PR Newswire
GUADALAJARA, Mexico, July 27, 2023
GUADALAJARA, Mexico, July 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 second 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 July 28, 2023, to discuss its results for the second quarter of fiscal year 2023.
Group |
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Betterware |
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Jafra Mexico |
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Jafra USA |
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Message from Betterware´s Chairman
We ended 2Q2023 with excellent results for the Group, experiencing growth in net sales in Mexico and achieving expense savings and operating efficiencies which led to an increase in profit margin. During this period, we made great accomplishments that set the foundation for us to remain strong into the second half of the year.
At Betterware we had a positive 2Q2023. We were able to grow the number of Distributors at the end of the period by 5% when compared to 1Q2023, and to stabilize the Associate base. We also achieved sales growth of +4.0% vs. 1Q2023. In June, we achieved an average gross weekly sale of Ps. 223M, which represents a growth of 6.6% vs. 1Q2023, and even though sales are slightly below expectations, we have achieved the level of margins we had at the beginning of 2022 throughout 1H2023, which led to EBITDA slightly above our expectations for the period.
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 14.8% vs. EOP base of 2Q2022. Consequently, net revenues increased 14.5% vs 2Q2022, while EBITDA increased 25.0%, supported also by a strict control in operating expenses. The previous, derived in incremental margins and contributed significantly to the generation of cash flow.
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 70% of the Company's total debt allows early payments at no additional cost. Our goal is to continue gradually reducing leverage.
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
Exploration
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 | $3,220,097 | $3,243,604 | (0.7 %) | $6,484,308 | $5,103,800 | 27.0 % |
Gross Margin | 73.3 % | 69.6 % | 368-bps | 73.0 % | 67.9 % | 517-bps |
EBITDA | $717,433 | $615,266 | 16.6 % | $1,371,992 | $1,181,836 | 16.1 % |
EBITDA Margin | 22.3 % | 19.0 % | 331-bps | 21.2 % | 23.2 % | (200-bps) |
Free Cash Flow | $755,735 | ($16,947) | NA | $1,305,047 | ($158,040) | NA |
Net Income | $258,370 | $289,422 | (10.7 %) | $446,367 | $570,656 | (21.8 %) |
EPS | $6.94 | $7.77 | (10.7 %) | $11.98 | $15.31 | (21.7 %) |
Net Debt / TTM EBITDA | 2.0x | 2.8x | | | | |
Interest Coverage Ratio (TTM) | 2.7x | 10.0x | | | | |
Group's Consolidated Financial Results
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 USA results for the quarter accounted for 48% and 7% of consolidated net revenue, respectively.
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 27.0% to Ps. 6,484.3M from Ps. 5,103.8M in 1H2022. This increase is explained entirely by the Jafra acquisition, completed in April 2022. Comparable net revenue, which only includes Betterware, decreased by 18.2% due to lower average active associates and distributors and lower activity rates. It is relevant to mention that Betterware´s network of associates and distributors has stabilized, resulting in net revenue for the first half of the year 84.5% higher than the pre-pandemic comparable period (1H2019).
Consolidated gross margin for 2Q2023 expanded 368-bps to 73.3%, compared to 69.6% in 2Q2022. Margin expansion is explained by higher gross margins in all of the group´s subsidiaries due to the appreciation of the Mexican Peso, and to improvements in supply chain conditions and input costs normalization globally.
Year-to-date, the consolidated gross margin expanded 517-bps to 73.0% compared to 67.9% In 1H2022 mainly due to the inclusion of Jafra´s results, which has a higher gross margin profile, during the entire period in 1H2023, compared to most of the second quarter in 1H2022.
Consolidated EBITDA for 2Q2023 increased 16.6% to Ps. 717.4M from Ps. 615.3M in 2Q2022, largely attributed to significant profitability improvement in Betterware and Jafra Mexico, coupled with positive EBITDA contribution from Jafra USA. Consolidated EBITDA margin for the quarter expanded 331bps mainly explained by margin improvement in Betterware.
For the first half of the year, consolidated EBITDA increased 16.1% to Ps. 1,372.0M from Ps. 1,181.8M, due to the inclusion of Jafra´s results during the entire period in 1H2023, compared to only part of the second quarter in 1H2022, coupled with higher operating leverage in Betterware.
Consolidated net income for 2Q2023 decreased 10.7% to Ps. 258.4M from Ps. 289.4M in 2Q2022, reflecting a 57.2% increase in interest expense due to the syndicated loan utilized for Jafra´s acquisition, higher interest rates in Mexico, coupled with a negative effect related to the realized and unrealized loss in FX (forwards closed vs. real exchange rate). Earnings Per Share (EPS) for the quarter were Ps. 6.94, compared to Ps. 7.77 in 2Q2022.
Year-to-date, consolidated net income declined 21.8% to Ps. 446.4M from Ps. 570.7M in 1H2022, mainly explained by higher interest expense related to the Jafra acquisition (1Q and 2Q2023 vs. just 2Q2022 with the acquisition´s debt) and the negative impact due to a loss in FX explained above. EPS for 1H2023 was Ps. 11.98, compared to Ps. 15.31 in 1H2022.
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.
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