused on improving
incorporation, retention, and reactivation rates, while working
towards improving our incentives programs and promotions during key
months, coupled with special focus on the development of future Top
Leaders.
- Technology: during May 2023, we
expect to launch Jafranet 2.0. This new App will improve
leaders and consultants' capabilities to better manage their own
business and become more efficient. A 24/7 Chatbot will also be set
up to assist our sales network and improve their selling
experience; we expect to launch it during the year, and to generate
more than Ps. 40M savings per year
with this development.
- Operations: Continue focusing on cost control and expense
reductions, taking advantage of the identified synergies. Improved
our days payable from 77 in 1Q2022 to 91 in 1Q2023, and our days
inventory from 141 in 1Q2022 to 102 in 1Q2023, significantly
improving our cash conversion cycle. We will continue to strive to
optimize our working capital, as well as improving processes for
leaders and consultants to achieve better service levels.
Jafra USA
|
|
1Q2023
|
1Q2022
|
%
|
4Q2022
|
% vs.
4Q2022
|
Consultants
|
Avg. Base
|
31,437
|
36,131
|
(13.0 %)
|
36,563
|
(14.0 %)
|
EOP Base
|
30,779
|
35,200
|
(12.6 %)
|
36,222
|
(15.0 %)
|
Monthly Churn
Rate
|
14.2 %
|
12.2 %
|
198-bps
|
9.5 %
|
470-bps
|
Monthly Activity
Rate
|
40.6 %
|
47.4 %
|
(684-bps)
|
49.4 %
|
(879-bps)
|
Avg. Monthly Order
(USD)
|
$228
|
$237
|
(3.6 %)
|
$242
|
(5.6 %)
|
Leaders
|
Avg. Base
|
2,080
|
2,016
|
3.2 %
|
2,183
|
(4.7 %)
|
EOP Base
|
2,099
|
1,918
|
9.4 %
|
2,095
|
0.2 %
|
Monthly Churn
Rate
|
1.8 %
|
6.5 %
|
(468-bps)
|
6.5 %
|
(466-bps)
|
Monthly Activity
Rate
|
80.4 %
|
96.3 %
|
(1,593-bps)
|
93.7 %
|
(1,333-bps)
|
Avg. Monthly Order
(USD)
|
$187
|
$200
|
(6.4 %)
|
$208
|
(10.2 %)
|
|
1Q2023
|
4Q2022
|
%
|
Net
Revenue
|
$212,823
|
$333,472
|
(36.2 %)
|
Gross
Margin
|
76.5 %
|
76.1 %
|
43-bps
|
EBITDA
|
($35,344)
|
$19,629
|
NA
|
EBITDA
Margin
|
(16.6 %)
|
5.9 %
|
NA
|
* Jafra's financial
results prior to the acquisition (April 7th, 2022) are
not fully comparable due to differences accounting methods. Before
the acquisition Jafra used German GAAP standards and since April
7th, 2022, we use IFRS Standards.
|
For the full quarter, JAFRA USA
continues to show negative results compared to 4Q2022. As
previously mentioned, we are currently undergoing a full
transformation of the business, adapting our commercial strategies
to improve client and consultant opportunity and bring stability to
the business. Having said that, during the last month of the
quarter, positive changes in business trends reinforce our belief
that our turnaround plans are moving in the right direction,
including a 69% increase in our VIP members from February to
March 2023, increasing consultant's
activity rate from 37.1% in February to 53.8% in March, the
reactivation of 4,100 consultants, among other positive indicators.
These positive results were better and came sooner than we
previously anticipated. We expect improved performance during
2H2023 and going forward, to achieve our business' full
potential.
Net revenue for the quarter reached Ps. 212.8M, below our estimates mainly due to the
lower average consultant's base, which declined 13.0% relative to
1Q2022, coupled with the expected negative initial effects of our
strategy changes which upset the rhythm of the Hispanic market
within Jafra.
On a QoQ basis, net revenue decreased 36.2% reflecting the
previously mentioned negative effect of the rapid changes in our
commercial strategies, coupled with an appreciation of the Mexican
Peso of approximately 5.4% on average.
JAFRA USA's gross margin for to
the quarter was 76.5%, slightly below our expectations due to
aggressive promotions to drive sales and increase activity rates
given negative sales trends.
On a positive note, gross margin expanded 43-bps on a QoQ
basis.
JAFRA USA's EBITDA for 1Q2023
was Ps. (35.3M) and EBITDA margin was
(16.6%), negatively impacted by lower operating leverage due to
lower net revenue, coupled inefficiencies at the distribution
facility that impacted our expenses and level of service to our
customers and consultants.
Corrective actions are currently underway and should result in
profitability improvements going forward.
- Update on Business Strategies for 2023
Jafra USA represents a great
opportunity for our company to as we implement our strategies that
are expected to result in improved profitability and revenue
growth. The successful replication of our business pillars of
Product Innovation, Business Intelligence and Technology will be
instrumental to the turnaround. Jafra USA´s management team is
focused on correcting its course to return to positive performance
and, while still early, positive signs during the last month of the
year make us confident in our strategies, which include, among
others:
- Product Marketing: as part of our transition strategy, we
relaunched our monthly brochure with a reduced page count. This
number will continue to gradually decrease along with the number of
promotions offered, which should result in higher gross margins due
to improved sales mix. In addition, we implemented a product
training module titled "Let's Talk Product" which focuses on
educating consultants on product innovation.
- Product Innovation: at Jafra we are focused on innovating
products, taking care of different aspects while doing so, such as
launch cadence, product story, trend products, innovative
ingredients, innovative delivery methods, and building on fan
favorites. Jafra's rebranding, together with product innovation,
will refresh our offer and customers experience with our
brand.
- Digital Marketing: increased direct communication with client
base through email and text message, which over time should attract
a larger client base and increase our e-commerce conversion rates,
resulting in revenue growth. Our digital team has begun educating
consultants on social media and digital resources so that they can
begin utilizing those platforms to engage clients and improve their
monthly sales.
- Business development: in March we deployed business initiatives
to help adjust the course of Jafra USA focused on reactivation and retention,
which combined resulted in the reactivation 4,800 consultants and
approximately USD $1.1 million
increase in net revenue. This heavy focus on reactivation and
retention also allowed us to move from a consultant activity rate
of 37.1% in February to 53.8% in March.
- Technology: currently performing a software evaluation for the
potential replacement of existing software, focusing on the
ecommerce and direct selling space. The implementation of this
software will allow us to be competitive in the e-commerce and the
direct selling space in the USA.
- Operations: Freight out expenses were better than expected for
the quarter, but we are still working to identify areas to improve
costs such as: multi-carrier, shipping tiers for expedited
shipping, among others. Currently working with Jafra Mexico to
identify potential improvements in our operations.
Capital Allocation
As disclosed in our previous earnings release, during 2023 we
will remain focused in the successful integration of the business
and the achievement of identified synergies and operating
efficiencies, and we estimate that we have the installed capacity
in place to support growth for the mid-term, therefore we do not
anticipate any large investment requirement for the year.
Our current leverage ratio is at 2.3x Net Debt/ TTM EBITDA, down
from 2.6x in 4Q2022, and during the period we were able to reduce
our total debt outstanding by Ps. 472.7M. While our financial position remains
strong and improving, our objective is to reduce our leverage ratio
to below 2.0x by the end of 2023. Therefore, most of our cash flow
generation will be destined to prepay debt and reduce our debt
burden.
As we also mentioned in our 4Q2022 earnings release, we are
confident we can pay growing quarterly dividends if the Group's
results are as expected. Therefore, our Board of Directors has
proposed to pay a Ps. 150M dividend
to shareholders for the quarter, which is subject to approval at
the Ordinary General Shareholders' Meeting of May 15th, 2023.
2023 Guidance and Long-Term Growth Prospects
Given year-to-date results, while there are still uncertainties
ahead, we are cautiously optimistic about our short-term prospects
and reaffirm our previous guidance for our consolidated
business:
|
2023
|
2022
|
Var %
|
Net
Revenue
|
Ps. 13,200 - Ps.
14,200
|
Ps.11,499
|
15% - 23%
|
EBITDA
|
Ps. 2,600 – Ps.
2,800
|
Ps. 2,213
|
17% - 27%
|
There are some exogenous risks that may affect the results of
our businesses, such as adverse global and National macroeconomic
conditions, inflation, freight costs, disruptions in the supply
chain, among others. But we may also have many opportunities that
can have the opposite effect, such as the expansion of our sales
force, superior activity, greater penetration in the market derived
from different approaches such as new product categories, product
innovation, differentiated sales channels, in the case of the
USA, going to a general market
much larger than the Hispanic market -which we will continue to
serve-, and of course, taking advantage of the synergies between
Jafra and Betterware.
In the longer term, we are confident in our growth prospects in
Mexico, the US and
internationally, as our recent Jafra acquisition provides a
compelling and diversified product portfolio as a group,
contributing to our financial strength in changing business
environments.
Form 20-F Publication
Betterware de Mexico, SAPI. de
CV (the "Company") has determined that it will not file its annual
report on Form 20-F for the fiscal year ended December 31, 2022 (the "Form 20-F") within the
prescribed period.
Some minor adjustments identified by us are being validated by
our external auditors. The effect is a small reduction in the 2021
result and an improvement in the 2022 result, which combined
represent a slight increase in the company's net income. The
Company is working diligently to complete all procedures related to
these adjustments in order to file Form 20-F within the fifteen-day
grace period provided by Rule 12b-25
of the Securities Exchange Act of 1934.
Betterware de
México, S.A.P.I. de C.V.
Consolidated
Statements of Financial Position
As of March 31,
2023, and 2022
(In Thousands of
Mexican Pesos)
|
|
|
March
2023
|
March
2022
|
Assets
|
|
|
Cash and cash
equivalents
|
579,788
|
711,625
|
Trade accounts
receivable, net
|
1,238,152
|
756,100
|
Accounts receivable
from related parties
|
12
|
7
|
Inventories
|
1,832,185
|
1,670,444
|
Prepaid
expenses
|
134,843
|
100,754
|
Income tax
recoverable
|
235,280
|
-
|
Other assets
|
192,968
|
56,083
|
Total current
assets
|
4,213,228
|
3,295,013
|
Property, plant and
equipment, net
|
2,933,315
|
1,092,165
|
Right of use assets,
net
|
282,343
|
18,264
|
Deferred income
tax
|
319,157
|
-
|
Investment in
subsidiaries
|
1,236
|
1,521
|
Intangible assets,
net
|
1,645,283
|
376,433
|
Goodwill
|
1,553,689
|
353,703
|
Other assets
|
44,373
|
3,229
|
Total non-current
assets
|
6,779,396
|
1,845,315
|
Total
assets
|
10,992,624
|
5,140,328
|
Liabilities and
Stockholders' Equity
|
|
|
Short term debt and
borrowings
|
761,419
|
107,047
|
Accounts payable to
suppliers
|
1,382,580
|
1,850,080
|
Accrued
expenses
|
279,784
|
199,773
|
Provisions
|
792,345
|
-
|
Income tax
payable
|
-
|
52,335
|
Value added tax
payable
|
132,192
|
12,805
|
Trade accounts payable
to related parties
|
104,917
|
-
|
Statutory employee
profit sharing
|
162,844
|
67,415
|
Lease
liability
|
94,890
|
7,934
|
Derivative financial
instruments
|
65,545
|
71,219
|
Total current
liabilities
|
3,776,516
|
2,368,608
|
Employee
benefits
|
150,876
|
2,343
|
Deferred income
tax
|
844,545
|
80,907
|
Lease
liability
|
184,731
|
10,575
|
Long term debt and
borrowings
|
4,926,846
|
1,483,082
|
Total non-current
liabilities
|
6,106,998
|
1,576,907
|
Total
Liabilities
|
9,883,514
|
3,945,515
|
|
|
|
Stockholders'
Equity
|
1,107,753
|
1,193,290
|
Non-controlling
interest
|
1,357
|
1,523
|
Total Stockholders'
Equity
|
1,109,110
|
1,194,813
|
Total Liabilities
and Stockholders' Equity
|
10,992,624
|
5,140,328
|
Betterware de
México, S.A.P.I. de C.V.
Consolidated
Statements of Profit or Loss and Other Comprehensive
Income
For the three-months
ended on March 31, 2023, and 2022
(In Thousands of
Mexican Pesos)
|
|
|
Q1
2023
|
Q1
2022
|
∆%
|
Net revenue
|
3,268,948
|
1,869,127
|
74.9 %
|
Cost of
sales
|
889,495
|
680,327
|
30.7 %
|
Gross
profit
|
2,379,453
|
1,188,800
|
100.2 %
|
|
|
|
|
Administrative
expenses
|
824,562
|
315,954
|
161.0 %
|
Selling
expenses
|
844,502
|
260,247
|
224.5 %
|
Distribution
expenses
|
145,177
|
68,078
|
113.3 %
|
Total
expenses
|
1,814,241
|
644,279
|
181.6 %
|
|
|
|
|
Share of results of
subsidiaries
|
-
|
(18,333)
|
(100.0 %)
|
|
|
|
|
Operating
income
|
565,212
|
526,188
|
7.4 %
|
|
|
|
|
Interest
expense
|
(210,935)
|
(29,417)
|
617.1 %
|
Interest
income
|
12,494
|
5,412
|
130.9 %
|
Unrealized loss in
valuation of financial derivative instruments
|
(50,216)
|
(99,412)
|
(49.5 %)
|
Foreign exchange (loss)
gain, net
|
(10,573)
|
6,840
|
(254.6 %)
|
Financing cost,
net
|
(259,230)
|
(116,577)
|
122.4 %
|
|
|
|
|
Income before income
taxes
|
305,982
|
409,611
|
(25.3 %)
|
|
|
|
|
Income taxes
|
114,081
|
142,636
|
(20.0 %)
|
|
|
|
|
Net income including
minority interest
|
191,901
|
266,975
|
(28.1 %)
|
Non-controlling
interest loss
|
(232)
|
320
|
(172.5 %)
|
Net
income
|
191,669
|
267,295
|
(28.3 %)
|
EBITDA breakdown
(Ps. 659 million)
|
Concept
|
Q1
2023
|
Q1
2022
|
∆%
|
Net income including
minority interest
|
191,901
|
266,975
|
(28.1 %)
|
(+) Income
taxes
|
114,081
|
142,636
|
(20.0 %)
|
(+) Financing cost,
net
|
259,230
|
116,577
|
122.4 %
|
(+) Depreciation and
amortization
|
93,744
|
21,617
|
333.7 %
|
EBITDA
|
658,956
|
547,805
|
20.3 %
|
EBITDA
margin
|
20.2 %
|
29.3 %
|
(9.2 %)
|
Betterware de
México, S.A.P.I. de C.V.
Consolidated
Statements of Cash Flows
For the three-months
ended on March 31, 2023, and 2022
(In Thousands of
Mexican Pesos)
|
|
|
Mar
2023
|
Mar
2022
|
Cash flows from
operating activities:
|
|
|
Profit for the
period
|
191,901
|
266,975
|
Adjustments
for:
|
|
|
Income tax expense
recognized in profit of the year
|
114,081
|
142,636
|
Depreciation and
amortization of non-current assets
|
93,744
|
21,617
|
Interest income
recognized in profit or loss
|
(12,494)
|
(5,412)
|
Interest expense
recognized in profit or loss
|
210,935
|
29,417
|
Gain of property,
plant, equipment sale
|
(1,453)
|
(61)
|
Unrealized loss in
valuation of financial derivative instruments
|
50,216
|
99,412
|
Share-based payment
expense
|
489
|
9,011
|
Currency
effect
|
(4,125)
|
(96)
|
Movements in not-
controlling interest
|
(58)
|
4,560
|
Movements in working
capital:
|
|
|
Trade accounts
receivable
|
(242,952)
|
21,954
|
Trade accounts
receivable from related parties
|
49
|
17
|
Inventory,
net
|
278,904
|
(331,066)
|
Prepaid expenses and
other assets
|
70,657
|
(4,580)
|
Accounts payable to
suppliers and accrued expenses
|
(15,861)
|
(192,733)
|
Provisions
|
2,209
|
-
|
Value added tax
payable
|
43,050
|
12,805
|
Statutory employee
profit sharing
|
27,546
|
12,110
|
Trade accounts payable
to related parties
|
8,058
|
-
|
Income taxes
paid
|
(129,866)
|
(178,687)
|
Employee
benefits
|
(3,031)
|
250
|
Net cash generated (used) by operating activities
|
681,999
|
(91,871)
|
Cash flows from
investing activities:
|
|
|
Investment in
subsidiaries
|
-
|
(1,024)
|
Payments for property,
plant and equipment, net
|
(10,707)
|
(55,521)
|
Proceeds from disposal
of property, plant and equipment, net
|
7,518
|
6,299
|
Interest
received
|
12,494
|
5,412
|
Net cash generated (used) in investing activities
|
9,305
|
(44,834)
|
Cash flows from
financing activities:
|
|
|
Repayment of
borrowings
|
(1,000,000)
|
(120,006)
|
Proceeds from
borrowings
|
550,000
|
220,000
|
Interest
paid
|
(215,719)
|
(49,509)
|
Lease
payment
|
(32,137)
|
(2,089)
|
Share
repurchases
|
-
|
(25,264)
|
Dividends
paid
|
(99,806)
|
(350,000)
|
Net cash used in financing activities
|
(797,662)
|
(326,868)
|
Net decrease in cash and cash equivalents
|
(106,358)
|
(463,573)
|
Cash and cash
equivalents at the beginning of the period
|
686,146
|
1,175,198
|
Cash and cash
equivalents at the end of the period
|
579,788
|
711,625
|
Use of Non-IFRS Financial Measures
This announcement includes certain references to EBITDA, EBITDA
Margin, Net Debt:
EBITDA: defined as profit for the year adding back the
depreciation of property, plant and equipment and right of use
assets, amortization of intangible assets, financing cost, net and
total income taxes
EBITDA Margin: is calculated by dividing EBITDA by net
revenue
EBITDA and EBITDA Margin are not measures recognized under IFRS
and should not be considered as an alternative to, or more
meaningful than, consolidated net income for the year as determined
in accordance with IFRS or as indicators of our operating
performance from continuing operations. Accordingly, readers are
cautioned not to place undue reliance on this information and
should note that these measures as calculated by the Company, may
differ materially from similarly titled measures reported by other
companies.
Betterware believes that these non-IFRS financial measures are
useful to investors because (i) Betterware uses these measures to
analyze its financial results internally and believes they
represent a measure of operating profitability and (ii) these
measures will serve investors to understand and evaluate
Betterware's EBITDA and provide more tools for their analysis as it
makes Betterware's results comparable to industry peers that also
prepare these measures.
Definitions: Operating Metrics
- Betterware de México (Associates and Distributors)
Avg. Base: Weekly average Associate/Distributor
base
EOP Base: Associate/Distributor base at the end of the
period
Weekly Churn Rate: Average weekly data. Total
Associates/Distributors lost during the period divided by the
beginning of the period Associate/Distributor base.
Weekly Activity Rate: Average weekly data. Active
Associates/Distributors divided by ending Associate/Distributor
base.
Avg. Weekly Order: Average weekly data. Total Revenue
divided by number of active Associates/Distributors
- Jafra (Consultants and Leaders)
Avg. Base: Monthly average Consultant/Leader
base
EOP Base: Consultant/Leader base at the end of the
period
Monthly Churn Rate (Consultants): Average monthly data.
Total Consultants lost during the period divided by the number of
active Consultants 4 months prior. A Consultant is terminated only
after 4 months of inactivity.
Monthly Churn Rate (Leaders): Average monthly data.
Total Leaders lost during the period divided by end of period
Leader's base.
Monthly Activity Rate: Average monthly data. Active
Consultants/Leaders divided by the end of period Consultant/Leaders
base.
Avg. Monthly Order (Consultants): Average monthly data.
Total Catalogue Revenue divided by number of consultant orders.
Avg. Monthly Order (Leaders): Average monthly data.
Total Leaders Revenue divided by number of leaders orders.
About Betterware de México, S.A.P.I. de C.V.
Founded in 1995, Betterware de Mexico is the leading direct-to-consumer
company in Mexico focused on
creating innovative products that solve specific needs regarding
organization, practicality, space saving and hygiene within the
household. Betterware's wide product portfolio includes home
organization, kitchen, commuting, laundry and cleaning, as well as
other categories that include products and solutions for every
corner of the household.
The Company has a differentiated two-tier network of
distributors and associates that sell their products through twelve
catalogs per year. All products are designed by the Company and
under the Betterware brand name through its different sources of
product innovation. The Company's state-of-the-art infrastructure
allows it to safely and timely deliver its products to every part
of the country, backed by the strategic location of its national
distribution center. Today, the Company distributes its products in
Mexico and Guatemala, and has plans of additional
international expansion.
Supported by its asset light business model and its three
strategic pillars of Product Innovation, Business Intelligence and
Technology, Betterware has been able to achieve sustainable
double-digit growth rates by successfully expanding its household
penetration and share of wallet.
Forward-Looking Statements
This press release includes certain statements that are not
historical facts but are forward-looking statements for purposes of
the safe harbor provisions under the United States Private
Securities Litigation Reform Act of 1995. Forward-looking
statements generally are accompanied by words such as "believe,"
"may," "will", "estimate", "continue", "anticipate", "intend",
"expect", "should", "would", "plan", "predict", "potential",
"seem", "seek," "future," "outlook", and similar expressions that
predict or indicate future events or trends or that are not
statements of historical matters. The reader should understand that
the results obtained may differ from the projections contained in
this document and that many factors could cause our actual
activities or results to differ materially from the activities and
results anticipated in forward looking statements. For this reason,
the Company assumes no responsibility for any indirect factors or
elements beyond its control that might occur inside Mexico or abroad and which might affect the
outcome of these projections and encourages you to review the
'Cautionary Statement' and the 'Risk Factor' sections of our annual
report on Form 20-F for the year ended December 31, 2020 and any of the Company's other
applicable filings with the Securities and Exchange Commission for
additional information concerning factors that could cause those
differences
The Company undertakes no obligation and does not intend to
update these forward-looking statements to reflect events or
circumstances occurring after the date hereof. You are cautioned
not to place undue reliance on these forward-looking statements,
which speak only as of the date hereof. Further information on
risks and uncertainties that may affect the Company's operations
and financial performance, and the forward statements contained
herein, is available in the Company's filings with the SEC. All
forward-looking statements are qualified in their entirety by this
cautionary statement.
1Q2023 Conference Call
Management will hold a conference call with investors on
April 28, 2023, at 8:00 am Central Standard Time (CST)/ 9:00am Eastern Time (EST). For anyone who wishes
to join live, the dial-in information is:
Toll Free: 1-877-451-6152
Toll/International: 1-201-389-0879
Conference ID: 13737895
If you wish to listen to the replay of the conference call,
please see instructions below:
Toll Free: 1-844-512-2921
Toll/International: 1-412-317-6671
Replay Pin Number: 13737895
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SOURCE Betterware de México, S.A.P.I. de C.V.