Betterware de México(BWMX) - 2023 Q4 - Annual Report

Revenue Performance - The Group's total net revenue for the year 2023 was Ps. 13,009,507, an increase of 13.1% compared to Ps. 11,507,549 in 2022[433]. - JAFRA's net revenue increased by 41.0%, reaching Ps. 7,282,899 in 2023, compared to Ps. 5,164,205 in 2022, driven by brand refresh and product innovation[440]. - BWM's net revenue decreased by 9.7%, totaling Ps. 5,726,608 in 2023, down from Ps. 6,343,344 in 2022, attributed to stabilization of the distributor network post-pandemic[440]. - The average price per unit sold increased by 13.1% in 2023, despite a 20.8% decrease in the volume of units sold, which dropped from 100.3 million in 2022 to 79.4 million in 2023[440]. Profitability and Gross Margin - Gross profit for the Group increased by 44.8%, amounting to Ps. 6,024,873 in 2023, compared to Ps. 4,161,291 in 2022[437]. - The cost of sales as a percentage of net revenue for the Group decreased to 17.3% in 2023 from 19.4% in 2022, attributed to supplier negotiations and favorable exchange rates[437]. - EBITDA for BWM decreased by 5.3%, or Ps.79,726, to Ps.1,434,501 in 2023, mainly due to a 9.7% drop in net revenue[459]. - JAFRA's EBITDA increased by 60.4%, or Ps.484,518, to Ps.1,286,399 in 2023, driven by a 41.0% increase in net revenue and cost reductions[459]. Expenses and Cost Management - Administrative expenses for BWM decreased by 10.1%, or Ps.110,445, to Ps.987,981 in 2023 compared to Ps.1,098,426 in 2022, attributed to a streamlined operational structure and effective cost control[444]. - JAFRA's administrative expenses increased by 28.2%, or Ps.422,748, to Ps.1,920,964 in 2023 compared to Ps.1,498,216 in 2022, primarily due to a full year of expenses consolidation and increased operational costs[445]. - Total selling expenses for the Group rose by 23.2%, or Ps.652,337, to Ps.3,460,367 in 2023 from Ps.2,808,030 in 2022, driven by JAFRA's full-year consolidation and increased promotional activities[447]. - BWM's selling expenses decreased by 24.6%, or Ps.251,273, to Ps.770,008 in 2023, representing 13.4% of net revenue compared to 16.1% in 2022, due to efficient management[449]. Taxation and Interest Expenses - Interest expense for the GROUP rose by 51.0%, or Ps.276,941, to Ps.820,262 in 2023, primarily due to loans for the JAFRA acquisition and increased bond issuance costs[453]. - BWM's income taxes decreased by 61.7%, or Ps.226,404, to Ps.140,762 in 2023, attributed to lower pre-tax profits and a 9.7% decline in net revenue[456]. - JAFRA's income taxes increased by 62.7%, or Ps.93,868, to Ps.243,622 in 2023, reflecting a 41.0% rise in net revenue and full-year consolidation[456]. Cash Flow and Financing Activities - Cash flows from operating activities increased by 40.4% or Ps.957,077 to Ps.2,366,779 for the year ended December 31, 2023, compared to Ps.1,409,702 for 2022[483]. - Cash flows used in investing activities decreased by 98.6% or Ps.4,759,894 to Ps.(65,328) for the year ended December 31, 2023, mainly due to cash paid for the JAFRA Acquisition in 2022[484]. - Cash flows generated from financing activities decreased by 184.0% or Ps.(5,623,331) to Ps.(2,567,365) for the year 2023 compared to Ps.3,055,966 for 2022[486]. Acquisition and Integration - Betterware acquired 100% of JAFRA for a total cash amount of Ps.5,044,371, with an addition to goodwill of Ps.1,250,132[523]. - JAFRA contributed revenues of Ps.5,164,205 and net income of Ps.493,062 from the acquisition date to December 31, 2022[551]. - The total identifiable assets acquired from the JAFRA acquisition amounted to Ps.5,044,371, with goodwill of Ps.1,250,132 attributed to the profitability of the acquired business[550]. Financial Position and Assets - As of December 31, 2023, Betterware's total assets increased to Ps. 548,098 from Ps. 381,824 as of December 31, 2022, reflecting a growth of approximately 43.6%[531]. - The total liabilities were adjusted to Ps. 3,985,026 as of December 31, 2021, showing a decrease of Ps. 12,516 from previously reported amounts[428]. - The total debt as of December 31, 2023, is Ps.5,131,422, a decrease from Ps.6,148,675 in 2022[517]. Employee and Operational Metrics - Betterware's total number of employees increased to 2,294 as of December 31, 2023, compared to 2,177 in 2022 and 1,272 in 2021[503]. - The average number of employees was 938 in 2023, with a future salary growth rate of 7.0% and a discount rate of 9.7%[610]. Risk Management and Compliance - The company utilized derivative financial instruments to hedge against exchange rate fluctuations, covering 100% of product needs until December 2024[482]. - The Group employs a sensitivity analysis for foreign exchange risk, assessing a 10% increase or decrease in the Mexican Peso against the US Dollar, which is used for internal reporting to management[616]. - The company is not expected to be classified as a Passive Foreign Investment Company (PFIC) for the foreseeable future, based on projected income and asset composition[498].