Betterware Reports Second Quarter 2023 Results
- Net revenue for 2Q2023 grew 4.0% compared to 1Q2023.
- Jafra Mexico had an outstanding performance with a 14.5% increase in net revenue and 25.0% increase in EBITDA.
- Betterware's net revenue declined 9.9% in 2Q2023, but profitability improved due to lower expenses and improved expense structure.
- Cash flow from operations improved significantly and free cash flow turned positive.
- None.
2Q2023 Highlights
Group |
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Betterware |
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Jafra Mexico |
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Jafra |
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Message from Betterware´s Chairman
We ended 2Q2023 with excellent results for the Group, experiencing growth in net sales in
At Betterware we had a positive 2Q2023. We were able to grow the number of Distributors at the end of the period by
Jafra's business evolution continues to be positive. The transformation of the Innovation and Research and Development areas has had a significant impact on the results, where new products have been increasingly participating in total net sales. Regarding Jafra Mexico´s sales force, the EOP base in 2Q2023 grew
On July 10th, 2023, we prepaid the syndicated loan utilized for Jafra´s acquisition. The original amount of this credit facility was Ps. 4,499M; we prepaid Ps. 1,250M during 1H2023, ending the period with a balance of Ps. 3,249M. This amount was settled with funds coming from different sources, such as long and short-term credit lines, bonds issued on July 5th, and cash. The refinancing of this loan allows us to reduce the cost of debt and defer principal payment obligations that we had in the years 2024 to 2026. The net deferment for these years is as follows: Ps. 262M in 2024, Ps. 900M in 2025, and Ps. 1,067M in 2026. More than
Regarding our structure, we appointed Santiago Campos as Chief Transformational Officer, whose mission is to ensure that the company offers beloved and relevant brands to the consumer and to become, in the next five years, one of the leading global direct selling companies in terms of net revenue and EBITDA. Thinking that we must anticipate market trends and opportunities in the medium and long term, we decided to create this position that, together with his team, will be setting the guidelines and igniting the necessary actions that will transform our business to boost future revenue streams and/or productivity by thinking and planning 5 years ahead of time.
The approach is to follow two transformation paths:
Exploitation
- Maximize our key capabilities and reinforce those that are important for the future
- Ensure successful geographic expansion and replicate the successful operating model
- Add new categories that allow us to increase share of wallet and market share
- Promote the necessary technologies (like A.I. initiatives) across the company to ensure a full data driven digital transformation.
Exploration
- Evaluate M&A transactions that can be relevant and strategic to the Company such as product industry diversification to stabilize even more the stream of future cash flows
- Set and boost Engine 2 initiatives: find new sources of income based on our scale, capabilities, and operating business model
We are certain that with this new position, the Group will be able to take advantage of relevant business opportunities in the future.
We will continue working to achieve greater efficiencies, focused on further differentiating the Company from our competitors through innovation, technological support for the sales force, and data analysis that informs successful strategic decisions. With solid foundations, we will continue growing revenues and profitability, and will generate greater value for our shareholders. Our first half performance and expectations for the remainder of the year have us well positioned to achieve our 2023 guidance, and we are certain that we are on a great momentum to continue experiencing the positive trend that we have been demonstrating in our results, which encourages us to continue working to achieve the annual objective and maintain the trend of sustained growth in the long term.
Luis G. Campos
Executive Chairman of the Board
2Q2023 Consolidated Selected Financial Information
2Q2023 | 2Q2022 | % | 1H2023 | 1H2022 | % | |
Net Revenue | (0.7 %) | 27.0 % | ||||
Gross Margin | 73.3 % | 69.6 % | 368-bps | 73.0 % | 67.9 % | 517-bps |
EBITDA | 16.6 % | 16.1 % | ||||
EBITDA Margin | 22.3 % | 19.0 % | 331-bps | 21.2 % | 23.2 % | (200-bps) |
Free Cash Flow | ( | NA | ( | NA | ||
Net Income | (10.7 %) | (21.8 %) | ||||
EPS | (10.7 %) | (21.7 %) | ||||
Net Debt / TTM EBITDA | 2.0x | 2.8x | ||||
Interest Coverage Ratio (TTM) | 2.7x | 10.0x |
Group's Consolidated Financial Results
- Net Revenue
Consolidated net revenue for 2Q2023 was Ps. 3,220.1M, practically in line with 2Q2022 net revenue of Ps. 3,243.6M. Performance is mainly attributed to the growth in net revenue in Jafra Mexico, partially offset by a decline in Betterware´s net revenue due to a lower associate and distributor base. Jafra Mexico and Jafra
During the quarter, we continue to see positive performance in Jafra Mexico, and a continued stabilization in Betterware´s network of distributors and associates, which has led to two consecutive quarters of net revenue growth.
Year-to-date, consolidated net revenue increased
- Gross Margin
Consolidated gross margin for 2Q2023 expanded 368-bps to
Year-to-date, the consolidated gross margin expanded 517-bps to
- EBITDA and EBITDA Margin
Consolidated EBITDA for 2Q2023 increased
For the first half of the year, consolidated EBITDA increased
- Net Income and EPS
Consolidated net income for 2Q2023 decreased
Year-to-date, consolidated net income declined
- Cash Flow
Consolidated cash flow from operations for 2Q2023 improved significantly compared to 2Q2022, going to Ps. 764.8M, from Ps. 38.9M in 2Q2022, due to improved inventory management, along with cost and expense savings related to corporate restructuring expenses to align with the new level of sales at Betterware and the inclusion of Jafra operations in our results.
Consolidated CAPEX for 2Q2023 decreased
As a result, consolidated free cash flow, measured as cash flow from operations less CAPEX, for 2Q2023 improved to Ps. 755.7M from Ps. (16.9M) in 2Q2022, primarily driven by improved cash flow generation at Betterware, recovering the key feature of our business model of high cash flow generation.
For the first 6 months of the year, consolidated cash flow from operations increased significantly to Ps. 1,318.8M from Ps. (52.9M) in 1H2022, primarily due to improved cash flow generation in Betterware and Jafra Mexico. On a comparable basis, which only considers Betterware´s operations, cash flow from operations increased to Ps. 751.6M for the period.
Consolidated CAPEX decreased
- Balance Sheet
At the end of 2Q2023, the Company's balance sheet reflects greater strength than first quarter. We maintain financial discipline and have focused on improving Jafra's cash conversion cycle, which has allowed us to reduce our leverage ratio.
YoY, inventories decreased
During 1H2023 we prepaid Ps. 1,250M to the syndicated loan used for the acquisition of Jafra (Ps. 1,000M in 1Q2023 and Ps. 250M in 2Q2023) and reduced the outstanding balance to Ps. 3,249M.
On July 5th, 2023, we successfully concluded the offering of a two-tranche bond issuance for a total of Ps. 814M with maturities across 4 and 7 years, offered in the Mexican Market. The 4-year tranche amounted to Ps. 314M with a variable coupon of 28-day TIIE (28-day Interbank Interest Rate) +
On July 10th, we prepaid the syndicated loan with resources coming from long and short-term loans, long-term fixed-rate bonds, long-term variable-rate bonds, and cash.
The estimated weighted average interest rate for our debt´s whole term went from
We released principal payment obligations for a total amount of Ps. 2,229M until the end of 2026. We defer net principal payments of Ps. 262M in 2024, Ps. 900M in 2025, and Ps. 1,067M in 2026.
Net debt at the end of the semester closed at Ps. 5,071.6M, which represents a
2Q2023 and 1H2023 Financial Results by Business
Betterware
- Key Operating and Financial Metrics
2Q2023 | 2Q2022 | % | 1H2023 | 1H2022 | ||
Associates | Avg. Base | 753,743 | 907,989 | (17.0 %) | 753,160 | 952,890 |
EOP Base | 756,637 | 873,423 | (13.4 %) | 756,637 | 873,423 | |
Weekly Churn Rate | 3.6 % | 3.3 % | 27-bps | 3.6 % | 3.6 % | |
Weekly Activity Rate | 27.0 % | 28.2 % | (118-bps) | 27.4 % | 30.3 % | |
Avg. Weekly Order | 13.9 % | |||||
Distributors | Avg. Base | 40,825 | 44,404 | (8.1 %) | 39,927 | 46,268 |
EOP Base | 41,981 | 43,434 | (3.3 %) | 41,981 | 43,434 | |
Weekly Churn Rate | 2.1 % | 2.1 % | 1-bps | 2.0 % | 2.1 % | |
Weekly Activity Rate | 77.5 % | 78.3 % | (84-bps) | 78.4 % | 80.2 % | |
Avg. Weekly Order | (0.3 %) | |||||
2Q2023 | 2Q2022 | % | 1H2023 | 1H2022 | % | ||
Net Revenues | (9.9 %) | (18.2 %) | |||||
Gross Margin | 61.8 % | 58.3 % | 356-bps | 61.5 % | 61.8 % | (31-bps) | |
EBITDA | 10.0 % | (11.7 %) | |||||
EBITDA Margin | 30.7 % | 25.1 % | 556-bps | 30.2 % | 28.0 % | 221-bps | |
Betterware´s network of distributors and associates continued to show positive stabilization trends during 2Q2023, in line with beginning of the year expectations and with 1Q2023. On a QoQ basis, our associate´s EOP base was practically in line with the previous quarter, (
In terms of distributors, our EOP base grew
Year-to-date trends reinforce our view that our commercial efforts are having a positive impact on our top line, as we achieved two consecutive quarters with QoQ net revenue growth and our 1H2023 net revenues account for almost double the level we had on 1H2019, the pre-pandemic comparable period.
In terms of our profitability, the company showed positive results both on a QoQ basis and a YoY basis, due to continued improvement 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 expansion in terms of EBITDA and EBITDA margin. Coupled with profitability improvements, year-to-date results show great improvement in our cash flow generation, a key characteristic of our asset-light business model.
May and June´23 continued with a better trend in sales force growth indicators. At the distributors level, during these two months we achieved a net profit of 224 distributors per week on average, driven by better incorporation and churn rates than the last year. In the case of associates, we also achieved better rates, although the effect was neutral (neither grew nor decreased). We expect to improve churn rate in the coming months, maintaining the levels of incorporation of associates above
- Net Revenue
For 2Q2023, Betterware´s net revenue declined
Compared to 1Q2023, net revenue increased
Year-to-date, Betterware´s net revenue declined
Even though we are slightly below the expected sales level, weekly sales during June'23 reflect a growth of
- Gross Margin
Betterware´s gross margin for 2Q2023 expanded 356-bps to
Year-to-date, Betterware´s gross margin contracted 31-bps to
- EBITDA and EBITDA Margin
Betterware´s EBITDA for 2Q2023 increased
Due to efficient expense control and gross margin expansion, EBITDA Margin expanded 556-bps to
On a QoQ basis, EBITDA increased
Year-to-date, Betterware´s EBITDA declined
- Update on Business strategies 2023
As mentioned in our previous earnings releases, we have been actively implementing elevated 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: starting in April, we resumed offering our core product line, recovering the main concepts we previously removed from our catalog to adapt our portfolio during the pandemic. We increased the number of SKUs and pages in the catalog, reaching in June to 375 and 110, respectively.
- Product Innovation: during this period, we launched four different new categories: Baby & Kids, Bedding, Hydration, and Pets. Although too early to assess their performance, all of them had a good volume of sales that represented
12% of total net revenues for 2Q23. During the 3Q2023, we will introduce Cleaning Consumables to the catalog. - New Catalog: as previously mentioned, during 1Q2023, we improved the design of our digital and physical catalogs, which resulted in increased excitement, engagement, and better sales conversion rates. During May, we launched the "pocket catalog" to help Distributors recruit associates easier and faster. This new version of the catalog was greatly received by the market, allowing us to reach more associates and as well consumers, increasing our monthly printed catalogs from 3 to 4 million units, without increasing our total spending.
- Technology: after completing the migration of our associates and distributors to Betterware+ App in February, we have been working on adding more capabilities to increase our sales network efficiency and productivity. We incorporated new functionalities to ease the onboarding of new associates and distributors, and to improve tracking and visualization of sales network´s performance. Also, we add the possibility to customize the digital catalog with the distributor/associate's data to be shared with their customers.
- Operations: our semi-automated pick-and-pack Tower started operations by mid-June 2023. We have observed a good start in productivity ahead of our plans and will report in more detail next quarter when we have enough time measured to confirm results.
Jafra Mexico
- Key Operating and Financial Metrics
2Q2023 | 2Q2022 | % vs. 2Q2022 | 1Q2023 | % vs. 1Q2023 | ||
Consultants | Avg. Base | 427,289 | 375,655 | 13.7 % | 448,982 | (4.8 %) |
EOP Base | 424,435 | 365,918 | 16.0 % | 427,280 | (0.7 %) | |
Monthly Churn Rate | 17.6 % | 18.9 % | (126-bps) | 20.4 % | (276-bps) | |
Monthly Activity Rate | 51.2 % | 54.9 % | (374-bps) | 51.7 % | (52-bps) | |
Avg. Monthly Order | 3.7 % | 1.4 % | ||||
Leaders | Avg. Base | 18,978 | 20,382 | (6.9 %) | 19,030 | (0.3 %) |
EOP Base | 18,875 | 20,220 | (6.7 %) | 18,952 | (0.4 %) | |
Monthly Churn Rate | 1.6 % | 1.8 % | (20-bps) | 0.6 % | (80-bps) | |
Monthly Activity Rate | 93.9 % | 92.2 % | 170-bps | 94.3 % | (40-bps) | |
Avg. Monthly Order | 12.2 % | 9.0 % |
2Q2023 | 2Q2022 | % | 1Q2023 | % | |
Net Revenue | 14.5 % | (7.6 %) | |||
Gross Margin | 83.3 % | 81.9 % | 138-bps | 82.0 % | 127-bps |
EBITDA | 25.0 % | (3.2 %) | |||
EBITDA Margin | 17.5 % | 16.0 % | 147-bps | 16.7 % | 79-bps |
* 2Q2022 Jafra´s financial results include operations since April 7th, 2022. Prior to the acquisition, results are not fully comparable due to differences in 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 continue to deliver positive results, well ahead of the expectations we had when we completed the acquisition, as we continue to recreate the key features of Betterware´s asset-light business model to improve Jafra´s profitability and cashflow generation.
Jafra Mexico's management team remains focused on increasing the consultant and leaders base, providing them with improved training and tools to increase their online sales, which have already yielded positive results and should result in increased market share and better market position in all our categories. During the quarter, the average ticket has shown constant increases; this effect occurs from the reactivation of face-to-face dynamics with the field, in combination with more innovative products.
Constant improvements in our expense structure resulted in a
- Net Revenue
Jafra Mexico's 2Q2023 results reflect a strong performance as net revenue for the quarter increased
On a QoQ basis, net revenue declined
For the first half of the year, Jafra Mexico contributed with Ps. 3,199.2M to our net revenue, representing
- Gross Margin
Jafra Mexico´s gross margin for the quarter was
Year-to-date, Jafra Mexico´s gross margin was
- EBITDA and EBITDA Margin
Jafra Mexico´s EBITDA for 2Q2023 increased
Compared to 1Q2023, EBITDA declined
Year-to-date, Jafra Mexico´s EBITDA was Ps. 546.3M and EBITDA margin was
- Update on Business Strategies for 2023
During the first half of the year, extraordinary results were achieved across key financial metrics. Net revenue growth was 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 significant improvement in profitability.
For the rest of the year, our strategies will remain focused on driving sales network growth, retention and reactivation, 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. We persist to inject into Jafra the essence of innovation that has always characterized Betterware. In the 1H2023, we launched 21 new products that helped us gain ground in different categories, reinforcing our offer in Color, Skin Care and Fragrances. New products represented
4% of net revenue at the end of 2021,6% at the end of 2022,7% by the end of 1Q2023, and12% for the first half of the year. We are reaffirming our leadership in Fragrances, where we continue to be #1 in sales value and volume in the Country, and resuming the path in Color to recover market share that was lost before the acquisition. Part of our strategy is focused on the process of renovating the Jafra brand to make it more current, attractive, and appealing, expecting to complete it by the end of July 2023. - 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. The guideline of sustained growth in the base of Leaders and Consultants continues, considering an increase in sponsorship, retention, and reactivation, in improvements to the Program and in special promotions carried out in strategic months. In the same way it continues to invest in the development of future Top Leaders and sales force training. Extraordinary sales results were achieved in 2Q2023 because of the sustained activity and productivity of Leaders and Consultants, as well as proper management of promotions aimed at encouraging sales force activity. In the financial aspect, a rigorous control of costs, expenses and collections was maintained in the quarter. The catalog has had a constant improvement considering market trends. Additionally, the incentive program and strategic promotional campaigns have been reinforced to trigger sales.
- Technology: during May 2023, we launched our App for Consultants, which allows them to manage their own business and become more efficient. Within the App, consultants can check their balance, place orders, pay for them, and track them, see the promotions of the month, and have access to the most frequently asked questions. Regarding Jafranet 2.0, our App for Leaders, we will continue to add features such as lineage control and management, revenue calculations and multilevel visibility. During 3Q2023, we will go live with the first stage of our Chat Bot (will operate through WhatsApp), which will allow us to reduce some expenses and to move towards a much more technical and automated operation.
- Operations: continue to focus on cost control and expense reductions, taking advantage of the identified synergies. Improved our days payable from 70 in 2Q2022 to 94 in 2Q2023, and our days inventory from 135 in 2Q2022 to 119 in 2Q2023, 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
- Key Operating Metrics
2Q2023 | 2Q2022 | % vs. 2Q2022 | 1Q2023 | % vs. 1Q2023 | ||
Consultants | Avg. Base | 28,541 | 32,026 | (10.9 %) | 29,399 | (2.9 %) |
EOP Base | 29,921 | 31,321 | (4.5 %) | 28,749 | 4.1 % | |
Monthly Churn Rate | 11.5 % | 11.9 % | (42-bps) | 15.1 % | (356-bps) | |
Monthly Activity Rate | 44.4 % | 49.0 % | (461-bps) | 37.7 % | (670-bps) | |
Avg. Monthly Order | (0.7 %) | 6.9 % | ||||
Leaders | Avg. Base | 2,041 | 2,046 | (0.2 %) | 2,079 | (1.8 %) |
EOP Base | 1,760 | 2,174 | (19.0 %) | 2,099 | (16.2 %) | |
Monthly Churn Rate | 7.6 % | 2.0 % | 558-bps | 1.8 % | 578-bps | |
Monthly Activity Rate | 83.8 % | 91.5 % | (771-bps) | 81.1 % | 268-bps | |
Avg. Monthly Order | (8.7 %) | 0.6 % |
2Q2023 | 2Q2022 | % | 1Q2023 | % | |
Net Revenue | (19.7 %) | 12.3 % | |||
Gross Margin | 77.8 % | 74.9 % | 292-bps | 76.5 % | 128-bps |
EBITDA | ( | NA | ( | NA | |
EBITDA Margin | 2.2 % | (1.0 %) | NA | (16.6 %) | NA |
* 2Q2022 Jafra´s financial results include operations since April 7th, 2022. Prior to the acquisition, results are not fully comparable due to differences in accounting methods. Before the acquisition Jafra used German GAAP standards and since April 7th, 2022, we use IFRS Standards. |
Year-to-date, JAFRA
Within these strategy changes, we protected Leader titles at the beginning of 2023 to give our leaders time to adjust to business changes during the first few months of the year. This resulted in a minimum number of losses from February to May, and a higher-than-normal leader loss in June when the protection expired. We anticipated this high loss and as a result implemented a special incentive in June, July, and August aimed at recovering our Leader base.
- Net Revenue
Jafra
Net revenue increased
For the first half of the year, Jafra
As mentioned before, we have identified the source of these negative trends and we are focused on turning them around, going through a full revision of our business development and incentives program to improve the opportunity and attractiveness for our sales network and our clients. Positive early signs of the impact of our strategy changes are already materializing and improvements in our financial results are expected to play out during the second half of the year.
- Gross Margin
Jafra USA´s gross margin for the quarter was
Year-to-date, Jafra USA´s gross margin was
- EBITDA and EBITDA Margin
The company experienced improvements in terms of profitability, with Jafra USA´s EBITDA for 2Q2023 of Ps. 5.2M, compared to negative Ps. 3.0M in 2Q2022 (which includes EBITDA from April 7th, 2022, onwards), Results were a consequence of efficient expense control related to synergies and optimizations after the acquisition. EBITDA for the quarter also showed a significant improvement relative to 1Q2023.
Year-to-date, Jafra USA´s EBITDA continues to be negative, but corrective actions are showing positive results. Continued improvement have us confident that we can deliver the profitability turnaround as previously expected.
- Update on Business Strategies for 2023
The Jafra
The key elements of our comprehensive strategy where we have been focused on are, among others:
- Product Innovation: Jafra
USA is committed to partnering with Jafra Mexico to consistently introduce cutting-edge products that cater to an evolving beauty industry. Our efforts are geared towards ensuring that Jafra´s remains at the forefront of the industry, providing our customers with an unparalleled experience. The strategic integration of product innovation with a concerted effort to modernize the Jafra brand, while effectively conveying our esteemed heritage, ensures that Jafra is well positioned for growth within the beauty industry. - Product Marketing: In alignment with our product innovation strategy and strategic rebranding efforts, Jafra
USA is actively revising its client catalog to enhance its ability to effectively communicate our product offerings, deliver added value, and facilitate upselling opportunities through effective product placement. These revisions are designed to optimize the catalog's impact. - Digital Marketing: We are working on brand awareness by improving and tracking customer conversion through email and text messages, working to enhance both metrics. Also, we are partnering with Micro-Influencers, utilizing social ads to reach a new consumer base, and utilizing Google ads for look-a-like marketing, matching products in our portfolio to end users. On the training side, we are focused on creating training specific to new consultants joining, so they can understand what to do in the first 30 & 60 days, with re-purpose / re-create content to be quick and consumable (think TikTok videos) to consultants on the go. New platform to house the content, to be shareable, simple, and fun.
- Business development: we are implementing a comprehensive approach that encompasses social and personal community outreach, regional events, and incentives that support growth initiatives. This approach supports multiple objectives, including enhancing brand recognition, consultant base expansion, and increased engagement among leaders. Through these concerted efforts, we anticipate a notable uptick in overall activity levels.
- Business Intelligence: leveraging advanced analytics and market research will enable us to make informed decisions and capitalize on emerging opportunities. Data-driven insights have revealed an elevated attrition rate among new consultants in Jafra
USA , exceeding industry standards by approximately18% . leading us to launch initiatives involving the implementation of a comprehensive learning management system, designed to deliver customized educational courses, training programs, and materials that cater specifically to the needs of new consultants. Jafra is also focused on identifying key regions. Specifically, we are dedicated to supporting growth and expanding the influence of our leaders in five pivotal regions:California ,Texas ,Florida ,North Carolina , andIllinois . - Technology: We are diligently investing in state-of-the-art technological solutions to streamline our internal processes and enhance our digital platforms. In May, Jafra initiated the development of an enhanced e-commerce and virtual office platform, leveraging the capabilities of the global commerce platform, Shopify. The revamped Jafra.com will introduce an array of compelling features for our valued customers and consultants, including subscription services, loyalty programs, product review functionalities, and enhanced merchandising capabilities. These additions will elevate the overall user experience and empower our stakeholders with more effective tools to engage and transact on the platform. In connection with our enhanced e-commerce platform, Jafra is proactively enhancing direct communication channels with our client base through targeted email and text message campaigns, aimed at attracting a broader clientele and subsequently elevate our e-commerce conversion rates, ultimately driving revenue growth.
These strategies, among others, form the cornerstone of our comprehensive plan for Jafra
Capital Allocation
During the second half of 2023, we will remain focused on the successful integration of the business and the achievement of identified synergies and operating efficiencies, as well as improving our financial position. Therefore, most of our cash flow generation will be destined to prepay debt and reduce our debt burden.
We expect to continue obtaining good results generated by the attributes of our differentiated business model, specifically, high cash flow generation and asset-light structure. Our end-of-period 2Q2023 leverage ratio is at 2.0x Net Debt / TTM EBITDA, down from 2.2x in 1Q2023. By mid-July, once prepaid the syndicated loan, our Net Debt / TTM EBITDA ratio was 1.96x. We are totally aligned with our objective leverage ratio of 2.0x, which we expect to continue reducing towards the end of 2023.
Having said that, we remain committed to returning value to our shareholders through growing quarterly dividends as the Group's results are as expected. Therefore, our Board of Directors has proposed to pay a Ps. 200M dividend to shareholders for the quarter, which is subject to approval at the Ordinary General Shareholders' Meeting of August 9th, 2023.
2023 Guidance and Long-Term Growth Prospects
Considering year-to-date results, and still high interest rates, inflation, and some uncertainties ahead, we are cautiously optimistic about our short-term prospects and confirm our previous guidance for our consolidated business:
2023 | 2022 | Var % | |
Net Revenue | Ps. 13,200 - Ps. 14,200 | Ps.11,499 | |
EBITDA | Ps. 2,600 – Ps. 2,800 | Ps. 2,213 |
*Figures in millions |
There are some exogenous risks that may affect the results of our businesses, such as adverse global and National macroeconomic conditions, inflation, exchange rate, freight costs, disruptions in the supply chain, and political matters, among others. Nonetheless, we may also have several opportunities that can have the opposite effect, such as the expansion of our sales force, higher margins, superior activity, greater penetration in the market derived from different approaches such as new product categories, product innovation, differentiated sales channels, and of course, taking advantage of the synergies between Jafra and Betterware.
In the longer term, we are confident in our growth prospects in
Betterware de México, S.A.P.I. de C.V. Consolidated Statements of Financial Position As of June 30, 2023, and 2022 (In Thousands of Mexican Pesos) | ||
Jun 2023 | Jun 2022 | |
Assets | ||
Cash and cash equivalents | 728,872 | 575,727 |
Trade accounts receivable, net | 1,166,267 | 1,170,038 |
Accounts receivable from related parties | 30 | 6,414 |
Inventories | 2,021,738 | 2,527,583 |
Prepaid expenses | 126,859 | 149,915 |
Income tax recoverable | 213,784 | - |
Other assets | 163,131 | 502,478 |
Total current assets | 4,420,681 | 4,932,155 |
Property, plant and equipment, net | 2,902,039 | 1,848,424 |
Right of use assets, net | 357,831 | 153,006 |
Deferred income tax | 319,157 | 302,651 |
Investment in subsidiaries | 1,236 | 1,235 |
Intangible assets, net | 1,691,781 | 670,457 |
Goodwill | 1,599,718 | 3,084,893 |
Other assets | 50,934 | 121,732 |
Total non-current assets | 6,922,696 | 6,182,398 |
Total assets | 11,343,377 | 11,114,553 |
Liabilities and Stockholders' Equity | ||
Short term debt and borrowings | 754,232 | 679,933 |
Accounts payable to suppliers | 1,721,562 | 1,531,240 |
Accrued expenses | 357,051 | 333,421 |
Provisions | 788,698 | 780,945 |
Income tax payable | - | 88,148 |
Value added tax payable | 132,688 | 64,630 |
Trade accounts payable to related parties | 116,932 | 120,001 |
Statutory employee profit sharing | 77,489 | 73,442 |
Lease liability | 79,309 | 114,075 |
Derivative financial instruments | 80,066 | 42,904 |
Total current liabilities | 4,108,027 | 3,828,739 |
Employee benefits | 154,817 | 224,454 |
Deferred income tax | 837,672 | 68,326 |
Lease liability | 281,447 | 36,891 |
Long term debt and borrowings | 4,685,437 | 5,905,688 |
Total non-current liabilities | 5,959,373 | 6,235,359 |
Total Liabilities | 10,067,400 | 10,064,098 |
Stockholders' Equity | 1,277,753 | 1,049,248 |
Non-controlling interest | (1,776) | 1,207 |
Total Stockholders' Equity | 1,275,977 | 1,050,455 |
Total Liabilities and Stockholders' Equity | 11,343,377 | 11,114,553 |
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 June 30, 2023, and 2022 (In Thousands of Mexican Pesos) | |||
Q2 2023 | Q2 2022 | ∆% | |
Net revenue | 3,220,097 | 3,243,604 | (0.7 %) |
Cost of sales | 860,763 | 986,294 | (12.7 %) |
Gross profit | 2,359,334 | 2,257,310 | 4.5 % |
Administrative expenses | 742,747 | 769,034 | (3.4 %) |
Selling expenses | 838,525 | 781,476 | 7.3 % |
Distribution expenses | 153,189 | 158,138 | (3.1 %) |
Total expenses | 1,734,461 | 1,708,648 | 1.5 % |
Share of results of subsidiaries | - | - | 0 % |
Operating income | 624,873 | 548,662 | 13.9 % |
Interest expense | (206,173) | (131,163) | 57.2 % |
Interest income | 14,993 | 10,301 | 45.6 % |
Unrealized (loss) gain in valuation of financial derivative instruments | (14,521) | 28,315 | (151.3 %) |
Foreign exchange loss, net | (38,535) | (31,888) | 20.8 % |
Financing cost, net | (244,236) | (124,435) | 96.3 % |
Income before income taxes | 380,637 | 424,227 | (10.3 %) |
Income taxes | 125,412 | 135,122 | (7.2 %) |
Net income including minority interest | 255,225 | 289,105 | (11.7 %) |
Non-controlling interest loss | 3,145 | 317 | 892.1 % |
Net income | 258,370 | 289,422 | (10.7 %) |
EBITDA breakdown (Ps. 717 million) | |||
Concept | Q2 2023 | Q2 2022 | ∆% |
Net income including minority interest | 255,225 | 289,105 | (11.7 %) |
(+) Income taxes | 125,412 | 135,122 | (7.2 %) |
(+) Financing cost, net | 244,236 | 124,435 | 96.3 % |
(+) Depreciation and amortization | 92,560 | 66,604 | 39.0 % |
EBITDA | 717,433 | 615,266 | 16.6 % |
EBITDA margin | 22.3 % | 19.0 % | 3.3 % |
Betterware de México, S.A.P.I. de C.V. Consolidated Statements of Profit or Loss and Other Comprehensive Income For the six-months ended on June 30, 2023, and 2022 (In Thousands of Mexican Pesos) | |||
Jun 2023 | Jun 2022 | ∆% | |
Net revenue | 6,484,308 | 5,103,800 | 27.0 % |
Cost of sales | 1,748,747 | 1,640,146 | 6.6 % |
Gross profit | 4,735,561 | 3,463,654 | 36.7 % |
Administrative expenses | 1,567,507 | 1,088,684 | 44.0 % |
Selling expenses | 1,684,000 | 1,038,528 | 62.2 % |
Distribution expenses | 298,366 | 226,216 | 31.9 % |
Total expenses | 3,549,873 | 2,353,428 | 50.8 % |
Share of results of subsidiaries | - | (16,611) | (100.0 %) |
1,438,557 | 2,319,583 | -38.0 % | |
Operating income | 1,185,688 | 1,093,615 | 8.4 % |
Interest expense | (417,108) | (160,580) | 159.8 % |
Interest income | 27,488 | 15,713 | 74.9 % |
Unrealized loss in valuation of financial derivative instruments | (64,737) | (71,097) | (8.9 %) |
Foreign exchange loss, net | (49,108) | (25,048) | 96.1 % |
Financing cost, net | (503,465) | (241,012) | 108.9 % |
Income before income taxes | 682,223 | 852,603 | (20.0 %) |
Income taxes | 238,769 | 283,732 | (15.8 %) |
Net income including minority interest | 443,454 | 568,871 | (22.0 %) |
Non-controlling interest loss | 2,913 | 1,785 | 63.2 % |
Net income | 446,367 | 570,656 | (21.8 %) |
EBITDA breakdown (Ps. 1,372 million) | |||
Concept | Jun 2023 | Jun 2022 | ∆% |
Net income including minority interest | 443,454 | 568,871 | (22.0 %) |
(+) Income taxes | 238,769 | 283,732 | (15.8 %) |
(+) Financing cost, net | 503,465 | 241,012 | 108.9 % |
(+) Depreciation and amortization | 186,304 | 88,221 | 111.2 % |
EBITDA | 1,371,992 | 1,181,836 | 16.1 % |
EBITDA margin | 21.2 % | 23.2 % | (2.0 %) |
Betterware de México, S.A.P.I. de C.V. Consolidated Statements of Cash Flows For the six-months ended on June 30, 2023, and 2022 (In Thousands of Mexican Pesos) | ||
Jun 2023 | Jun 2022 | |
Cash flows from operating activities: | ||
Profit for the period | 443,454 | 568,871 |
Adjustments for: | ||
Income tax expense recognized in profit of the year | 238,769 | 283,732 |
Depreciation and amortization of non-current assets | 186,304 | 88,221 |
Interest income recognized in profit or loss | (27,488) | (15,713) |
Interest expense recognized in profit or loss | 417,108 | 160,580 |
Loss (gain) of property, plant, equipment sale | (2,358) | (368) |
Unrealized loss /(gain) in valuation of financial derivative instruments | 64,737 | 71,097 |
Share-based payment expense | (3,699) | 9,011 |
Currency translation effect | (6,066) | 1,291 |
Movements in not- controlling interest | (46) | 5,709 |
Movements in working capital: | ||
Trade accounts receivable | (195,205) | 67,664 |
Trade accounts receivable from related parties | 31 | 3,857 |
Inventory, net | 100,932 | (233,653) |
Prepaid expenses and other assets | (53,423) | (149,543) |
Accounts payable to suppliers and accrued expenses | 405,293 | (739,979) |
Provisions | (4,573) | (37,107) |
Value added tax payable | 43,546 | 85,719 |
Statutory employee profit sharing | (57,809) | (39,058) |
Trade accounts payable to related parties | 20,073 | 120,204 |
Income taxes paid | (251,738) | (307,100) |
Employee benefits | 910 | 3,642 |
Net cash generated by (used in) operating activities | 1,318,752 | (52,923) |
Cash flows from investing activities: | ||
Investment in subsidiaries | - | (4,629,997) |
Payments for property, plant and equipment, net | (26,349) | (110,603) |
Proceeds from disposal of property, plant and equipment, net | 12,644 | 5,486 |
Interest received | 27,488 | 15,713 |
Net cash generated by (used in) investing activities | 13,783 | (4,719,401) |
Cash flows from financing activities: | ||
Repayment of borrowings | (1,600,000) | (220,010) |
Proceeds from borrowings | 875,000 | 5,368,651 |
Interest paid | (383,769) | (231,539) |
Lease payment | (61,025) | (18,985) |
Share repurchases | - | (25,264) |
Dividends paid | (249,513) | (700,000) |
Net cash generated by (used in) in financing activities | (1,419,307) | 4,172,853 |
Net decrease in cash and cash equivalents | (86,772) | (599,471) |
Cash and cash equivalents at the beginning of the period | 815,644 | 1,175,198 |
Cash and cash equivalents at the end of the period | 728,872 | 575,727 |
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
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
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
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.
2Q2023 Conference Call
Management will hold a conference call with investors on July 28, 2023, at 8:00 am Central Time (CT)/ 9:00am Eastern Time (ET). 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: 13740161
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: 13740161
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SOURCE Betterware de México, S.A.P.I. de C.V.
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