Selected Statement of Profit or Loss Data for the 2020 period, the 2019 period and the 2018 period
(In thousands of Mexican pesos “Ps.”)

The following table shows the income and share data used in the calculation of basic and diluted earnings per share for the 2020, 2019 and 2018 periods, respectively:

Please see Note 23 of the Audited Consolidated and Combined Financial Statements elsewhere in this annual report for details of the transactions impacting basic and diluted earnings per share for the 2020, 2019 and 2018 periods.

RECONCILIATION OF NON-IFRS MEASURES

Non IFRS Financial Measures

We define “EBITDA” 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. Adjusted EBITDA also excludes the effects of gains or losses on sale of fixed assets and adds back other non-recurring expenses. EBITDA and Adjusted EBITDA are not measures required by, or presented in accordance with IFRS. The use of EBITDA and Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation from, or as a substitute for analysis of, our results of operations or financial condition as reported under IFRS.

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.

Betterware’s EBITDA and Adjusted EBITDA Reconciliation

Not applicable.

Not applicable.

An investment in our ordinary sharesOrdinary Shares carries a significant degree of risk. You should carefully consider the following risk factors, together with all of the other information included in this annual report, before making a decision to invest in our ordinary shares. The risks described below are those which Betterwarethe Group believes are the material risks that it faces. Some statements in this annual report, including such statements in the following risk factors, constitute forward-looking statements. See the section entitled “Cautionary Note Regarding Forward-Looking Statements.” If any of the following events occur, our business, financial condition and operating results may be materially adversely affected. In that event, the trading price of our securities could decline, and you could lose all or part of your investment.

Risks Related to Betterware’sOur Business

If we are unable to retain our existing, or recruit new, independent distributors, leaders and recruit additional distributors,consultants, our results of operations could be negatively affected.

We distribute almost all of our products through our independent distributors, leaders and it dependsconsultants, and we depend on them directly for the sale of our products. BWM experiencesWe experience high turnover among distributors, leaders and consultants from year to year since they can terminate their services at any time. As a result, it needswe need to continuemake significant efforts to retain existing and recruit additional independent distributors. or attract others.

To increase itsour revenue, BWMwe must increase the number and/or the productivity of our distributors.distributors, leaders and consultants. The number and productivity of BWM’sour distributors, leaders and consultants also depends on several additional factors, including:

BWM’sOur operations would be harmed if we fail to generate continued interest and enthusiasm among our distributors, leaders and consultants or we fail to attract new, distributors, or if BWM’sour distributors, leaders and consultants are unable to operate due to internal or external factors.

The number of our active distributors, including those at the managerleaders and district director level,consultants, may not increase and could decline in the future. BWM’sOur operating results could be harmed if existing and new business opportunities and products do not generate sufficient interest to retain existing distributors, leaders and attractconsultants recruit new distributors.of them.

The loss of key high-level distributors, leaders or consultants could negatively impact Betterware’s consultantour growth and our revenue.

As of January 3, 2021,December 31, 2022, BWM had approximately 1,230,699778,845 active associates and 39,413 distributors, and JAFRA had approximately 59,713492,191 and 21,385 active consultants and leaders, respectively. BWM’s distributors district managers and district directors. The district directors,JAFRA’s leaders and consultants, together with their extensive networks of downline distributors or leaders, account for an important part of our net revenue. As a result, the loss of a high-level consultantdistributors, leaders or a group of leading distributors in the consultant’s network of downline distributors, whether by their own choice or through disciplinary actions by BWM for violations of our policies and procedures,consultants, could negatively impact our consultantnetwork growth and our net revenue.

A decline in our customers’ purchasing power or consumer confidence or in customers’ financial condition and willingness to spend could materially and adversely affect our business.

The sale of home organizationour products strongly correlates strongly to the level of consumer spending generally, and thus is significantly affected by the general state of the economy and the ability and willingness of consumers to spend on discretionary items. Reduced consumer confidence and spending generally may result in reduced demand for BWM’sour products and limitations on our ability to maintain or increase prices. A decline in economic conditions or general consumer spending in any of our major markets could have a material adverse effect on our business, financial condition and results of operations.

Failure ofto successfully develop new products to gain distributors and market acceptance could harm Betterware’sour business.

An important component of BWM’sour business is our ability to develop new products that create enthusiasm among our customers. If we fail to introduce new products planned for the future, our distributors’distributors, leaders and consultants’ productivity could be harmed. In addition, if anyour new products fail to gain market acceptance, are restricted by regulatory requirements, or have quality problems, this would harm our results of operations. Factors that could affect our ability to continue to introduce new products include, among others, government regulations, proprietary protections of competitors that may limit our ability to offer comparable products and any failure to anticipate changes in consumer tastes and buying preferences.

Betterware’s markets are competitive, and market conditionsWe depend on multiple contract manufacturers mostly located in China, and the strengthsloss of competitors maythe services provided by any of our manufacturers could harm our business.business and results of operations.

We outsource product manufacturing to third-party contractors located mainly in China. During the 2022 period, products supplied by Chinese manufacturers accounted for approximately 93% of BWM’s revenues.

If these suppliers have unscheduled downtime or are unable to fulfill their obligations under these manufacturing agreements because of political or regulatory restrictions, equipment breakdowns, labor strikes, natural disasters, health diseases or health epidemics, such as the COVID-19 pandemic, or any other cause, this could adversely affect our overall operations and financial condition.

Also, although we provide all of the formulations used to manufacture our products, we have limited control over the manufacturing process itself. As a result, any difficulties encountered by the third-party manufacturer that result in product defects, production delays, cost overruns, or the inability to fulfill orders on a timely basis, due to, for instance, sanctions or blocks imposed to Chinese products, could have a material adverse effect on our business, financial condition and operating results

Disruptions or delays at our facility in Queretaro, Mexico could have a material adverse effect on our business, particularly with respect to the beauty and personal care segment.

Our facility in Queretaro, Mexico, manufactures a substantial portion of the products of our beauty and personal care segment, which accounts 85% of JAFRA sales, and as of December 31, 2022 represented 38% of our total sales at a consolidated level. Significant unscheduled downtime or a reduction in capacity at this facility, whether due to equipment breakdowns, power failures, natural disasters (due to climate change or otherwise), pandemics (including COVID-19), weather conditions hampering delivery schedules, shortages of raw materials and products, technology disruptions or other disruptions, including those caused by transitioning manufacturing across these facilities, or any other cause could have a material adverse effect on our ability to provide products to our leaders, consultants and customers, which could have a material adverse effect on our sales, business, prospects, reputation, results of operations, financial condition and/or cash flows.

Additionally, some of our employees at this facility are members of labor unions. In the past, we have experienced labor-union related work strikes in Mexico which have affected our operations. Also, negotiating labor contracts, either for new locations or to replace expiring contracts, is time consuming or may not be accomplished on a timely basis. If we are unable to satisfactorily negotiate those labor contracts with the labor unions on terms acceptable to us or without a strike or work stoppage, the effects on our business could be materially adverse. Any strike or work stoppage could disrupt our business, adversely affecting our results of operations and our public image could be materially adversely affected by such labor disputes. In addition, existing labor contracts may not prevent a strike or work stoppage, and any such work stoppage could have a material adverse effect on our business.

Volatility in costs, along with delays and disruptions in the supply of materials and services, as a result of the recent global supply chain disruptions, could have a material adverse effect on our business, prospects, results of operations, financial condition and/or cash flows.

We purchase raw materials, including essential oils, alcohols, chemicals, containers and packaging components, from various third-party suppliers. Substantial cost increases delays and the unavailability of raw materials or other commodities, as a result of continued global supply chain disruptions, and higher costs for energy, transportation and other necessary services have adversely affected and may continue to adversely affect our beauty and personal care segment profit margins if we are unable to wholly or partially offset them, such as by achieving cost efficiencies in its supply chain, manufacturing and/or distribution activities. In addition, we purchase certain finished goods, raw materials, packaging and other components from single-source suppliers or a limited number of suppliers and if we are required to find alternative sources of supply, these new suppliers may have to be qualified under applicable industry, governmental and Company-mandated vendor standards, which can require additional investment and be time-consuming.

Any significant disruption to our manufacturing or sourcing of products or raw materials, packaging and other components for any reason (including the continued global supply chain disruptions) could materially impact our inventory levels and interrupt and delay our supply of products to its leaders and consultants. Such events, if not promptly remedied, could have a material adverse effect on our business, prospects, reputation, results of operation, financial condition and/or cash flows.

Competition could have a material adverse effect on our business, prospects, results of operations, financial condition and/or cash flows.

The market for BWM’s products ismarkets in which we operate are competitive. Our results of operations may be harmed by market conditions and competition in the future. Many competitors have much greater name recognition and financial resources than BWM has,we have, which may give them a competitive advantage. For example, BWM’s

We compete against a number of multi-national manufacturers, some of which are larger and have substantially greater resources than us, and which may therefore have the ability to spend more aggressively than us on new business acquisitions, research and development activities, technological advances to evolve in their e-commerce capabilities and advertising, promotional, social media and/or marketing activities and have more flexibility than us to respond to changing business and economic conditions.

Also, our products compete directly with branded, premium retail products. BWMWe currently doesdo not hashave significant patent or other proprietary protection, and competitors may introduce products with the same ingredients that BWM useswe use in itsour products.

BetterwareWe also competescompete with other companies for distributors.distributors, leaders and consultants. Some of these competitors have a longer operating history, better name recognition and greater financial resources than we do. Some of our competitors have also adopted and could continue to adopt some of BWM’sour business strategies. Consequently, to successfully compete in this market and attract and retain distributors, Weleaders and consultants, we must ensure that our business opportunities and compensation plans are financially rewarding. BWMWe may not be able to continue to successfully compete in this market for distributors, leaders and consultants, which would ultimately, affect our business operations.

If Betterware’sthe industry in which we operate, our business or our products are subject to adverse publicity, our business may suffer.

Betterware isWe are very dependent upon our distributors’distributors, leaders, consultants and the general public’spublic perception of the overall integrity of our business, as well as the safety and quality of our products and similar products distributed by other companies. The number and motivation of our distributors, leaders and consultants and the acceptance by the general public of our products may be negatively affected by adverse publicity regarding:

Any event that negatively affects the general public perception of our industry, business or products could have a material effect in our results of operations.

Failure of Betterware’s internet and our other technology initiatives to create sustained consultant enthusiasm in our distributors, leaders and consultants and incremental cost savings could negatively impact our business.

We have been developingconstantly develop and implementing a strategyimplement strategies to use the internetcontinue using technology to sign upattract distributors, leaders and takeconsultants and provide them new technology to facilitate taking orders forof our products. In certain demographic markets, it haswe have experienced some success using BWM’s internet strategyimplementing our technology strategies to improve our operating efficiency. However, any cost savings from our internet strategytechnology strategies may not prove to be significant, or we may not be successful in adapting and implementing the strategythese strategies to other markets in which BWM operates.we operate. This could result in our inability to service our distributors, leaders and consultants in the manner they expect.expect, which could ultimately affect our results of operations.

We are dependent on information and communication technologies, and our systems and infrastructures face certain risks, including cybersecurity risks.

We are dependent on information and communication technologies, and our systems and infrastructures face certain risks, including cybersecurity risks.

The operation of complex infrastructures and the coordination of the many actors involved in our operation require the use of several highly specialized information systems, including both our own information technology systems and those of third-party service providers, such as systems that monitor our operations or the status of our facilities, communication systems to inform the public, access control systems and closed circuit television security systems, infrastructure monitoring systems and radio and voice communication systems used by our personnel. In addition, our accounting and fixed assets, payroll, budgeting, human resources, supplier and commercial, hiring, payments and billing systems and our websites are key to our functioning. The proper functioning of these systems is critical to our operations and business management. These systems may, from time to time, require modifications or improvements as a result of changes in technology, the growth of our business and the functioning of each of these systems.

The risk of cyber-crime continues to augment across all industries and geographies as infiltrating technology is becoming increasingly sophisticated. If we are unable to prevent a significant cyber-attack, such attack could materially disrupt our operations, damage our reputation and lead to regulatory penalties and financial losses. To prevent such disruptions to our operations we have implemented a multi-layer security framework, from strategic corporate policies to operational procedures and controls. To support this framework, we use sophisticated technologies to secure our perimeter, computing equipment, networks, servers, storage and databases.

Information technology systems cannot be completely protected against certain events such as natural disasters, fraud, computer viruses, hacking, communication failures, equipment breakdown, software errors and other technical problems. However, our security framework allows us to minimize and manage these risks through the use of enabling technologies such as, but not limited to, firewalls, mail & web filtering, endpointend point protection, antivirus and antimalware,anti malware, access lists, encryption and hardening.

In addition, our business operations routine involves gathering personal information about vendors, distributors, leaders, consultants, customers and employees among others, through the use of information technologies. Breaches of our systems or those of our third-party contractors, or other failures to protect such information, could expose such people’s personal information to unauthorized use. Any such event could give rise to a significant potential liability and reputational harm.

During 20202022 and 2019, we2021, BWM encountered an increased number of non-material phishing attempts which consisted onof fake e-mails requesting minor payments and/or confidential information. As mentioned, noneinformation and e-mails with malicious files successfully quarantined and contained as well as sporadic attempted attacks, minor and unsuccessful, on our infrastructure. None of these attempts were material nor had any major consequences for our operations or our customers. However, we cannot guarantee any future events will not affect our operations or customers. We are constantly seeking to improve and strengthen our security strategy by aligning it with Security Frameworks and Best Practices such as NIST and ISO 27000.

During 2021 (prior to consummation of the JAFRA Acquisition), JAFRA received various attacks with at least one impacting IT servers such as email, SharePoint, and other Information Technology support services. None of these attacks affected our core servers or our customers’ personal information. In 2022, JAFRA implemented a Security Operation Center for purposes of identifying and preventing cybersecurity attacks. This Security Operation Center has prevented a considerable number of incidents such as: ransomware attacks (nine in total), malware execution via USB, malicious URLs, malicious content from email, various JAFRA account login attempts and phishing. No attacks were materialized during the 2022 period. We expect align JAFRA’s operations with the NIST CSF and ISO 27000 frameworks.

Because of the costs and difficulties inherent in managing cross-border business operations, the Company’sour results of operations may be negatively impacted.

Managing aour business, operations, personnel or assets in another countrymultiple jurisdictions is challenging and costly. Management may be inexperienced in cross-border business practices and unaware of significant differences in accounting rules, legal regimes and labor practices. Even with a seasoned and experienced management team, the costs and difficulties inherent in managing cross-border business operations, personnel and assets can be significant (and much higher than in a purely domestic business) and may negatively impact the Company’sour financial and operational performance.

BWM’sOur distributors, leaders and consultants are independent contractors and not employees. If regulatory authorities were to determine, however, that our distributors leaders and consultants are legally BWMour employees, BWMwe could have significant liability under social benefit laws.

BWM’s distributorsDistributors, leaders and consultants are self-employed and are not our employees. Periodically, the question of the legal status of our distributors, leaders and consultants has arisen, usually with regard to possible coverage under social benefit laws that would require BWMus to make regular contributions to social benefit funds. We cannot guarantee there will not be a future judicial or administrative determination adverse to thisthe current criteria, which would substantial and materially adversely affect our business and financial condition.

BWM depends on multiple contract manufacturers mostly located in China, and the loss of the services provided by any of our manufacturersInflation could harmadversely affect our business and results of operations.

BWMWhile inflation in the United States and global markets has outsourced product manufacturing functions to third-party contractors mainly locatedbeen relatively low in China. In 2020, products supplied by Chinese manufacturers accounted for approximately 90%recent years, during 2021 and 2022, the economy in the United States and global markets encountered a material increase in the level of BWM’s revenues.

If these suppliers have unscheduled downtime or are unable to fulfill their obligations under these manufacturing agreements becauseinflation. The impact of political or regulatory restrictions, equipment breakdowns, natural disasters, health diseases or health epidemics,COVID-19, geopolitical developments such as the COVID-19 virus,Russia-Ukraine conflict and global supply chain disruptions continue to increase uncertainty in the outlook of near-term and long-term economic activity, including whether inflation will continue and how long, and at what rate. Increases in inflation raise our costs for commodities, labor, materials and services and other costs required to grow and operate our business, and failure to secure these on reasonable terms may adversely impact our financial condition. Additionally, increases in inflation has caused, and may in the future cause, global economic uncertainty and uncertainty about the interest rate environment, which may make it more difficult, costly or any other cause, this could adversely affect BWM’s overall operations and financial condition.

Also, although BWM provides all of the formulations useddilutive for us to manufacture our products, BWM has limited control over the manufacturing process itself. As a result, any difficulties encountered by the third-party manufacturer that result in product defects, production delays, cost overruns, or the inabilitysecure additional financing. A failure to fulfill orders on a timely basisadequately respond to these risks could have a material adverse effectimpact on our business, financial condition, and operating results.results of operations or cash flows.

Goodwill, property, plant and equipment and intangible assets represent a significant portion of Betterware’sthe Group’s statement of financial position, and our operating results may suffer from possible impairments.

Goodwill, property, plant and equipment and intangible assets in Betterware’sour statement of financial position derived from past business combinations carried out by BWM,the Group, are further explained in the notes to the consolidated and combined financial statements located elsewhere in this annual report. Goodwill and intangible assets with indefinite useful lives are tested for impairment at least annually. Property, plant and equipment and intangible assets with definite useful lives are tested for impairment whenever there is an indication that these assets may be impaired. In the case of an impairment, we will recognize charges to our operating results based on the impairment assessment processes. In addition, future acquisitions may be made by BWMthe Group and a portion of the purchase price of these acquisitions may be allocated to acquired goodwill, property, plant and equipment and intangible assets. An impairment on property, plant and equipment or goodwill of acquired businesses could have a material adverse effect on our financial condition and results of operations.

The COVID-19 virus (nCoV), as well as any other public health crises that may arise in the future, is havinghas had and will likelymay continue to have a negative impact on our gross margins and in our results of operation.

In late December 2019, a notice of pneumonia of unknown cause originating from Wuhan, Hubei province of China was reported to the World Health Organization. A novel COVID-19 virus (nCoV) was identified, with cases soon confirmed in multiple provinces in China, as well as in several other countries. The Chinese government placed Wuhan and multiple other cities in Hubei province under quarantine, with approximately 60 million people affected. On March 11, 2020, the World Health Organization declared the coronavirus outbreak a pandemic. The ongoing COVID-19 pandemic has resulted in several cities be placed under quarantine, increased travel restrictions from and to several countries, such as the U.S., China, Italy, Spain and Mexico which had forced extended shutdowns of certain businesses in certain regions.

The COVID-19 pandemic continues to impact worldwide economic activity and pose the risk that we or our employees, contractors, suppliers, customers and other business partners may be prevented from conducting certain business activities for an indefinite period of time, including due to shutdowns that may be requested or mandated by governmental authorities or otherwise elected by companies as a preventive measure. In addition, mandated government authority measures or other measures elected by companies as a preventive measure may lead to our consumers being unable to complete purchases or other activities. Its impact on the global and local economies may also adversely impact consumer discretionary spending.

Although our

Our operations were not interrupted as a result of the COVID-19 pandemic our gross margin was negatively affected byin 2021 and 2020. However, during 2022, after the depreciationCOVID-19 pandemic effects eased, we suffered a decline in the number of associates and distributors due to the contraction of the Mexican peso comparedmarket size for home goods and in consumer spending. Consequently, our net revenue related to our home organization segment decreased by 37.0%.

Also, as consequence of the US dollar,COVID-19 pandemic, we faced external headwind as we acquire mostsupply chain disruption in China, specifically increases in sea freight prices and the rationing of our products in US dollars. This affectedenergy, has caused partial and will likelytotal shutdowns of some factories. If these events continue, affecting our results of operations could be negatively impacted. We cannot predict future events that could disrupt our supply chain.

Although impact of COVID-19 pandemic has eased as restrictions have been or are being lifted in most of the countries we operate, the continuing impact of COVID-19 pandemic remains uncertain and may continue to affect our operations and the markets in which we operate, for so long as the COVID-19 pandemichealth crisis and the virus impact continues, to impact global and local economies.including the emergence of new strains such as the Omicron or Delta variant, of the virus arise.

Material weaknesses have been identified in Betterware’s internal control over financial reporting, and if we fail to establish and maintain proper and effective internal controls over financial reporting, our results of operations and our ability to operate our business may be harmed.

We areAs of December 31, 2022, our management assessed the effectiveness of our internal control over financial reporting based on the criteria for effective internal control over financial reporting established in the process of implementing Internal Control—Control - Integrated Framework, (2013 Framework) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO)in 2013.

Our results conclude thar we did not design and maintain effective controls over the (i) business combination transaction process; (ii) period-end financial reporting and consolidation process; and (iii) certain information technology (“IT”) general controls for information systems that are relevant to the preparation of our consolidated financial statements.

We are in the process of implementing several measures to strength our internal control over financial reporting such as the deployment of January 3,IT applications to enable and automate the consolidation and ITGC process. For details of the controls and remediation plan, see “Item 15—Controls and Procedures—Disclosure Controls and Procedures.”

In 2021, management has identified material weaknesses associated with the componentsCompany changed its status from an emerging growth company to an large accelerated filer, and during 2022 the Company change its status again to an accelerated filer. Therefore, the Company keep working and improving about the implementation of COSO.a formal internal control over financial reporting program based on a top-down risk assessment to validate the existence of controls over significant, accounts, processes, applications and IT environments. See “Disclosure“Disclosure Controls and Procedures—Control and Procedures.Procedures.”

If we fail to establish and maintain proper and effective internal controls over financial reporting or adequately resolve our existing material weaknesses, our results of operations and our ability to operate our business may be harmed.

Betterware’sOur controlling shareholder may have interests that conflict with your interests.

As of January 3, 2021,the date of this annual report, Campalier owns approximately 51.57%53.65% of theour outstanding common stock of Betterware.Ordinary Shares. As the controlling shareholder, Campalier may take actions that are not in the best interests of the Company’sGroup’s other shareholders. These actions may be taken in many cases even if they are opposed by the Company’sGroup’s other shareholders. In addition, this concentration of ownership may discourage, delay or prevent a change in control which could deprive you of an opportunity to receive a premium for your Ordinary Shares as part of a sale of the Company.Group.

Our business and results of operations may be adversely affected by the increased strain on our resources from complying with the reporting, disclosure and other requirements applicable to public companies in the United States promulgated by the U.S. Government, Nasdaq or other relevant regulatory authorities.

Compliance with existing, new and changing corporate governance and public disclosure requirements adds uncertainty to our compliance policies and increases our costs of compliance. Changing laws, regulations and standards include those relating to accounting, corporate governance and public disclosure, including the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Sarbanes-Oxley Act of 2002, new SEC regulations and the Nasdaq listing guidelines. TheseApplication of these laws, regulations and guidelines may lack specificity and are subject to varying interpretations. Their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. In particular, compliance with Section 404 of the Sarbanes-Oxley Act of 2002 (“Section 404”) and related regulations regarding required assessment of internal controls over financial reporting and our external auditor’s audit of that assessment, requires the commitment of significant financial and managerial resources. We also expect the regulations to increase our legal and financial compliance costs, making it more difficult to attract and retain qualified officers and members of our board of directors, particularly to serve on our audit committee, and make some activities more difficult, time-consuming and costly.

Existing, new and changing corporate governance and public disclosure requirements could result in continuing uncertainty regarding compliance matters and higher costs of compliance as a result of ongoing revisions to such governance standards. Our efforts to comply with evolving laws, regulations and standards have resulted in, and are likely to continue to result in, increased general and administrative expenses. In addition, new laws, regulations and standards regarding corporate governance may make it more difficult for our company to obtain director and officer liability insurance. Further, our board members and senior management could face an increased risk of personal liability in connection with their performance of duties. As a result, we may face difficulties attracting and retaining qualified board members and senior management, which could harm our business. If we fail to comply with new or changed laws or regulations and standards differ, our business and reputation may be harmed.

Our revenue and profitability may be affected if we fail to acquire new companies or integrate those that we have already acquired, such as JAFRA.

We consider acquisitions a useful instrument to complement our organic growth. We opportunistically explore acquiring other businesses and assets, such as the JAFRA Acquisition.

However, we may face financial, managerial and operational challenges, including diversion of management attention and resources needed for existing operations, difficulties with integrating acquired businesses, such as JAFRA, integration of different corporate cultures, increased expenses, potential dilution of our brand, assumption of unknown liabilities, potential disputes with the sellers and the need to evaluate the financial systems of and establish internal controls for acquired entities. Further, we seek out acquisitions of companies that maintain the same high quality standards that we maintain, and if we misjudge or overestimate products quality standards, we may not be able to use these products or implement the strategies that were the primary reason for the corresponding acquisition, such as may be the case with the JAFRA Acquisition, which would lead to a significant loss both financially and in time spent by our teams trying to integrate the products or implement the strategy.

In addition, our ability to realize the benefits we anticipate from our acquisition activities, including the JAFRA Acquisition, including any anticipated sales growth, cost synergies and other anticipated benefits, will depend in large part upon whether we are able to integrate such businesses efficiently and effectively. Integration is an ongoing process, and we may not be able to fully integrate such businesses smoothly or successfully, and the process may take longer than expected. Further, the integration of certain operations and the differences in operational culture following such activity will continue to require the dedication of significant management resources, which may distract management’s attention from day-to-day business operations.

There may also be unasserted claims or assessments that we failed or were unable to discover or identify in the course of performing due diligence investigations of target businesses. While we normally negotiate representation and warranties and related indemnification in relation to such acquisitions, these may not be enough to cover our exposure if a significant liability arises in connection with any acquisition agreement, including the JAFRA Acquisition. We cannot assure you that these indemnification provisions will protect us fully or at all, and as a result we may face unexpected liabilities that could adversely affect our business, financial condition and results of operations.

If we are unable to successfully integrate the operations of JAFRA, or any other acquired business, into our business, we may be unable to realize the sales growth, cost synergies and other anticipated benefits of such transactions, and our business, results of operations and cash flow could be adversely affected.

Our indebtedness and any future inability to meet any of our obligations under our indebtedness, could adversely affect us by reducing our flexibility to respond to changing business and economic conditions.

As of December 31, 2022, we had Ps.6,441 million of outstanding indebtedness (current and non-current borrowings, and leases). We rely on obtaining financing and refinancing of existing indebtedness in order to operate our business, implement our strategy and grow our business. Recent disruptions in the global credit markets and their effect on the global and Mexican economies could materially adversely affect our business. We may also incur additional working capital lines of credit to meet future financing needs, subject to certain restrictions under our indebtedness, which would increase our total indebtedness. We may be unable to generate sufficient cash flow from operations and future borrowings, and other financing may be unavailable in an amount sufficient to enable us to fund our current and future financial obligations or our other liquidity needs, which would have a material adverse effect on our business, prospects, financial condition, liquidity and results of operations as well as reduce the availability of our cash flow to fund working capital, operations, capital expenditures, dividend payments, strategic acquisitions, expansion of our operations and other business activities. Our indebtedness could have material negative consequences on our business, prospects, financial condition, liquidity, results of operations and cash flows, including the following:

Certain of our indebtedness contain customary covenants, including, among other things, limits on the ability of the company and any restricted subsidiary to, subject to certain exceptions, incur liens, incur debt, merge, consolidate or dispose of all or substantially all of its assets.

Changes in taxes and other assessments may adversely affect us.

The legislatures and tax authorities in the tax jurisdictions in which we are subject to tax regularly enact reforms to the tax and other assessment regimes to which we, our distributors, leaders and consultants, and our customers are subject. Such reforms include changes in tax rates and, occasionally, enactment of temporary taxes, the proceeds of which are earmarked for designated governmental purposes. In addition, the interpretation of tax laws by courts and taxation authorities is constantly evolving. The effects of these changes and any other changes that result from enactment of additional tax reforms or changes to the manner in which current tax laws are applied cannot be quantified and there can be no assurance that any such reforms or changes would not have an adverse effect upon our business directly or indirectly (e.g., by affecting the business of our consultants and representatives).

For example, Latin American governments have often increased taxes or changed tax legislation as a response to macroeconomic crises or other developments affecting their respective jurisdictions. These and any other possible future changes in tax policy laws in the countries where we are subject to tax may adversely affect our business, financial condition and results of operations.

We are subject to environmental laws and regulations risks that could affect our operations and results of operations

Our operations are subject to a wide range of environmental laws and regulations in each of the jurisdictions in which we operate. These laws and regulations impose increasingly rigorous environmental protection standards. According to Mexican General Law of Ecological Balance and Environmental Protection (Ley General de Equilibrio Ecológico y la Protección al Ambiente or LGEEPA in Spanish), organizations must comply with the following, among others: (i) guarantee the human right of every person to a healthy environment for their development and well-being; (ii) the preservation, restoration and improvement of the environment; (iii) the preservation and protection of biodiversity, as well as the establishment and administration of protected natural areas; (iv) the sustainable use, preservation and, where appropriate, restoration of soil, water and other natural resources, so that they are compatible for obtaining economic benefits and the activities of society with the preservation of the ecosystems; and (v) prevention and control of air, water and soil pollution, among others. The establishment of these controls and security measures exposes us to a risk of significant environmental costs and responsibilities, such as taxes, investment in equipment and technology, investment in spaces for development and well-being, fines and penalties. In addition, we are exposed to the fact that, over time, these laws and regulations may become more stringent over existing ones, which could lead to the imposition of new risks and costs resulting in a decrease in our profitability.

Environmental requirements can restrict trade which could lead to increased transportation and import costs for the products we sell to our customers.

Environmental, social and corporate governance (ESG) issues, including those related to climate change and sustainability, may have an adverse effect on our business, financial condition and results of operations and damage our reputation.

There is an increasing focus from certain investors, customers, consumers, employees and other stakeholders concerning ESG matters. Additionally, public interest and legislative pressure related to public companies’ ESG practices continue to grow. If our ESG practices fail to meet regulatory requirements or investor, customer, consumer, employee or other stakeholders’ evolving expectations and standards for responsible corporate citizenship in areas including environmental stewardship, support for local communities, board of director and employee diversity, human capital management, employee health and safety practices, product quality, supply chain management, corporate governance and transparency, our reputation, brand and employee retention may be negatively impacted, and our customers and suppliers may be unwilling to continue to do business with us. See “Company Information—Environment, Social and Governance.”

Customers, consumers, investors and other stakeholders are increasingly focusing on environmental issues, including climate change, energy and water use, plastic waste and other sustainability concerns. Concern over climate change may result in new or increased legal and regulatory requirements to reduce or mitigate impacts to the environment. Changing customer and consumer preferences or increased regulatory requirements may result in increased demands or requirements regarding plastics and packaging materials, including single-use and non-recyclable plastic products and packaging, other components of our products and their environmental impact on sustainability, or increased customer and consumer concerns or perceptions (whether accurate or inaccurate) regarding the effects of substances present in certain of our products. Complying with these demands or requirements could cause us to incur additional manufacturing, operating or product development costs.

If we do not adapt to or comply with new regulations, or fail to meet evolving investor, industry or stakeholder expectations and concerns regarding ESG issues, investors may reconsider their capital investment in our Company, and customers and consumers may choose to stop purchasing our products, which could have a material adverse effect on our reputation, business or financial condition.

Our products are subject to federal, state and international regulations that could have a material adverse effect on our business, prospects, results of operations, financial condition and/or cash flows.

Our business is subject to numerous laws, regulations and trade policies. We are subject to regulation by the FTC and the FDA in the U.S., as well as various other federal, state, local and foreign regulatory authorities, including those in the countries in which the Company operates. Our facility located in Queretaro, Mexico is registered with the FDA as a drug manufacturing establishment, permitting the manufacture of cosmetics and other beauty-care products that contain over-the-counter drug ingredients, such as sunscreens, anti-perspirant deodorants and anti-dandruff hair-care products. Regulations in the U.S., the EU, Canada and other countries in which we operate are designed to protect consumers or the environment, such as regulations enacted to address the impacts of climate change, have an increasing influence on our product claims, ingredients and packaging. To the extent federal, state, local and/or foreign regulatory changes occur in the future, whether due to changes in applicable laws or regulations or evolving interpretations and enforcement policies by regulatory authorities, they could require us to reformulate or discontinue certain of our products or revise its product packaging or labeling, any of which could result in, among other things, increased our costs, delays in product launches, product returns or recalls and lower net sales, and therefore could have a material adverse effect on our business, prospects, results of operations, financial condition and/or cash flows

Risks Related to Mexico

Since more that 90% our operations are concentrated in Mexico, economic developments in Mexico may adversely affect our business and results of operations.

Currently, almost all of our operations are conducted, and almost all of our customers are located, in Mexico. Accordingly, our ability to raise revenues, our financial condition and results of operations are substantially dependent on the economic conditions prevailing in Mexico. As a result, our business may be significantly affected by the Mexican economy’s general condition, by the depreciation of the Mexican peso, by inflation and high interest rates in Mexico, or by political developments in Mexico. Declines in growth, high rates of inflation and high interest rates in Mexico have a generally adverse effect on our operations. If inflation in Mexico increases while economic growth slows, our business, results of operations and financial condition will be affected. In addition, high interest rates and economic instability could increase our costs of financing. For the years ended December 31, 2021, and 2022, GDP increased 4.8% and decreased to 3.1%, respectively.

During 2022, Mexico’s sovereign debt rating has been confirmed and a stable outlook has been maintained. We cannot ensure that the rating agencies will not announce an outlook revision and/or any downgrades of Mexico or any of its state owned companies. These revisions and downgrades could adversely affect the Mexican economy and, consequently, our business, financial condition, operating results and prospects.

In the event that the Mexican economy continues to experience a deterioration of economic conditions such as rising inflation, additional interest rate increases, downgrade of sovereign debt, among other factors, the activities, financial situation, operating results, cash flows and/or prospects of the Group, could be adversely and significantly affected.

Developments in other countries could materially affect the Mexican economy and, in turn, our business, financial condition and results of operations.

Mexico’s economy is vulnerable to global market downturns and economic slowdowns. The global economy, including Mexico’s economy, has been materially and adversely affected by a significant lack of liquidity, disruption in the credit markets, reduced business activity, rising unemployment, interest rates changes and erosion of consumer confidence during the global pandemic and its effects. This situation has had a direct adverse effect on the purchasing power of our customers in Mexico. The macroeconomic environment in which we operate is beyond our control, and the future economic environment may continue to be less favorable than in recent years. There is no assurance of a strong economic recovery or that the current economic conditions will ameliorate. The risks associated with current and potential changes in the Mexican economy are significant and could have a material adverse effect on our business and results of operations.

The market prices of securities issued by companies with Mexican operations are affected to varying degrees by the economic and market situation in other places, including the United States, China, the rest of Latin America and other countries with emerging markets. Therefore, investors’ reactions to events in any of these countries could have an adverse effect on the market price of securities issued by companies with Mexican operations. Past economic crises that have occurred in the United States, China or in countries with emerging markets could cause a decrease in the levels of interest in the securities issued by companies with Mexican operations.

In the past, the emergence of adverse economic conditions in other emerging countries has led to capital flight and, consequently, to decreases in the value of foreign investments in Mexico. The financial crisis that arose in the United States during the third quarter of 2008, unleashed a global recession that directly and indirectly affected the economy and the Mexican stock markets and caused, among other things, fluctuations in purchase prices the sale of securities issued by publicly traded companies, shortage of credit, budget cuts, economic slowdowns, volatility in exchange rates, and inflationary pressures.

Financial problems or an increase in risk related to investment in emerging economies or a perception of risk could limit foreign investment in Mexico and adversely affect the Mexican economy. Mexico has historically experienced uneven periods of economic growth and the economy as a whole has recently been adversely affected by the current expectation of a recession or slowdown in the United States and other countries’ economies. There can be no assurance that the overall business environment in which we operate will improve and we cannot predict the impact any future economic downturn could have on our results of operations and financial condition. However, consumer demand generally decreases during economic downturns, which will negatively affect our business and results of operations.

The political situation in Mexico could negatively affect our operating results.

Mexican political events may significantly affect our business operations. As of this date, the president’s political party and its allies hold a majority in the Chamber of Deputies and the Senate and a strong influence in various local legislatures. The federal administration has significant power to implement substantial changes in law, policy and regulations in Mexico, including Constitutional reforms, which could negatively affect our business, results of operations, financial condition and prospects. We cannot predict whether potential changes in Mexican governmental and economic policy could adversely affect Mexico’s economic conditions or the sector in which we operate. We cannot provide any assurances that political developments in Mexico, over which we have no control, will not have an adverse effect on our business, results of operations, financial condition and prospects.

After the mid-term elections held on June 6, 2021, the political party Movimiento Regeneración Nacional (National Regeneration Movement, or “Morena”) lost the absolute majority in the Cámara de Diputados (Chamber of Deputies) that it had held since 2018. However, Morena continues to hold the most seats relative to any other political party. In July 2024, federal elections will be held in Mexico to elect new president and both houses of congress. We cannot predict the impact that political developments in Mexico will have on the Mexican economy nor can provide any assurances that these events, over which we have no control, will not have an adverse effect on our business, financial condition and results of operations.

The Mexican federal government has made significant changes to policies and regulations and may continue to do so in the future. For instance, the Mexican federal government drastically cut spending for the 2019 budget and it may cut spending in the future which may adversely affect economic growth. On July 2, 2019, the new Mexican Federal Republican Austerity Law (Ley Federal de Austeridad Republicana) was approved by the Mexican Senate. Federal government actions, such as those implemented to control inflation, federal spending cuts and other regulations and policies may include, among other measures, increases in interest rates, changes in tax policies, price controls, currency devaluations, capital controls and limits on imports. Our business, financial condition and results of operations may be adversely affected by changes in governmental policies or regulations involving or affecting our management, operations and tax regime.

We cannot predict the impact that economic, social and political instability in or affecting Mexico could adversely affect our business, financial condition and results of operations, as well as market conditions and prices of our securities. These and other future developments, over which we have no control, in the Mexican economic, political or social environment may cause disruptions to our business operations and decreases in our sales and net income.

Currency exchange rate fluctuations, particularly with respect to the US dollar/Mexican peso exchange rate, could lower margins.

The value of the Mexican peso has been subject to significant fluctuations with respect to the U.S. dollar in the past and may be subject to significant fluctuations in the future. Historically, BWM has been able to raise their prices generally in line with local inflation, thereby helping to mitigate the effects of devaluations of the Mexican peso. However, BWM may not be able to maintain this pricing policy in the future, or future exchange rate fluctuations may have a material adverse effect on our ability to pay suppliers.

Given Betterware’s inability to predict the degree of exchange rate fluctuations, it cannot estimate the effect these fluctuations may have upon future reported results, product pricing or our overall financial condition. Although we attempt to reduce our exposure to short-term exchange rate fluctuations by using foreign currency exchange contracts, it cannot be certain that these contracts or any other hedging activity will effectively reduce exchange rate exposure. In particular, BWM currently employs a hedging strategy comprised of forwards U.S. dollar–Mexican peso derivatives that are designed to protect us against devaluations of the Mexican peso. As of the date of this annual report, theThe hedging contracts cover 100% of the home organization product needs as of November 2021.until August 2023. In addition, Wewe generally purchase our hedging instruments on a rolling twelve-month basis; instruments protecting it to the same or a similar extent may not be available in the future on reasonable terms. Unprotected declines in the value of the Mexican peso against the U.S. dollar will adversely affect our ability to pay our dollar-denominated expenses, including our supplier obligations.

Any adverse changes in BWM’sour business operations in Mexico would adversely affect our revenue and profitability.

BWM’s revenue is generated in Mexico. VariousThe following factors, among others, could harm BWM’sour business in Mexico. These factors include, among others:Mexico:

Economic and political developments in Mexico and the United States may adversely affect Mexican economic policy.

The U.S. economy heavily influences the Mexican economy, and therefore, the deterioration of the United States’ economy, the termination of the United States-Mexico-Canada trade agreement (“USMCA)”, claims or disputes thereunder or other related events may impact the economy of Mexico. Economic conditions in Mexico are highlyhave become increasingly correlated withto economic conditions in the United States due toas a result of the physical proximityNorth American Free Trade Agreement (“NAFTA”), and, subsequently, the high degree ofUSMCA, which has induced higher economic activity between the two countries generally, includingand increased the trade facilitated by USMCA, the successor agreement to NAFTA. As a result, political developmentsremittance of funds from Mexican immigrants working in the United States including changes into Mexican residents. On an annual basis, as of 2022, close to 81% of Mexico’s total exports are purchased by the administrationUnited States, the single country with the highest share of trade with Mexico. Due to its recent entry into force, it is currently unclear what the results of the USMCA and governmental policies, can alsoits implementation will be. The new terms of the USMCA could have an impact on Mexico’s economy generally and job creation in Mexico, which could significantly adversely affect our business, financial performance and results of operations.

Likewise, any action taken by the exchange rate betweencurrent U.S. or Mexico administrations, including changes to the USMCA and/or other U.S. government policies that may be adopted by the U.S. dollar andadministration, could have a negative impact on the Mexican peso,economy, such as reductions in the levels of remittances, reduced commercial activity or bilateral trade or declining foreign direct investment in Mexico. In addition, increased or perceptions of increased economic conditionsprotectionism in the United States, Mexico and other countries could potentially lead to lower levels of trade and investment and economic growth, which could have a similarly negative impact on the global capital markets.

Mexican economy. These economic and political consequences could adversely affect our business, operating results and financial condition.

We cannot make assurances that any events in the United States or elsewhere will not materially and adversely affect us.

Mexico is an emerging market economy, with attendant risks to BWM’sour results of operations and financial condition.

The Mexican government has exercised, and continues to exercise, significant influence over the Mexican economy. Accordingly, Mexican governmental actions concerning the economy and state-owned enterprises could have a significant impact on Mexican private sector entities in general, as well as on market conditions, prices and returns on Mexican securities. The national elections held on July 2, 2018 ended six years of rule by the Institutional Revolutionary Party or PRI with the election of President Andres Manuel Lopez Obrador, a member of the Morena Party, and resulted in the increased representation of opposition parties in the Mexican Congress and in mayoral and gubernatorial positions. Multiparty rule is still relatively new in Mexico and could result in economic or political conditions that could materially and adversely affect BWM’sour operations. BWMWe cannot predict the impact that this new political landscape will have on the Mexican economy. Furthermore, BWM’sour financial condition, results of operations and prospects and, consequently, the market price for our shares, may be affected by currency fluctuations, rising inflation, rising interest rates, price controls, regulation, taxation, social instability and other political, social and economic developments in or affecting Mexico.

The Mexican economy in the past has suffered balance of payment deficits and shortages in foreign exchange reserves. There are currently no exchange controls in Mexico; however, Mexico has imposed foreign exchange controls in the past. Pursuant to the provisions of the United States-Mexico-Canada Agreement, if Mexico experiences serious balance of payment difficulties or the threat thereof in the future, Mexico would have the right to impose foreign exchange controls on investments made in Mexico, including those made by U.S. and Canadian investors.

Securities of companies in emerging market countries tend to be influenced by economic and market conditions in other emerging market countries. Emerging market countries, including Argentina and Venezuela, have recently been experiencing significant economic downturns and market volatility. These events could have adverse effects on the economic conditions and securities markets of other emerging market countries, including Mexico.

Political and social events in Mexico could adversely affect our business.

Mexico will hold federal and local intermediate elections on June 6, 2021. Due to the fact that the Partido Movimiento Regeneración Nacional (Morena), has majority in both houses of congress, the Party, and therefore the President of Mexico, has substantial power to approve new laws, amend existing ones and freely determine the policies and governmental actions including those related to the country’s economy and therefore affect or impact the operations and financial results of Mexican companies. We cannot predict what the result of the elections will bring regarding the integration of congress and the ruling party’s ability to maintain its current ability to dictate and implement public policies. The uncertainty associated with the result of the election and the result itself may adversely affect our operations and financial condition.

Investmentsinvestments in Mexican companies entail substantial risk; the Mexican government has exercised, and continues to exercise, an important influence on the Mexican economy

Investments in Mexico carry significant risks, including the risk of expropriation or nationalization laws being enacted or imposing exchange controls, price controls, taxes, inflationary, hyperinflationary, exchange rate risk, credit risk, among other governmental or political restrictions. We are incorporated under the laws of Mexico and most of our operations and assets are located in Mexico. As a consequence of the foregoing, our financial situation and operating results could be negatively affected.

The Mexican government has exercised, and continues to exercise, a strong influence on the country’s economy. Consequently, Mexican federal government actions and policies related to the economy, state-owned and controlled companies, and financial institutions financed or influenced, could have a significant impact on private sector entities in general, including us, in particular and on market conditions, prices and returns on Mexican securities, including counterparty risk. The Mexican federal government has made major policy and regulatory changes and may do so again in the future. Actions to control inflation and other regulations and policies have involved, among other measures, an increase in interest rates, changes in fiscal policies, price controls, currency devaluations, capital controls and limits on imports. Tax and labor legislation, in particular, in Mexico is subject to continuous change, and we cannot guarantee that the Mexican government will maintain current economic or other policies in force or if any the changes to such laws and policies would have a material adverse effect on us or on our financial performance. The measures adopted by the government could have a significant effect on private sector entities in general, as well as on the market situation and on the price of our shares.

Additionally, the Mexican federal government has implemented protectionist policies in the past and could implement certain national policies in the future that could restrict our operations, including restrictions on imports from certain countries.

Mexico may experience high levels of inflation in the future, which could affect BWM’sour results of operations.

During mostHistorically, inflation in Mexico has led to higher interest rates, depreciation of the 1980sMexican peso and during the mid-imposition of substantial government controls over exchange rates and late-1990s, Mexico experienced periods of high levels of inflation, although the country has had stable inflation during the last five years.prices. The annual ratesrate of inflation for the last fivethree years, as measured by changes in the Mexican National Consumer Price Index (Índice Nacional de Precios al Consumidor), as provided by INEGI and as published by Banco de México, was 3.2% in 2020, 7.4% in 2021 and 8.03% in 2022. If Mexico were:

A substantial increaseexperiences high levels of inflation as it has in the Mexicanpast, these might adversely affect our operations and financial performance. For example, during 2021, due to inflation rateeffects, our business was impacted by a sluggish consumer in Mexico and by external factors related to cost pressures and supply chain disruptions prevailing globally.

In addition, increased inflation would have the effectraise our cost of increasing some of BWM’s costs,funding, which we may not be able to fully pass on to our customers, given that doing so could adversely affect our business. Our financial condition and profitability may be adversely affected by the level of, and fluctuations in, interest rates, which affect our ability to earn a spread between the interest received on our loans or the rentals and fees charged on our leases and the cost of our funding. Although we have taken measures to minimize the potential impact of inflation by ensuring that the majority of our liabilities have fixed interest rates, if the rate of inflation increases or becomes uncertain and unpredictable, our business, financial condition and results of operations could be adversely affected.

Security violence risks in Mexico could increase, and financial condition.this could adversely affect our results.

Mexico has experienced a periodis currently experiencing high levels of increasing criminal activity, which could affect the Company’s operations.

In recent years, Mexico has experienced a period of increasing criminal activity, primarilyviolence and crime due to, among others, the activities of drug cartels and related criminal organizations. In response,organized crime. Despite the measures adopted by the Mexican Government has implemented various security measures and has strengthened its military and police forces aimed at decreasing incidents of theft and other criminal activity. Despite thesegovernment efforts, criminal activityorganized crime (especially drug-related crime) continues to exist and operate in Mexico. These activities, their possible escalation and the violence associated with them in an extreme case,have had and may have a negative impact on the Company’s financial conditionMexican economy or on our operations in the future. The presence of violence among drug cartels, and resultsbetween these and the Mexican law enforcement and armed forces, or an increase in other types of operations.crime, pose a risk to our business, and might negatively impact business continuity.

The regulatory environment in which Betterware operateswe operate is evolving, and our operations may be modified or otherwise harmed by regulatory changes, subjective interpretations of laws or an inability to work effectively with national and local government agencies.

Although BWMour reviews applicable local laws in developing our plans, our efforts to comply with them may be harmed by an evolving regulatory climate and subjective interpretation of laws by the authorities. Any determination that BWM’sour operations or activities are not in compliance with applicable regulations could negatively impact our business and our reputation with regulators in the markets in which we operate.

Laws and regulations may restrict Betterware’sour direct sales efforts and harm our revenue and profitability.

Various government agencies throughout the world regulate direct sales practices. These laws and regulations are generally intended to prevent fraudulent or deceptive schemes, often referred to as “pyramid” schemes, that compensate participants for recruiting additional participants irrespective of product sales and/or which do not involve legitimate products. The laws and regulations in BWM’sour current markets often:

Complying with these sometimes inconsistent rules and regulations can be difficult and requires the devotion of significant resources on BWM’sthe Group’s part.

In addition, Mexico could change its laws or regulations to negatively affect or prohibit completely network or direct sales efforts. Government agencies and courts in Mexico may also use their powers and discretion in interpreting and applying laws in a manner that limits BWM’sour ability to operate or otherwise harms our business. If any governmental authority were to bring a regulatory enforcement action against BWMthe Group that interrupts BWM’sour business, our revenue and earnings would likely suffer.

You may have difficulty enforcing your rights against Betterware and our directors and executive officers.

Betterware is a company incorporated in Mexico. AllMost of our directors and executive officers are non-residents of the U.S. You may be unable to effect service of process within the U.S. on Betterware, its directors and executive officers. In addition, as all of our assets and substantially all of the assets of our directors and executive officers are located outside of the U.S., you may be unable to enforce against BWM and our directors and executive officersofficers’ judgments obtained in the U.S. courts, including judgments predicated upon civil liability provisions of the U.S. federal securities laws or state securities laws. There is also doubt as to the enforceability, in original actions in Mexican courts, of liabilities including those predicated solely on U.S. federal securities laws and as to the enforceability in Mexican courts of judgments of U.S. courts obtained in actions, including those predicated upon the civil liability provisions of U.S. federal securities laws. There is no bilateral treaty currently in effect between the United States and Mexico that covers the reciprocal enforcement of civil foreign judgments. In the past, Mexican courts have enforced judgments rendered in the United States by virtue of the legal principles of reciprocity and comity, consisting of the review in Mexico of the United States judgment, in order to ascertain, among other matters, whether Mexican legal principles of due process and public policy (orden público) have been complied with, without reviewing the merits of the subject matter of the case.

Risks Related to Ownership of our Ordinary Shares

As a “foreign private issuer” under the rules and regulations of the SEC, Betterware is permitted to, and is expected to, file less or different information with the SEC than a company incorporated in the United States or otherwise subject to these rules and is expected to follow certain home country corporate governance practices in lieu of certain Nasdaq requirements applicable to U.S. issuers.

Betterware is considered a “foreign private issuer” under the Securities Exchange Act (the “Exchange Act”) and therefore exempt from certain rules under the Exchange Act, including the proxy rules, which impose certain disclosure and procedural requirements for proxy solicitations for U.S. and other issuers. Moreover, the CompanyGroup is not required to file periodic reports and financial statements with the SEC as frequently or within the same time frames as U.S. companies with securities registered under the Exchange Act. We currently prepare our financial statements in accordance with IFRS. The CompanyGroup is not required to file financial statements prepared in accordance with or reconciled to U.S. GAAP so long as our financial statements are prepared in accordance with IFRS. The CompanyGroup is not required to comply with Regulation FD, which imposes restrictions on the selective disclosure of material information to shareholders. In addition, the Company’sBWM’s officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions of Section 16 of the Exchange Act and the rules under the Exchange Act with respect to their purchases and sales of Company securities.

In addition, as a “foreign private issuer” whose shares are listed on Nasdaq, the Company is permitted to, and is expected to, follow certain home country corporate governance practices in lieu of certain Nasdaq requirements. A foreign private issuer must disclose in its annual reports filed with the SEC each Nasdaq requirement with which it does not comply followed by a description of its applicable home country practice. As a Mexican corporation listed on Nasdaq, the Company is expected to follow our home country practice with respect to the composition of the board of directors and nominations committee and executive sessions. Unlike the requirements of Nasdaq, the corporate governance practices and requirements in Mexico do not require the Company to (i) have a majority of its board of directors to be independent; do not require the Company toindependent, (ii) establish a nominations committee;committee, and do not require the Company to(iii) hold regular executive sessions where only independent directors shall be present. Such home country practices of Mexico may afford less protection to holders of Company shares.shares than under U.S. standards.

The Company could lose its status as a “foreign private issuer” under current SEC rules and regulations if more than 50% of the Company’s outstanding voting securities become directly or indirectly held of record by U.S. holders and one of the following is true: (i) the majority of the Company’s directors or executive officers are U.S. citizens or residents; (ii) more than 50% of the Company’s assets are located in the United States; or (iii) the Company’s business is administered principally in the United States. If the Company loses its status as a foreign private issuer in the future, it will no longer be exempt from the rules described above and, among other things, will be required to file periodic reports and annual and quarterly financial statements as if it were a company incorporated in the United States. If this were to happen, the Company would likely incur substantial costs in fulfilling these additional regulatory requirements and members of the Company’s management would likely have to divert time and resources from other responsibilities to ensuring these additional regulatory requirements are fulfilled.

Betterware qualifies as an emerging growth company within the meaning of the Securities Act, and if it takes advantage of certain exemptions from disclosure requirements available to emerging growth companies, which could make the Company’s securities less attractive to investors and may make it more difficult to compare the Company’s performance to the performance of other public companies.

Betterware qualifies as an “emerging growth company” as defined in Section 2(a)(19) of the Securities Act, as modified by the JOBS Act. As such, the Company is eligible for and intends to take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies for as long as it continues to be an emerging growth company, including (i) the exemption from the auditor attestation requirements with respect to internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act, (ii) the exemptions from say-on-pay, say-on-frequency and say-on-golden parachute voting requirements and (iii) reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements. The Company will remain an emerging growth company until the earliest of (i) the last day of the fiscal year in which the market value of our ordinary shares that are held by non-affiliates exceeds $700 million as of June 30 of that fiscal year, (ii) the last day of the fiscal year in which it has total annual gross revenue of $1.07 billion or more during such fiscal year (as indexed for inflation), (iii) the date on which it has issued more than $1 billion in non-convertible debt in the prior three-year period or (iv) the last day of the fiscal year following the fifth anniversary of the date of the first sale of DD3’s ordinary shares in its initial public offering. In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the exemption from complying with new or revised accounting standards provided in Section 7(a)(2)(B) of the Securities Act as long as the Company is an emerging growth company. An emerging growth company can therefore delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. DD3 has elected not to opt out of such extended transition period and, therefore, the Company may not be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies. Investors may find the Company shares less attractive because the Company will rely on these exemptions, which may result in a less active trading market for the Company shares and their price may be more volatile.

If securities or industry analysts do not publish or cease publishing research or reports about Betterware, our business, or markets, or if they change their recommendations regarding the Company shares adversely, the price and trading volume of the Company shares could decline.

The trading market for the Company shares is influenced by the research and reports that industry or securities analysts may publish about the Company, our business, market or competitors. Securities and industry analysts do not currently, and may never, publish research on the Company. If no securities or industry analysts commence coverage of the Company, the price and trading volume of the Company shares would likely be negatively impacted. If any of the analysts who may cover the Company change their recommendation regarding the Company shares adversely, or provide more favorable relative recommendations about the Company’s competitors, the price of the Company shares would likely decline. If any analyst who may cover the Company were to cease coverage of the Company or fail to regularly publish reports on it, the Company could lose visibility in the financial markets, which in turn could cause our share price or trading volume to decline.

There can be no assurance that Betterware will be able to comply with the continued listing standards of Nasdaq.

Betterware’s shares are listed on Nasdaq under the symbol “BWMX.” If Nasdaq delists the Company’s securities from trading on its exchange for failure to meet the listing standards, the Company and its shareholders could face significant material adverse consequences including:

If Betterware is characterized as a passive foreign investment company, or a PFIC, adverse U.S. federal income tax consequences may result for U.S. holders of Company shares.

Based on the projected composition of our income and assets, including goodwill, it is not expected that the Company will be a PFIC for its taxable year that includes the date of the Merger or in the foreseeable future. However, the tests for determining PFIC status are applied annually after the close of the taxable year, and it is difficult to predict accurately future income and assets relevant to this determination. Accordingly, there can be no assurance that the Company will not be considered a PFIC for any taxable year.

If the Company is a PFIC for any year during which a U.S. holder holds Company shares, a U.S. holder generally would be subject to additional taxes (including taxation at ordinary income rates and an interest charge) on any gain realized from a sale or other disposition of the Company shares and on any “excess distributions” received from the Company. Certain elections may be available that would result in alternative treatments of the Company shares.

We urge U.S. holders to consult their own tax advisors regarding the possible application of the PFIC rules to the ownership of Company shares.

An investor may be subject to adverse U.S. federal income tax consequences in the event the IRS were to disagree with the U.S. federal income tax consequences described herein.

The Tax Cuts and Jobs Act of 2017, or the TCJA, and was signed into law on December 22, 2017. The TCJA changes many of the U.S. corporate and international tax provisions, and certain of the provisions are unclear. No ruling has been or will be requested from the IRS as to any U.S. federal income tax consequences described herein. The IRS may disagree with the descriptions of U.S. federal income tax consequences contained herein, and its determination may be upheld by a court. Any such determination could subject an investor or the Company to adverse U.S. federal income tax consequences that would be different than those described herein. Accordingly, each prospective investor is urged to consult a tax advisor with respect to the specific tax consequences of the acquisition, ownership and disposition of DD3’s or the Company’s securities, including the applicability and effect of state, local or non-U.S. tax laws, as well as U.S. federal tax laws.

The Amended and Restated Charter of Betterware provides for the exclusive jurisdiction of the federal courts in Mexico City, Mexico for substantially all disputes between the Company and its shareholders, which could limit Company shareholders’ ability to obtain a favorable judicial forum for disputes with the Company or its directors, officers, other employees or shareholders.

The Amended and Restated Charter of the Company provides for the exclusive jurisdiction of the federal courts located in Mexico City, Mexico for the following civil actions:

This exclusive jurisdiction provision may limit a shareholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with the Company or any of its directors, officers, other employees or shareholders, which may discourage lawsuits with respect to such claims, although the Company’s shareholders will not be deemed to have waived the Company’s compliance with U.S. federal securities laws and the rules and regulations thereunder applicable to foreign private issuers. Alternatively, if a court were to find the exclusive jurisdiction provision contained in the Amended and Restated Charter to be inapplicable or unenforceable in an action, the Company may incur additional costs associated with resolving such action in other jurisdictions, which could harm the Company’s business, operating results and financial condition. The exclusive jurisdiction provision would not prevent derivative shareholder actions based on claims arising under U.S. federal securities laws from being raised in a U.S. court and would not prevent a U.S. court from asserting jurisdiction over such claims. However, there is uncertainty whether a U.S. court would enforce the exclusive jurisdiction provision for actions for breach of fiduciary duty and other claims.

The anti-takeover protections included in our Bylaws and others provided under Mexican Law may deter potential acquirorsacquirors.

Our bylaws provide that, subject to certain exceptions as explained below, prior written approval from the board of directors shall be required for any person, or group of persons to acquire, directly or indirectly, any of our common shares or rights to our common shares, by any means or under any title whether in a single event or in a set of consecutive events, such that its total shares or rights to shares would represent 20% or more of our outstanding shares.

These provisions could make it substantially more difficult for a third party to acquire control of us. These provisions in our bylaws may discourage certain types of transactions involving the acquisition of our securities. These provisions could discourage transactions in which our shareholders might otherwise receive a premium for their shares over the then current market price. Holders of our securities who acquire shares in violation of these provisions will not be able to vote, or receive dividends, distributions or other rights in respect of, these securities and would be obligated to pay us a penalty. For a description of these provisions, see “Item 10. Additional Information—Bylaws——Anti-takeover Protections.”

The Company makes its filings in electronic form under the EDGAR filing system of the SEC. ItsOur filings are available through the EDGAR system at www.sec.gov. The Company’s filings are also available to the public through the Internet at the Company’sour website at http:https://ri.betterware.com.mx/.investors.betterware.com.mx. Such filings and other information on our website are not incorporated by reference in this annual report. Interested parties may request a copy of this filing, and any other report, at no cost, by writing to the following email address: ir@better.com.mx.

We are a leading company in the direct sales industry, offering a product portfolio divided two segments:

Company Overview

Founded in 1995,

Home Organization Segment (BWM):

Betterware is a leading direct-to-customer company in Mexico. BWMOur home organization segment is focused on creating innovative products that solve specific needs regarding organization, practicality, space-saving and hygiene within the home organization segment,household, with a wide product portfolio including home solutions, kitchen and food preservation, technology and mobility, amongbedroom, bathroom, laundry and cleaning and other categories.

BWM sells itscategories that include products and solutions for every corner of the household.

Our home organization segment’s products are sold through ninemonthly catalogues published throughout the year. During 2022, BWM launched 568 new products (compared to 338 during 2021), with a balance of 397 new developments (compared to 281 during 2021) and 171 bring-backs (compared to 57 during 2021). Despite the 6.4% reduction in the number of “Stock Keeping Unit” (SKU’s) displayed per catalogue (driven by change to monthly catalogues), increased innovation allowed Betterware to exhibit more than 3,800 SKU’s throughout the year (approximately six weeks outstanding each) with an offer of approximately 380 products per catalogue. BWM constantly innovates introducing approximately 300 products every year, representing 10% – 15% of the products in(achieving a catalogue.12% growth compared to 3,395 during 2021). All of theour home organization’s products are Betterware branded with unique characteristics and manufactured by +300+365 certified producersmanufactures in MexicoChina and China,México, and then delivered to BWM’s warehouseswarehouse in Guadalajara, Jalisco where theywe process and pack the products.

Betterware sells itsWe sell our home organization segment’s products through a unique two-tier sales model that is comprisedmodel., As of December 31, 2022, more than 1,290,412 Distributors39,413 distributors and Associates778,845 associates across Mexico, thatwho serve + 20% Household Penetration23% household penetration in Mexico,Mexico; and 82%79% of Distributorsdistributors and 28% of associates place orders every week. The DistributorsOur distributors and Associatesassociates are monitored tightly through an in-house developed business intelligence platform that tracks weekly performance and has a detailed mapping system of the country to identify potential areas to penetrate and increase the network.

BWM’sOur home organization segment business model is tailored to Mexico’s unique geographic, demographic and economic dynamics, where communities are small and scattered across the country, with very low retail penetration and difficult to fulfill last mile logistics, middle-income consumers are emerging, and historic high consumer confidence was present during 2020.logistics. Additionally, theour business model is resilient to economic downturns and seasonal fluctuations given low average sales price to consumers and also because being a Distributor or Associate represents an additional source of income for households. As a result, BWM’s operations are not subject to significant seasonal fluctuations.

consumers.

Betterware has

We have a zero last mile cost, with its Distributorsbecause our distributors and Associates delivering theassociates deliver our products to final consumers, which means that our state-of-the-art infrastructure allows us to safely deliver products to every part of the final consumers.country in a timely and efficient manner. Our infrastructure is backed by the strategic location of our distribution center in Jalisco, Mexico.

BetterwareSupported by our top-notch product innovation, business intelligence and technology units, which provide daily monitoring of key metrics and product intelligence, our home organization product segment has shown long termbeen able to achieve sustainable double-digit growth rates by successfully expanding our household penetration.

Beauty and Personal Care Segment (JAFRA)

Our beauty and personal care segment has a portfolio of more than 500 products within four main categories: fragrances, color, skin care and toiletries. JAFRA has been leader in revenuethe fragrance market since 2015. In 2022, our beauty and adjusted EBITDA. For the 2020 period, Betterware had triple-digit growthpersonal care segment’s products were sold through 12 promotional catalogues published on a monthly basis offering 300 products in average per catalogue, as well as a brochure with annually available products at regular price. JAFRA develops approximately 200 new products in average for all categories every year.

Almost all of our beauty and has built a platform that management believes can grow domesticallypersonal care segment’s products are produced in our facility located in Queretaro, México and distributed across Mexico and in other markets.some cities of the United States through our distribution center located in Lerma, Mexico. Our beauty and personal care segment’s products are sold through a generational multilevel model, reaching more than 7,500 cities in Mexico.

Industry Overview

Direct selling is aWe operate under “Direct selling” retail channel used by top global brands, the market serves all types of goods and services, including healthcare, jewelry, cookware, nutritionals, cosmetics, housewares, energy and insurance, among others.industry. The direct selling channelindustry differs from broader retail in an important way mainly due toin the avenue where entrepreneurial-minded individuals can work independently to build a business with low start-up and overhead costs.

17 DirectOur direct selling representatives as distributors, leaders and consultants, are not employees of the Company and work on their own, but are affiliated with a company that uses the channel, retaining thetheir freedom to run a business and have other sources of income.

Our independent distributors, leaders and consultants earn sales commissions as a freelancer. They set their own hours, create their own marketing plans, determine whether to build a sales team and how to mentor those within it and how to serve their customers.

Competitive Strengths

An important number of representatives join direct selling companies because they enjoy their products or services and want to purchase them at a discount. Some others decide to market these offerings to friends, family and others and earn discounts from their sales.

Competitive Strengths

Unique Business Intelligence and Data Analytics Unit

Betterware’sOur in-house business intelligence unit plays a crucial role within the operations and strategy of the company.Company. The unit’s team is comprised of geographers, anthropologists, actuaries, and more,among others, in order to diversify the way of thinking and create the best analyses and business strategies.

The main functions of the business intelligence unit are:

Product Development and Innovation Program

Distributors, Associates, Leaders and AssociatesConsultants Network & Loyalty and Reward Programs

Unparalleled Logistics and Supply Chain Platform

Our home organization segment’s products are manufactured by more than 365 third-party certified factories located in China and Mexico following BWM’s quality standards. All of our beauty and personal care segment’s products are internally manufactured in our facility located in Queretaro, Mexico.

Growth Strategies

Experienced Management & Meritocratic Culture

The company hasExpansion Strategy

We have a clear and executable plan for growth, which includes organic and inorganic initiatives. The main strategies divided by timeline are the following:

Customers

Offerings

The living spaces in our target communities are on a decreasing size trend. Hence it is becoming more and more important to optimize the organization within our living spaces and hectic lifestyles. The Company offers a unique and innovative product portfolio with great depth in the home organization segment focused on providing everyday solutions for modern spaces.

Logistics Infrastructure and Supply Chain

Customers

Sales & Marketing

Betterware does not rely on significant traditional advertising expenditures to drive net sales since Distributors and Associates distribute its catalogues directly to customers, thus making the sales catalog design and printing an important selling expense representing 3.4%

Environmental, Social and Governance (ESG)

Sustainability events during 2021

In 2021, we issued a Ps.1,500 million Sustainable Bond Program to, among other things, acquire certain assets intended to help us achieve a resilient economy with low greenhouse gas emissions. The bond program was also intended to help us developing social projects that meet one or more goals of the Sustainable Development Goals (SDG), established in the 2030 Agenda for Sustainable Development, adopted by the United Nations (UN). These environmental and social impact projects are mainly focused on:

In addition, the financing obtained under such bonds was allocated to finance the construction of the Campus Betterware, which was built to: (i) concentrate activities; (ii) promote care for the environment and the individual well-being of our employees, and (iii) improve life quality of the communities surrounding the Campus.

The construction of the Campus respects the ecosystem and took advantage of natural light and ventilation to reduce the environmental footprint. Likewise, we took advantage of the characteristics of the land, and we incorporated local flora species of the place into the outdoor recreation areas.

Some of the main advertising costs incurredenvironmental friendly practices that were implemented in the construction of the Campus, include:

We focus and seek to protect labor rights and promote a safe and secure work environment for all workers by increasing the number of workers using Campus Betterware amenities, including a hair salon, infirmary, coffee shop, library, training room, basketball and soccer fields, a gym, laundry, and a meditation garden. On December 14, 2021, Betterware received a Fitwell certification for the “Campus Betterware” project.

Sustainability Events during 2022

During 2022, we developed a comprehensive “Materiality Assessment” that involved all our stakeholders and followed recognized international standards. In this assessment, we analyzed information from our employees, distributors, associates, leaders, consultants, clients, suppliers, community and investors. This broad focus on our stakeholders gave us a specific materiality matrix that was used to prioritize the key subjects that are material for the Group. We were able to identify our “Sustainable Development Goal” standards (SDGs).

In performing the assessment, we followed the “Global Reporting Initiative” standards (GRIs) and the “Sustainability Accountant Standards Board” (SASB).

Once we had all the material issues identified, we created a comprehensive ESG model with focus, dimension, and lines of action. Also, this model recognizes specific SDGs that we will focus on within the sustainability strategy. Specifically, we will focus on ten SDGs:

Strategic Sustainability Model

Within the three ESG’s dimensions, environment, social and governance, we determined several focuses and action lines. We developed a strategic sustainability model around these focuses and action lines.

Some of the initiatives that have been developed during 2022 include:

Environment:

BWM Environment:

JAFRA environment:

Social

Governance

We promote and encourage full and effective participation of women and equal leadership opportunities at all decision-making levels.

Women occupy key positions within the Company, including chief executive officer, chief financial officer, quality and development director, credit and collection director, international commercial director, national sales director, as well as a high number of managers from the different areas of the Company. On March 8, 2023, Silvia Davila was appointed as the first woman to become Independent Board Member of the Company. This action is in line with our commitment to include social media and transit advertisingat least two women in bus lines and subways that represent 0.2%our Board of net revenue.Directors by 2025.

Betterware establishes and maintains credibility primarily through the quality of their products, their customer service and the attractiveness of their pricing.

Research & Development

The following diagram depicts the current organizational structure of Betterware:the Group as of the date of this annual report: