December 2, 2022

GRUPO ELEKTRA ANNOUNCES REVENUE OF Ps.40,045 MILLION AND EBITDA OF Ps.4,119 MILLION IN THE THIRD QUARTER OF 2022

Grupo Elektra, S.A.B. de C.V. (BMV: ELEKTRA* Latibex: XEKT), Latin America’s leading specialty retailer and financial services company, and the largest non-bank provider of cash advance services in the United States, announced third quarter 2022 financial results.

Third quarter results

Consolidated revenue grew 13% to Ps.40,045 million in the period, compared to Ps.35,504 million in the same quarter of the previous year. Operating costs and expenses were Ps.35,926 million, from Ps.29,947 million in the same period of 2021.

As a result, EBITDA was Ps.4,119 million, compared to Ps.5,557 million a year ago. Operating income was Ps.1,802 million this quarter, from Ps.3,433 million in the same period of 2021.

The company reported net loss of Ps.2,384 million, compared to net income of Ps.999 million a year ago.

   3Q 2021    3Q 2022    Change
Ps. %
Consolidated revenue $35,504 $40,045 $4,541 13 %
EBITDA  $5,557 $4,119 $(1,437) -26 %
Operating profit

Net result

$3,433

$999

$1,802

$(2,384)

$(1,631)

$(3,383)

-48%

—-

Net result per share $4.40 $(10.55) $(14.95) —-

Figures in millions of pesos
EBITDA: Earnings Before Interest, Taxes, Depreciation and Amortization.
As of September 30, 2021, Elektra* outstanding shares were 227.2 million and as of September 30, 2022, were 225.9 million.

Revenue

Consolidated revenue increased 13% in the period, as a result of a 19% growth in financial income and a 5% increase in commercial sales.

The increase in financial income — to Ps.23,949 million, from Ps.20,202 million in the previous year — largely reflects a 22% increase in revenue from Banco Azteca México — which further strengthens its solid financial margin— in the context of dynamic growth of the gross credit portfolio in the period, which improves the well-being of millions of families and the growth of businesses.

The increase in sales of the commercial business — to Ps.16,095 million, from Ps.15,302 million a year ago — is largely the result of strong growth in sales of Italika motorcycles — which strengthens the productivity of the businesses and the mobility of the families —, white line — which boosts the quality of life in households — and income related to electronic money transfers, in the context of important transfer flows from the United States to Mexico, which contribute to the well-being and progress of millions of families.

Costs and expenses

Consolidated costs for the quarter were Ps.18,653 million, compared to Ps.16,855 million from the previous year. The growth is explained by a 21% increase in the financial cost — derived from a higher creation of allowance for credit risks, in the context of the solid dynamism of the consolidated gross portfolio, as well as higher interest payments, in line with rising market rates. — and a 5% increase in the commercial cost, consistent with higher income from the sale of merchandise.

Sales, administration and promotion expenses totaled Ps.17,273 million, from Ps.13,092 million a year ago, mainly as a result of higher operating expenses in the period. The increase is related to the development of supply logistics strategies that will further strengthen the product supply process, to promptly meet the growing demand for world-class merchandise by millions of families, both on the sales floor and through the company’s Omnichannel operations.

Similarly, impacting expenses are system developments to additionally promote high efficiency standards, both in digital banking — which currently has more than 18 million users and is growing dynamically — and in Omnichannel sales — with superior levels of security, comfort and time savings — as well as higher personnel and maintenance expenses, in the context of a solid expansion of contact points, which allow maximizing the customer’s shopping experience.

EBITDA and net result

EBITDA was Ps.4,119 million, from Ps.5,557 million the previous year. The company reported operating income of Ps.1,802 million, compared to Ps.3,433 million in the same quarter of 2021.

The most important variation below EBITDA was a reduction of Ps.2,805 million in other financial results, which reflects an 11% loss this quarter in the market value of the underlying financial instruments held by the company — and which does not imply cash flow — compared to a 3% loss a year ago.

Consistent with the results of the quarter, a reduction of Ps.1,534 million was recorded in the tax provision in the period.

Grupo Elektra reported a net loss of Ps.2,384 million, from a net income of Ps.999 million a year ago.

Unconsolidated Balance Sheet

A proforma balance sheet exercise of Grupo Elektra is presented, which allows knowing the non-consolidated financial situation, excluding the net assets of the financial business, whose investment is valued in this case under the participation method.

This presentation shows the debt of the company without considering Banco Azteca’s immediate and term deposits, which do not constitute debt with cost for Grupo Elektra. Also, the pro forma balance sheet does not include the bank’s gross loan portfolio.

This provides greater clarity on the situation of the different businesses that make up the company, and allows financial market participants to make estimates of the value of the company, considering only the relevant debt for said calculations.

Thus, the debt with cost was Ps.40,609 million as of September 30, 2022, compared to Ps.32,505 million of the previous year. The growth of the debt balance is related to the issuance of Certificados Busatiles and bank loans during the period.

The balance of cash and cash equivalents was Ps.9,480 million, from Ps.7,476 million in the previous year.

As of September 30, 2022, the company’s stockholders’ equity was Ps.94,406 million, and the ratio of stockholders’ equity to total liabilities was 1.16 times.

As of September 30    2021 As of September 30   2022 Change
Ps. %
Cash and cash equivalents $7,476 $9,480 2,004 27 %
Marketable financial instruments 34,734 34,411 (323) (1 %)
Inventories 19,130 24,204 5,074 27 %
Accounts receivables 59,809 43,287 (16,522) (28 %)
Other current assets 5,167 5,226 58 1 %
Investments in shares 38,189 37,238 (951) (2 %)
Fixed assets 7,406 9,704 2,298 31 %
Right of use assets 8,700 10,413 1,713 20 %
Other assets 1,356 1,674 318 23 %
Total assets $181,967 $175,636 ($6,331) (3 %)
Short-term debt $14,450 $13,643 (808) (6 %)
Suppliers 8,374 7,041 (1,334) (16 %)
Other short-term liabilities 12,967 19,395 6,428 50 %
Long-term debt 18,055 26,966 8,911 49 %
Differed taxes 12,284 1,800 (10,484) (85 %)
Other long-term debt 11,198 12,387 1,188 11 %
Total liabilities $77,328 $81,230 $3,902 5 %
Stakeholder´s equity $104,639 $94,406 ($10,233) (10 %)
Liabilities and equity $181,967 $175,636 ($6,331) (3 %)

Figures in millions of pesos

Consolidated Balance Sheet

Loan Portfolio and Deposits

As detailed in the previous quarter, starting on January 1, 2022, Banco Azteca México adopted IFRS-9 (‘Financial Instruments’) and IFRS-16 (‘Leases’), contained in the International Financial Reporting Standards (IFRS) to report their financial statements. These changes implied: growth in its portfolio, in the reserve for credit risks and in the accumulated results (IFRS-9) and a growth in the assets for rights of use and in the liabilities for leases (IFRS-16), when compared to figures for 2021.

The consolidated gross portfolio of Banco Azteca México, Purpose Financial and Banco Azteca Latin America as of September 30, 2022, grew 20%, to Ps.155,737 million, from Ps.129,929 million in the previous year.

Banco Azteca México’s gross portfolio balance increased 34% to Ps.149,849 million, from Ps.111,888 million a year ago. The Bank’s delinquency rate at the end of the quarter was 3.2%, compared to 4.7% a year earlier.

Grupo Elektra’s consolidated deposits grew 15%, to Ps.208,014 million, from Ps.180,609 million a year ago. Banco Azteca México’s deposits were Ps.207,233 million, 16% above the Ps.177,908 million of the previous year.

Banco Azteca México’s ratio of deposits to gross portfolio was 1.4 times, which allows solid growth for the Bank, with optimal funding costs.

The capitalization index of Banco Azteca México was 14.73%.

Infrastructure

Grupo Elektra currently has 6,207 points of contact, compared to 6,400 units the previous year. The decrease results from the closure of 294 points of contact of Purpose Financial in the United States — in the context of strategies aimed at boosting online credit operations and strengthening the company’s operational efficiency — partially offset by growth of 81 points of contact in Mexico and 20 in Central America.

In Mexico, in the last twelve months, 38 new Elektra stores were opened in strategic locations, with a format that offers an optimal mix of merchandise and services, and allows maximizing the customer’s shopping experience.

The company has 4,843 storefronts in Mexico at the end of the quarter, 978 in the United States, and 386 in Central America. The important distribution network allows the company to maintain close contact with customers and grants a superior market positioning in the countries where it operates.

Nine-month results

Consolidated revenue in the first nine months of the year grew 13%, to Ps.116,394 million, from Ps.102,957 million registered in the same period of 2021, driven by a growth of 17% in financial income and 9% in commercial sales.

EBITDA was Ps.14,873 million, compared to Ps.16,076 million in the previous year. The company reported operating income of Ps.7,080 million, from Ps.9,989 million a year ago.

In the first nine months of 2022, a net loss of Ps.8,764 million was registered, compared to a net income of Ps.10,996 million a year ago. The change reflects, to a large extent, a decrease in the market value of the underlying financial instruments held by the company — and which does not imply cash flow — compared to the gain of the previous year.

   9M 2021    9M 2022    Change
Ps. %
Consolidated revenue $102,957 $116,394 $13,437 13 %
EBITDA  $16,076 $14,873 $(1,203) -7 %
Operating profit

Net result

$9,989

$10,996

$7,080

$(8,764)

$(2,909)

$(19,760)

-29%

—-

Net result per share $48.40 $(38.80) $(87.20) —-

Figures in millions of pesos
EBITDA: Earnings Before Interest, Taxes, Depreciation and Amortization.
As of September 30, 2021, Elektra* outstanding shares were 227.2 million and as of September 30, 2022, were 225.9 million.

Company Profile:

Grupo Elektra is Latin America’s leading financial services company and specialty retailer and the largest non-bank provider of cash advance services in the United States.  The group operates more than 6,000 points of contact in Mexico, the United States, Guatemala, Honduras and Panama.