Betterware Reports Third Quarter 2023 Results

GUADALAJARA, Mexico, Oct. 26, 2023

3Q2023 Highlights

Group	Revenue Stability and Strong Profitability have driven strong cash flow generation. In 9M2023 we have generated Ps. 1,634.7, compared to Ps. 355.5M in 9M2022. Total Net Debt/EBITDA level has continued to improve, with a 2.1x ratio by 3Q2023 (vs 3.0x in 3Q2022), thanks to debt prepayments, lowering net debt from Ps. 6,217.9M to Ps. 5,200.4M. Additionally, remaining debt was restructured, improving terms and conditions. We ended 9M2023 with a strong balance sheet. Compared to Sep'22, inventory was reduced 9.9%, debt was reduced by 14.8% and stockholders' equity grew 39.3%. We are proposing a Dividend of Ps. 200M to be paid in November 2023. This would become the 15th consecutive quarter dividend payment, starting since we became public in March 2020, accumulating a total of Ps. 3,760M paid out dividends over that period.
Betterware	Revenue continues to show stability in 3Q2023, being the fourth consecutive quarter that revenues improved Quarter on Quarter since 4Q2022. In fact, 3Q2023 achieved a 3% increase vs 4Q2022. Thus, YoY percent decline in revenue has decreased from -25% in 1Q2022, to -5% in 3Q2023, including an increase of 4% in September. We expect 4Q2023 to present YoY growth of 6%. We have regained strong profitability. EBITDA for 3Q2023 closed at Ps. 328M, 10.1% above 3Q2022, with a 3.3pp margin expansion. 9M2023 EBITDA closed at Ps. 1,184M, -6.6% vs. 9M2022, with a 2.3pp margin expansion. Strong cash flow generation is back. We generated Ps. 1,272M of operating cash flow in 9M2023 vs. Ps. 399M in 9M2022.
Jafra Mexico	Net revenue for 3Q2023 increased 11.6% YoY. For 9M2023, it increased 17.4% YoY. It is worth noting that our consultant base closed 13.9% above last year. EBITDA for 3Q2023 closed at Ps. 209M, 23.3% below 3Q2022, due to 3Q2022 reversal of "pre-acquisition" provisions that positively impacted its EBITDA. Without the reversal of provisions from last year, our EBITDA would have remained at the same level. Our 9M2023 EBITDA is Ps. 755M (16.1% margin), well beyond our estimates. Also contributing to group cash flow generation with Ps. 548M of operating cash flow in 9M2023.
Jafra USA ARIVA.DE Börsen-Geflüster Kurse Betterware de México 18,45 € 0,00%	Undergoing a complete business turnaround. We saw progress toward our first goal of achieving business stability, having decreased EBITDA losses to (Ps. 6.8M) in 3Q2023, compared with (Ps. 35.7M) in 3Q2022. Going forward we will continue our efforts to improve profitability and focus our efforts on revenue growth.

Message from Betterware's Chairman

We ended 3Q2023 with extraordinary results for the Group, experiencing stable net sales in Betterware, better than expected results in Jafra Mexico and Jafra US, and achieving expense savings and operating efficiencies, which led to an increase in profit margin and outstanding cash flow generation.

Betterware Mexico has continued to show strength through its revenue stabilization at almost 2x revenue of 2019. This has allowed us to deliver strong profitability and cashflow generation.  After delivering 3% growth from 4Q2022 to 3Q2023, we feel confident that our initiatives have us positioned generate YoY growth.

At Jafra Mexico, the successful replication of our three business pillars of Product Innovation, Technology, and Business Intelligence, continues to yield positive results, both for the quarter and year-to-date. We are expecting a record year for Jafra Mexico, both in terms of net revenue and EBITDA.

Finally, at Jafra US, we are undergoing a complete business turnaround, with focus on business stability and back to growth strategies. We have witnessed initial positive results, although further improvements are needed to reach breakeven levels, and consistent growth.

We continue to focus on further differentiating the Company through Product Innovation, Technology and Business Intelligence, as we are confident that the future of our Group will continue to be founded on the relations between our people and our customers, coupled with the technological tools we develop to ease our network's sale experience and our customer's purchase experience.

We are certain that we will continue experiencing the positive trend we have seen year-to-date and since Jafra's acquisition was completed, which have us well positioned to achieve sustained and profitable growth in the long term.

Luis G. Campos
Executive Chairman of the Board

3Q2023 Consolidated Selected Financial Information

Group's Consolidated Financial Results

Consolidated net revenue for 3Q2023 was Ps. 3,123.5M, 1.5% lower compared to Ps. 3,171.3M in 3Q2022 explained mainly by Betterware's slightly lower net revenues due to lower average associates and distributors base, coupled with lower net revenue in Jafra US. Year-to-date, consolidated net revenue increased 16.1% to Ps. 9,607.8M from Ps. 8,275.1M in 9M2022, explained partially by the inclusion of Jafra's results for the entire period this year, compared to a partial year in 2022.  It is important to note that the normal seasonality causes 3Q2023 net revenue to be 3.0% lower to 2Q2023. This reflects moderation in sales force activity in the summer and back to school period.

At the closing of each fiscal year, December 31^st, Jafra Mexico considers a cut-off in revenue recognition according to the IFRS 15 standard. The cut off has never been significant compared to annual consolidated net revenue. As of September 30^th, 2023, the YTD cut-off amounted to Ps. 260.2M, which would imply having net sales at the end of 9M2023 of Ps. 9,347.7M and EBITDA of 1,834.7M as compared to our reported results of Ps. 9,607.8M and Ps. 1,901.4M, respectively. The cut-off amount would be added to the net revenue of 4Q2023, and so we expect to close FY 2023 with a not relevant cut-off effect again. We estimate that Jafra Mexico's annual result will remain in line with our expectations.

Consolidated gross margin for 3Q2023 expanded 122-bps to 70.2%, compared to 69.0% in 3Q2022. Margin expansion is explained by higher gross margins in Betterware and Jafra US, with Jafra Mexico's gross margin in line with previous quarter, and due to improvements in supply chain conditions and input costs normalization globally. And year-to-date, consolidated gross margin expanded 382-bps to 72.1% compared to 68.3% in 9M2022 mainly due to the inclusion of Jafra's results, which has a higher gross margin profile, during the entire period in 2023, compared to most of the second quarter and onwards in 2022.

Consolidated EBITDA for 3Q2023 decreased 1.0% to Ps. 529.4M from Ps. 534.9M in 3Q2022, while consolidated EBITDA margin stood at 16.9%, in line with that obtained on 3Q2022, due to some adjustments in provisions that positively impacted Jafra Mexico's EBITDA during 3Q2022, but not in 3Q2023, and partially offset by increased EBITDA in Betterware and Jafra US.  And year-to-date, consolidated EBITDA increased 10.8% to Ps. 1,901.4M from Ps. 1,716.8M, due to the inclusion of Jafra's results during the entire period in 2023, compared to most of the second quarter and onwards in 2022. Year-to-date consolidated EBITDA margin stood at 19.8%.

Consolidated net income for 3Q2023 significantly increased 279.2% to Ps. 197.0M from Ps. 52.0M in 3Q2022, due to easy comparison base, partially offset by 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. 5.28, compared to Ps. 1.39 in 3Q2022.

Year-to-date, consolidated net income increased 3.3% to Ps. 643.4M from Ps. 622.6M in 9M2022, mainly explained by the inclusion of Jafra's results for the entire period this year, compared to most of the second quarter and onwards in 2022. EPS for 9M2023 was Ps. 17.24, compared to Ps. 16.68 in 9M2022.

For the first nine months of the year, consolidated cash flow from operations increased significantly to Ps. 1,634.7M from Ps. 355.5M in 9M2022, primarily due to improved cash flow generation in Betterware and Jafra Mexico.

Balance Sheet

As of 3Q2023, the Company's financial position remains strong, reflecting the main attributes of our differentiated business model, namely high cash flow generation and asset light business model. As of September 30^th, 2023, the Company had Ps. $496.1M in cash and cash equivalents. Accounts payable increased 42.8%, inventory decreased 9.9%, and accounts receivable increased 4.6% from September 30^th, 2022. The Company noted that it is comfortable with the level and composition of its inventory, which supports future growth. We ended the quarter with a cash conversion cycle of 59 days in 3Q2023.

Debt Restructuring

As mentioned in our previous earnings release, on July 10^th, 2023, we prepaid the syndicated loan utilized for Jafra's acquisition. This debt restructuring improved the terms and conditions we had on the syndicated loan, reducing our interest rate spread, as well as enhancing the maturity profile. More than 70% of the Company's total debt allows early payments at no additional cost. Our goal is to continue gradually reducing leverage.

Net debt at quarter end was Ps. 5,200.4M, which represents a relevant decrease relative to the Ps. 6,217.9M at the end of 3Q2022. Our leverage ratio decreased on a YoY basis from 3.0x Net Debt to Trailing-Twelve-Months EBITDA ratio in 3Q2022 to 2.1x in 3Q2023, which demonstrates strong progress toward reducing our leverage ratio below 2.0x by the end of the year.

3Q2023 and 9M2023 Financial Results by Business

Betterware
Financial Metrics

3Q2023

3Q2022

%

9M2023

9M2022

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