Betterware Reports First Quarter 2024 Results

GUADALAJARA, Mexico, April 25, 2024 /PRNewswire/ -- Betterware de México, S.A.P.I. de C.V. (Nasdaq: BWMX) ("BeFra" or the "Company"), announced today its consolidated financial results for the first quarter 2024. 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 26, 2024, to discuss its results for the first quarter of 2024.

Message from the Chairman

We are very proud of our performance during the first quarter of 2024, which is a year of transformation for our company as multiple growth and efficiency initiatives gain additional traction. BeFra's resurgent growth accelerated during the quarter, sustained by a strong back-to-back growth trend at Betterware Mexico, driven by product innovation and effective marketing strategies, and by the ongoing successful expansion of Jafra Mexico, which has proven to be a highly accretive acquisition. What's more, there is still ample room to substantially grow the latter business even further.  During the quarter, we made substantial changes to Jafra US's commercial strategy and are now seeing early and encouraging signs of a recovery. In addition to the success of our many growth initiatives, we have been further reducing BeFra's cost structure to build in additional operating leverage, while also improving working capital management to increase our capital efficiency.

Betterware Mexico has identified a clear path to growth, recording a 12.0% year-over-year increase in net revenue compared to Q123. This marked its highest net revenue since Q222. April marks the two-year anniversary of acquiring Jafra, so the first quarter results of Jafra Mexico are particularly gratifying. This business maintained its impressive growth trajectory with an 11.3% year-over-year increase in net revenue and a 38.0% surge in EBITDA. Since the acquisition, Jafra Mexico's net revenue has grown 46%, its EBITDA margin has expanded 800 bps to 20.7%, and the cash conversion cycle fell from 223 days to 110 days.  We are exceedingly proud that Jafra remains Mexico's leading fragrance company, both in terms of sales and volume. Achieving this market position is a source of motivation to become the top beauty company in Mexico, as we further develop and introduce new product categories.

In our international operations, significant effort has been devoted to substantially improving the performance of Jafra US, where we have succeeded in optimizing direct and operating expenses. Our primary focus has been and will continue to be on stabilizing net revenues, establishing a solid foundation for growth that we expect to resume in the second half of the year. Higher efficiency levels coupled with comprehensive improvements to the commercial strategy are expected to drive additional momentum as the year proceeds.

International expansion is one of the cornerstones of our growth strategy. On April 16th we officially launched Betterware US, locating the headquarters in Dallas, Texas and going live with a website. Our initial focus remains the U.S.'s large and rapidly growing Hispanic market, starting with Texas. It is important to note that we are entering the U.S. home solutions market with an entirely new business model, one that targets the ecommerce as well as direct selling verticals. This model was designed from the customer up and enables Betterware to take a customer-first, digitally connected approach to the U.S. market. Meanwhile, our preparations for launching Betterware operations in Peru are proceeding well, with a launch targeted for the first quarter of 2025.

We recognize that significant challenges remain at BeFra, but we are still confident in our ability to continue effectively addressing these head-on to reestablish a firm profitable growth trajectory across the company and further deleverage its balance sheet. Significant progress in reducing costs as well as inventory levels are behind our confidence, along with the significant traction that our growth strategies continue gaining. A more solid foundation to grow upon, combined with the addition of new and dynamic leaders, positions us well for renewed success. As always, we have set ambitious goals but remain committed to maintaining high standards that further our mission of creating more opportunities for many to enhance their lives.

Luis G. Campos
Chairman of the Board

Q124 Select Consolidated Financial Information

Q124

Q123

Net Revenue

$3,602,503

$3,264,211

+10.4 %

Gross Margin

73.6 %

72.8 %

+79 bps

EBITDA

$755,390

$654,560

+15.4 %

EBITDA Margin

21.0 %

20.1 %

+92 bps

Free Cash Flow

$359,655

$549,312

-34.5 %

Net Income

$294,146

$187,997

+56.5 %

EPS

$7.90

$5.05

+56.5 %

Net Debt / EBITDA

1.8x

2.2x

Interest Coverage

3.2x

2.8x

 

Q124

Q123

Associates and Consultants

Avg. Base

1,215,441

1,230,958

-1.3 %

EOP Base

1,205,869

1,220,053

-1.2 %

Distributors and Leaders

Avg. Base

63,541

60,138

+5.7 %

EOP Base

65,315

61,042

+7.0 %

 

Highlights

  • Sustained revenue growth:  Consolidated Net revenue increased by 10.4% year-on-year (YoY), primarily due to growth of the Betterware and Jafra brands in Mexico.
  • Solid EBITDA growth:  EBITDA increased by 15.4% with a 92 bps YoY EBITDA margin increase, to 21.0%. This was despite a 7.3% decrease in Betterware Mexico EBITDA from a temporary increase in distribution costs at this business with lower Net Revenue and Gross Margin at Jafra US.
    • Gross margin expanded by 79 bps, primarily driven by margin improvements at Jafra Mexico: 89 bps from reduced material costs due to successful supplier negotiations, 33 bps from decreased obsolescence costs, and 27 bps from a favorable exchange rate effect. Conversely, an unfavorable sales mix of low-margin SKUs adversely impacted at Betterware Mexico Gross Margin by 70 bps.
    • Jafra Mexico EBITDA increased 38.0%, contributing 51% to the group's EBITDA, a reflection of consistently profitable growth since its acquisition in April 2022.
    • Strong demand in Mexico's home solutions and beauty markets, robust consumer demand, and BeFra's growth strategies and financial discipline are expected to drive sustained Net revenue and EBITDA growth.
  • Continued deleveraging trend: Net-Debt-to-EBITDA ratio decreased to 1.78x in Q124 from 1.83x in Q423 with an increased Interest Coverage ratio, to 3.2x.
  • Strong EPS growth: Outperformance across most key metrics resulted in a 56.5% YoY increase in earnings per share.

Q224 Priorities

  • Revenue growth: Continued effective execution of 2024 commercial plan across businesses.
  • Cost control: Maintain GM at an optimal level between 69% and 70% in 2024 through continued cost improvement and efficiency strategies. These include currency hedges, continued raw materials and product cost negotiations with suppliers, and implementing design-to-cost engineering throughout the Company's operations.
  • Betterware US launch: Betterware began formal operations in the U.S. in April 2024, with an initial focus on the Hispanic population in Texas. The projected investment in 2024 remains approximately USD$ 6 million.
  • Betterware Peru preparations. BeFra's Peru operations general manager is building a management team to lead the 2025 launch of Betterware Peru. This entails full buildout of the Company's operations within this market and developing the infrastructure necessary to ensure the rapid and successful penetration of the country's home solutions market.

Q124 Financial Results by Business

Betterware Mexico
Key Financial and Operating Metrics

Q124

Q123

Net Revenue

$1,555,027

$1,388,983

+12.0 %

Gross Margin

60.0 %

61.1 %

-117 bps

EBITDA

$382,107

$412,356

-7.3 %

EBITDA Margin

24.6 %

29.7 %

-512 bps

 

Q124

Q123

Associates

Avg. Base

716,645

752,577

-4.8 %

EOP Base

724,707

764,024

-5.1 %

Monthly Activity Rate

67.70 %

68.10 %

-40 bps

Avg. Monthly Order

$2,052

$1,767

+16.1 %

Distributors

Avg. Base

42,886

39,028

+9.9 %

EOP Base

44,482

39,991

+11.2 %

Monthly Activity Rate

98.50 %

98.50 %

+2 bps

Avg. Monthly Order

$23,582

$23,562

+0.1 %

 

Highlights

  • Sustained Net Revenue strength. A second consecutive quarter of positive YoY performance, with accelerated Net revenue growth (+12.0% YoY).
    • Expansion in Associates' average monthly order size by 16%, primarily due to the effective implementation of diverse marketing and sales strategies.
    • Successful execution of commercial plan:
      • Successful launch of new food container brand, "Gurmy", revitalizing the category and achieving a month-on-month revenue increase. Also strengthened Betterware's "hydration" subcategory with the introduction of successful new products.
      • Enhanced merchandising strategy: recalibrating prices and promotions across all concepts to drive market success.
      • Introduced new B+ app functionality to improve operational use for salesforce.
      • Launched new "segmented" Associate and Distributor promotions, contributing to the lowest historical decrease in "Holy Week" revenue, which in 2024 occurred in March (this holiday usually occurs in April).
      • Strengthened "personal companionship method" with our Field Managers, improving the salesforce's impact in the field.
  • Strong increase in Distributor base. Achieved a nearly 10% increase in Betterware's Distributor base with maintained activity and average order levels. This typically precedes an Associate base increase, as Distributors are key "group builders." 
  • Improved cash conversion cycle. A decrease in the cash conversion cycle to 40 days, with a 13 days turnaround, from 53 days in Q123. This considerable improvement resulted primarily from improved inventory turnover, decreasing to 143 days in Q124 from 185 days in Q123.
  • Slight decrease in Associates headcount. The number of Associates decreased slightly Q124, in both average and end-of-period metrics. Despite steady activity and recruitment rates, the churn rate remains high. This is expected to improve in the remainder of the year, contributing to a net YoY increase in the Associates base. Increased Associate productivity represents an important foundation for the Company's further expansion.
  • Slight Gross margin contraction. Gross Margin was primarily impacted by an increased mix of promotional products in total sales, which rose to 39% in Q124 from 33% in Q123.
  • Decrease in EBITDA and EBITDA Margin. EBITDA declined 7.3% year on year, primarily due to increased promotion and distribution expenses. This increase is expected to normalize for the remainder of the year, the Company's full year 2024 EBITDA target therefore remains unchanged.
  • Decreased excess inventory: Excess inventory decreased by 17% year on year and is expected to continue for the remainder of the year.

Q224 Priorities

  • Solid promotion and innovation plan: The plan's primary goal is to maintain strong average monthly orders and adequate average activity rates to decrease the Associate churn rate.
  • Reduce inventories: Control excess inventory generation decreasing a minimum of 80% of current levels, targeting approximately Ps. 200 million to Ps. 220 million in reductions.
  • Increase Associates base: Focus on both increased recruitment and retention of Associates through strengthened productivity, improved incentives, and enhanced ease of doing business with BeFra. This reduces churn in the base while fostering strong relationships with new members. 

Jafra Mexico

Key Financial and Operating Metrics

Q124

Q123

Net Revenue

$1,849,996

$1,662,405

+11.3 %

Gross Margin

85.0 %

82.0 %

+293 bps

EBITDA

$383,120

$277,547

+38.0 %

EBITDA Margin

20.7 %

16.7 %

+401 bps

 

Q124

Q123

Consultants

Avg. Base

469,290

448,982

+4.5 %

EOP Base

451,692

427,280

+5.7 %

Monthly Activity Rate

53.8 %

51.7 %

+211 bps

Avg. Monthly Order

$2,362

$2,063

+14.5 %

Leaders

Avg. Base

18,927

19,030

-0.5 %

EOP Base

19,159

18,952

+1.1 %

Monthly Activity Rate

95.0 %

94.3 %

+65 bps

Avg. Monthly Order

$2,698

$2,259

+19.4 %

 

Highlights
Highly accretive and successful acquisition: improvements in all key Jafra Mexico performance metrics within the first two years subsequent to its acquisition, most importantly revenue, EBITDA and cash conversion:

         

Q1 2022 

 

Q1 2023 

 

Q1 2024 

 

∆% 22 vs 24 

Net Revenues

1,266

1,662

1,850

+46 %

EBITDA

161

278

383

+138 %

EBITDA Margin

12.70 %

16.70 %

20.70 %

+800 bps

Cash Conversion Cycle

223

135

110

-113

   

  • Sustained Net Revenue growth. Jafra Mexico's Net revenue increased 11.3% compared to Q123, driven primarily by reinforcing the BeFra business model focused on expanding the Consultant base with important product innovation, which accounted for 18% of its total Net revenues. Jafra Mexico's new catalog concept featuring a monthly special edition with an attractive layout and simplified navigation drove further growth during the quarter, complemented by robust digital marketing efforts and strong innovation. It is important to note a higher-than-expected cut-off effect in March; excluding this effect, Q124 Net revenue would have increased by 18.9%. The cut-off effect will positively impact Q224 results.
  • Fragrances and color categories saw notable growth. These categories contributed significantly to revenue and EBITDA growth during the quarter.
  • Consultant base responding to the ongoing strategy. Jafra Mexico's Consultant base expanded 4.5% YoY and 1.6% sequentially, benefitting from strategic promotional activities initiated in early 2024 aimed at reactivation and retention. Although the Leaders base has not yet reached Q123 levels, this has shown continued progress over the last two quarters. This uptick is a direct result of the 2023 strategy to promote more Consultants to Leaders and enhance recruitment through appealing incentives.
  • Solid increase in average monthly orders. 9.6% YoY growth due to a 2.4 SKU increase in average order size, primarily driven by Fragrance category innovations. This was also supported by a 211 bps increase in the Consultants' activity rate, year on year.
  • Gross Margin improvement. Jafra Mexico Gross Margin improved by 293 bps YoY: 54 bps from a favorable exchange rate impact, 175 bps from reduced material costs due to successful supplier negotiations, and a 64 bps gain from decreased obsolescence costs.
  • EBITDA and EBITDA margin increased substantially. EBITDA increased 38.0% YoY while the corresponding margin expanded 401 bps, driven by higher Net revenue, a higher gross margin, and greater efficiency in administrative expenses (decreasing 13.4% in the quarter on an annual basis). These improvements reflect enhanced synergies and optimization strategies implemented in 2022 and 2023.
  • Strong cash flow.  Jafra Mexico generated substantial operational cash flow of Ps. 253 million; a 20.4% increase compared to Q123, contributing to a strong balance sheet at the end of the quarter. The Company has remained focused on extending Days Payables since early 2022, offering invoice factoring to suppliers and renegotiating terms and conditions when appropriate. This initiative was completed at the end of 2023, with the full positive impact expected in 2024 reflected in increased margins and enhanced availability of cash, while the cash conversion cycle improved, extending DPO to 82 days.

Q224 Priorities

  • Sustained revenue momentum. Continued growth strategy execution to drive double-digit growth in 2024.
  • Improve Skin Care performance. While the Skin Care category has grown compared to last year, this has not met expectations due to competitive pricing and a core portfolio refresh. The introduction of the new Jafra Skin Care Line, aimed at attracting younger consumers, will be supported by an extensive category plan. This strategy includes a mix of traditional and digital marketing, sample programs, special events, virtual consultations, and sales force training to boost category performance.
  • Expense improvement. Continued cost control with further streamlining of overall operational expenses.

 

Jafra US

Key Financial and Operating Metrics

Q124

Q123

Net Revenue

$197,480

$212,823

-7.2 %

Gross Margin

74.0 %

76.5 %

-250 bps

EBITDA

-$9,838

-$35,344

+259.3 %

EBITDA Margin

-5.0 %

-16.6 %

+1,163 bps

 

Q124

Q123

Consultants

Avg. Base

29,506

29,399

+0.4 %

EOP Base

29,470

28,749

+2.5 %

Monthly Activity Rate

42.40 %

37.70 %

+470 bps

Avg. Monthly Order (USD)

$223

$232

-3.9 %

Leaders

Avg. Base

1,728

2,080

-16.9 %

EOP Base

1,674

2,099

-20.2 %

Monthly Activity Rate

88.3 %

81.1 %

+717 bps

Avg. Monthly Order (USD)

$216

$219

-1.4 %

 

Highlights

  • Sustained upward trend in monthly activity rates: Q124 monthly activity rates for Consultants and Leaders increased by 470 bps and 717 bps, respectively, which is crucial to expanding the Jafra US Consultant and Leader bases during the remainder of the year.
  • End of period Consultant base: The EOP Consultant base increased by 2.5% YoY, aligned with 2024 targets.
  • Positive trend in Color category: The Color category revenues grew 13% YoY, benefiting from cross-category collaboration with Fragrances, which ended the quarter in line with the prior year performance.
  • Quarterly Net Revenue decrease but stabilized on a monthly basis: Jafra US Net revenue decreased 7.2% YoY but stabilized at Ps. 73 million on a monthly basis. The decrease is attributable to a nearly 9% appreciation of the Mexican peso.
    • It is important to note that Q124 Net Revenue increased by 2% in US dollars. (Q123 Net revenue calculated at 18.7 pesos per US dollar exchange rate; Q124 Net Revenue calculated at 16.9 pesos per US dollar exchange rate).
    • Q124 Net Revenue would have increased by 6.2% excluding the cut-off effect.
  • Skin Care and Toiletries decline:  These product category sales decreased relative to the prior period due to an inappropriate pricing strategy. Price levels have since been adjusted to be more competitive.
  • EBITDA and EBITDA margin improving:  While Q124 EBITDA was negative, this improved considerably compared to Q123 due to aggressive cost containment throughout 2022 and 2023, reflected in a Ps. 39 million, or 31%, YoY decrease in operating expenses.
  • Gross Margin contraction. Gross margin decreased by 250 bps YoY, primarily due to aggressive promotional strategies and initiatives to liquidate surplus inventory at reduced prices and mitigate the risks associated with inventory obsolescence.

Q224 Priorities

  • Jafra US commercial strategy has been calibrated and refined across all fronts: portfolio management, merchandising, catalog design and pagination, incentive programs, promotions, ease of doing business, and Field Management. Early projections for April revenue indicate a significant revenue increase. Q224 is expected to be a pivotal quarter, with further momentum in the second half of 2024.
  • Jafra US inventory levels: excess inventory has been reduced according to plan. Revenue projection management has been refined, and the focus will be on maintaining more inventory in Queretaro, Mexico rather than Dallas, Texas, U.S.

Balance Sheet Highlights

Strong balance sheet at the end of Q124.

  • BeFra's balance sheet further strengthened in Q124, providing greater financial flexibility to reduce debt leverage, invest in additional growth and efficiency initiatives, as well as pay dividends.
  • Total assets were Ps. 10,873 million, 16% higher than total liabilities. Total liabilities represented 86% of total assets, decreasing from 89% in Q123, with long-term debt representing 42% and short-term debt 5%.
  • Fixed assets represented 27% of total assets, reflecting BeFra's asset-light structure and ability to generate strong cash flows with a profitable business model.
  • Q124 short-term debt, long-term debt, and borrowings decreased by 29% and 8%, respectively, compared to Q123.
  • Stockholder's Equity was Ps. 1,510 million at the end of Q124, a 28% increase compared to Q123, primarily due to retained earnings from previous reporting periods.
  • Other key balance sheet metrics:
    • Current ratio (current assets/current liabilities): 1.04x.
    • Equity turnover (TTM Net revenue/average stockholder's equity): 10x.
    • Return on equity (ROE): 86%.
    • Return on assets (ROA): 11%.
    • Return on total assets (ROTA): 26%.
    • Debt-to-EBITDA ratio: 1.93x.
    • Net debt-to-EBITDA: 1.78x.

Capital Allocation

Deleveraging BeFra's balance sheet remains a strategic priority. The Company intends to use operating cash flow for debt repayments, with the same objective of lowering Net debt-to-EBITDA to at least 1.5x by the end of 2024. Total debt repayments are expected to amount to around Ps. 800 million during the remainder of the year. As of March 31, 2024, Net debt-to-EBITDA was 1.78x, down from 2.24x at the end of Q123.

We have finalized a purchase agreement for the property currently hosting Jafra Mexico's offices in Mexico City. The deal is valued at Ps. 385.7 million, with payments spread over a three-year term. These funds will be destined for servicing the Company's outstanding debt. Jafra Mexico will move to a newly leased office building starting in June 2024.

Given BeFra's improving performance, the Company remains committed to paying quarterly dividends as another means to increase shareholder value over the long term. The board of directors has proposed a Ps. 250 million dividend for the first quarter 2024, subject to approval at the Ordinary General Shareholders' Meeting to be held on May 13, 2024. This would mark the 17th consecutive quarterly dividend payment since we went public in March 2020. Future dividends are expected to be equal to or exceed this quarter's proposed dividend, depending on BeFra's financial results and taking into consideration the plan to repay debt.

2024 Guidance and Long-Term Growth Prospects

Looking ahead, BeFra remains confident and optimistic about the remainder of the year, given the Company's substantial achievements to date and further growth prospects. The current outlook assumes BeFra's Q124 net revenue and EBITDA are aligned with initial forecasts provided at the beginning 2024. Should the company's results remain strong, BeFra may consider raising guidance. However, guidance remains as is detailed below:

2024

2023

Var %

Net Revenue

$ 13,800 – 14,400

$ 13,010

6.1% - 10.7%

EBITDA

$ 2,900 – 3,100

$ 2,721

6.6% - 13.9%

*Figures in millions Ps.

 

The Company's strategy emphasizes consolidating BeFra's position within the U.S. and driving growth in the vibrant Mexican market, representing significant growth potential, while capitalizing on multiple growth opportunities and adapting to shifts in market conditions enabling continued growth and profitability.

Appendix

Financial Statements

Betterware de México, S.A.P.I. de C.V.

Consolidated Statements of Final Position

As of March 31, 2024 and 2023

(In Thousands of Mexican Pesos)

 Mar 2024

 Mar 2023

Assets

Cash and cash equivalents

425,177

579,788

Trade accounts receivable, net

1,198,708

1,209,278

Accounts receivable from related parties

163

12

Inventories

1,871,274

1,845,278

Prepaid expenses

133,877

113,075

Income tax recoverable

127,101

217,268

Other assets

164,260

192,968

Total current assets

3,920,560

4,157,667

Property, plant and equipment, net

2,889,521

2,933,315

Right of use assets, net

343,547

282,343

Deferred income tax

437,964

319,157

Investment in subsidiaries

-

1,236

Intangible assets, net

1,628,036

1,715,686

Goodwill

1,599,718

1,599,718

Other assets

53,388

44,373

Total non-current assets

6,952,174

6,895,828

Total assets

10,872,734

11,053,495

Liabilities and Stockholders' Equity

Short term debt and borrowings

539,195

761,419

Accounts payable to suppliers

1,670,630

1,382,580

Accrued expenses

295,535

280,890

Provisions

763,260

791,437

Income tax payable

-

Value added tax payable

133,055

132,192

Trade accounts payable to related parties

1,152

104,917

Statutory employee profit sharing

163,278

162,844

Lease liability

114,811

94,890

Derivative financial instruments

72,701

65,545

Total current liabilities

3,753,617

3,776,714

Employee benefits

130,585

150,876

Derivative financial instruments

-

-

Deferred income tax

697,565

832,239

Lease liability

241,976

184,731

Long term debt and borrowings

4,539,134

4,926,846

Total non-current liabilities

5,609,260

6,094,692

Total liabilities

9,362,877

9,871,406

Stockholders' Equity

Capital stock

321,312

321,312

Share premium account

-25,264

-12,182

Retained earnings

1,233,531

868,132

Other comprehensive income

-               18,148

3,470

Non-controlling interest

-                 1,574

1,357

Total Stockholders' Equity

1,509,857

1,182,089

Total Liabilities and Stockholders' Equity

10,872,734

11,053,495

 

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 March 31, 2024 and 2023

(In Thousands of Mexican Pesos)

Q1 2024

Q1 2023

%

Net revenue

3,602,503

3,264,211

10.4 %

Cost of sales

951,555

887,984

7.2 %

Gross profit

2,650,948

2,376,227

11.6 %

Administrative expenses

785,616

824,760

-4.7 %

Selling expenses

1,028,574

845,475

21.7 %

Distribution expenses

176,725

145,177

21.7 %

Total expenses

1,990,915

1,815,412

9.7 %

Share of results of subsidiaries

0

0

0.0 %

Operating income

660,033

560,815

17.7 %

Interest expense

-164,425

-210,935

-22.0 %

Interest income

6,669

12,494

-46.6 %

Unrealized loss in valuation of financial derivative instruments

-24,782

-50,216

-50.6 %

Foreign exchange gain (loss), net

-21,041

-10,573

99.0 %

Financing cost, net

-203,579

-259,230

-21.5 %

Income before income taxes

456,454

301,585

51.4 %

Income taxes

162,209

113,357

43.1 %

Net income including minority interest

294,245

188,228

56.3 %

Non-controlling interest loss

-99

-232

-57.3 %

Net income

294,146

187,996

56.5 %

EBITDA breakdown (Ps. million)

Concept

Q1 2024

Q1 2023

%

Net income

294,245

188,228

56.3 %

(+) Income taxes

162,209

113,357

43.1 %

(+) Financing cost, net

203,579

259,230

-21.5 %

(+) Depreciation and amortization

95,357

93,744

1.7 %

EBITDA

755,390

654,559

15.4 %

 

Betterware de México, S.A.P.I. de C.V.

Consolidated Statements of Cash Flows

For the three-months ended March 31, 2024 and 2023

(In Thousands of Mexican Pesos)

Q1 2024

Q1 2023

Cash flows from operating activities:

Profit for the period

294,245

188,229

Adjustments for:

Income tax expense recognized in profit of the year

162,209

113,357

Depreciation and amortization of non-current assets

95,357

93,744

Interest income recognized in profit or loss

-                 6,669

-               12,494

Interest expense recognized in profit or loss

164,425

210,935

Unrealized loss in valuation of financial derivative instruments

24,782

50,216

Share-based payment expense

-                 8,894

489

Gain on disposal of equipment

-                 1,614

-

Currency effect

-                         9

-                 4,045

Movements in not- controlling interest

-                      42

-                      58

Other gains and losses

-

-

Movements in working capital:

Trade accounts receivable

-            126,253

-            238,216

Trade accounts receivable from related parties

-                      59

49

Inventory, net

162,860

277,392

Prepaid expenses and other assets

14,418

-               62,914

Accounts payable to suppliers and accrued expenses

-            141,058

-                 6,512

Provisions

-               41,488

-                 1,975

Value added tax payable

14,694

43,050

Statutory employee profit sharing

30,423

27,546

Trade accounts payable to related parties

1,152

8,058

Income taxes paid

-            257,691

-            129,866

Employee benefits

3,435

-                 3,031

    Net cash generated by operating activities

384,223

553,954

Cash flows from investing activities:

Investment in subsidiaries

-

-

Payments for property, plant and equipment, net

-               27,380

-               10,707

Proceeds from disposal of property, plant and equipment, net

2,812

6,065

Interest received

6,669

12,494

    Net cash (used in) generated by investing activities

-               17,899

7,852

Cash flows from financing activities:

Repayment of borrowings

-            500,000

-         1,000,000

Proceeds from borrowings

480,000

550,000

Interest paid

-            183,295

-            215,719

Bond issuance costs

-

-

Lease payment

-               38,069

-               32,137

Share repurchases

-

-

Dividends paid

-            249,513

-               99,806

    Net cash used in financing activities

-            490,877

-            797,662

    Net decrease in cash and cash equivalents

-            124,553

-            235,856

Cash and cash equivalents at the beginning of the period

549,730

815,644

Cash and cash equivalents at the end of the period

425,177

579,788

 

Key Operating Metrics

Betterware Mexico

Q1 2023

Q2 2023

Q3 2023

Q4 2023

Q1 2024

Associates

Avg. Base

752,577

753,743

768,042

756,250

716,645

EOP Base

764,024

756,637

759,310

741,170

724,707

Monthly Activity Rate

68.10 %

66.70 %

65.20 %

66.00 %

67.73 %

Avg. Monthly Order

$1,767

$1,877

$1,823

$1,959

$2,052

Monthly Growth Rate

15.00 %

15.20 %

15.70 %

14.90 %

15.09 %

Monthly Churn Rate

15.60 %

15.50 %

15.60 %

15.70 %

15.84 %

Distributors

Avg. Base

39,028

40,825

42,551

42,369

42,886

EOP Base

39,991

41,981

41,932

41,825

44,482

Monthly Activity Rate

98.50 %

98.10 %

97.90 %

98.10 %

98.51 %

Avg. Monthly Order

$23,562

$23,440

$21,944

$23,518

$23,582

Monthly Growth Rate

9.10 %

10.70 %

10.40 %

10.00 %

10.80 %

Monthly Churn Rate

8.60 %

9.10 %

10.40 %

10.10 %

9.72 %

 

Jafra Mexico

Q1 2023

Q2 2023

Q3 2023

Q4 2023

Q1 2024

Consultants

Avg. Base

448,982

427,289

414,968

461,712

469,290

EOP Base

427,280

424,435

422,956

467,736

451,692

Monthly Activity Rate

51.7 %

51.2 %

52.2 %

52.9 %

53.81 %

Avg. Monthly Order

$2,063

$2,091

$2,088

$2,181

$2,362

Monthly Growth Rate

9.2 %

8.9 %

10.5 %

11.5 %

9.5 %

Monthly Churn Rate

11.3 %

9.1 %

10.6 %

8.3 %

10.6 %

Leaders

Avg. Base

19,030

18,978

18,553

18,576

18,927

EOP Base

18,952

18,875

18,555

18,719

19,159

Monthly Activity Rate

94.3 %

93.9 %

94.0 %

95.0 %

94.95 %

Avg. Monthly Order

$2,259

$2,463

$2,236

$2,624

$2,698

Monthly Growth Rate

1.0 %

1.0 %

1.1 %

1.4 %

1.6 %

Monthly Churn Rate

1.6 %

1.4 %

1.4 %

1.1 %

0.8 %

 

Jafra US

Q1 2023

Q2 2023

Q3 2023

Q4 2023

Q1 2024

Consultants

Avg. Base

29,399

28,541

29,608

31,268

29,506

EOP Base

28,749

29,921

30,489

31,117

29,470

Monthly Activity Rate

37.7 %

44.4 %

45.1 %

43.8 %

42.40 %

Avg. Monthly Order (USD)

$232

$236

$229

$231

$223

Monthly Growth Rate

9.7 %

12.9 %

14.5 %

12.5 %

11.3 %

Monthly Churn Rate

15.0 %

11.5 %

13.8 %

11.5 %

13.1 %

Leaders

Avg. Base

2,080

2,041

1,642

1,782

1,728

EOP Base

2,099

1,760

1,645

1,793

1,674

Monthly Activity Rate

81.1 %

83.8 %

90.4 %

90.2 %

88.27 %

Avg. Monthly Order (USD)

$219

$220

$217

$215

$216

Monthly Growth Rate

1.9 %

2.6 %

6.3 %

7.9 %

4.6 %

Monthly Churn Rate

1.8 %

7.6 %

8.4 %

5.0 %

6.9 %

 

Key Financial Metrics

Consolidated

Q1 2023

Q2 2023

Q3 2023

Q4 2023

Q1 2024

Net Revenue

$3,264,211

$3,220,097

$3,123,507

$3,401,692

$3,602,503

Gross Margin

72.8 %

73.3 %

70.2 %

70.0 %

73.6 %

EBITDA

$654,559

$717,433

$529,424

$819,484

$755,390

EBITDA Margin

20.1 %

22.3 %

16.9 %

24.1 %

21.0 %

Net Income

$187,996

$258,370

$196,991

$406,104

$294,146

Free Cash Flow

$549,311

$1,305,046

$1,643,327

$2,256,395

$359,655

 

Betterware Mexico

Q1 2023

Q2 2023

Q3 2023

Q4 2023

Q1 2024

Net Revenue

$1,388,983

$1,444,406

$1,420,739

$1,472,480

$1,555,027

Gross Margin

61.1 %

61.8 %

56.2 %

50.2 %

60.00 %

EBITDA

$412,356

$443,508

$328,295

$250,342

$382,107

EBITDA Margin

29.7 %

30.7 %

23.1 %

17.0 %

24.60 %

 

Jafra Mexico

Q1 2023

Q2 2023

Q3 2023

Q4 2023

Q1 2024

Net Revenue

$1,662,405

$1,536,775

$1,486,816

$1,668,956

$1,849,996

Gross Margin

82.0 %

83.3 %

83.0 %

86.5 %

85.00 %

EBITDA

$277,547

$268,724

$207,985

$532,780

$383,120

EBITDA Margin

16.7 %

17.5 %

14.0 %

31.9 %

20.70 %

 

Jafra US

Q1 2023

Q2 2023

Q3 2023

Q4 2023

Q1 2024

Net Revenue

$212,823

$238,916

$215,952

$260,256

$197,480

Gross Margin

76.5 %

77.8 %

74.1 %

74.4 %

74.00 %

EBITDA

($35,344)

$5,201

($6,856)

$36,361

($9,837)

EBITDA Margin

(16.6 %)

2.2 %

(3.2 %)

14.0 %

(5.00 %)

 

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.

1Q2024 Conference Call
Management will hold a conference call with investors on April 26th, 2024, at 7:00 am Mexico City Time/ 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: 13746020

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: 13746020

 

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SOURCE Betterware de México, S.A.P.I. de C.V.