BBB Foods Inc.

Good day everyone and welcome to the BBB Foods fourth quarter 23 results. At this time all participants are in a listen only mode. Later you will have the opportunity to ask questions during the question and answer session. You may register to ask questions by pressing the star and one on your telephone keypad. You may withdraw yourself from the queue by pressing star two. Please note this call is being recorded and I will be sending by should you need any assistance. It is now my pleasure to turn the conference over to Anthony Hatoum, CEO. Please go ahead.

Good morning, everybody. Welcome to our first turning conference. We will begin by reviewing our key accomplishments from our fourth quarter of last year, and we will review 2023. We will next look at the important operational milestones. Eduardo Pizzuto, our CFO, will follow, presenting our financial results and outlining our guidance for 2024. We will conclude with a Q&A session to answer as many questions as we can. As expected, we delivered strong results in the fourth quarter and for the full year 2023. Sales grew by 30.8% for the fourth quarter and by 35.3% for the full year. We opened a record 396 stores in the year and 153 alone in the last quarter. In terms of cash flow from operations, in 2023, they reached 3.1 billion pesos, a growth of 48% for the year. This driven by improvements in our EBITDA and our favorable working capital dynamics. Post-IPO, we have a very robust balance sheet, having fully repaid our outstanding dollar debt. Let's turn to operational performance. In terms of store expansion, 2023 was a landmark for our company. We opened a record-breaking 396 new stores, bringing our total to 2,288 stores. That is a growth of 21%. Of these 396 stores, we opened 153 in the fourth quarter alone. That's 39% of the total. We have been very consistent with our growth from 2019 to 2023. we have maintained a compound annual growth rate of new stores opened of 20 plus percent. For those of you with whom I spoke during our roadshow, you know that we have significant runway to sustain these growth rates for the next 10 years. And we maintain our view that Mexico offers a potential market of no less than 12,000 3D stores. Moving on to revenues and margins. For 2023, revenues reached 44 billion pesos. That's a 35% growth over 2022. To break it down of this 35%, 29% is from stores opened before 2022 and 7% from the new stores of 2023. Our gross margins increased by 86 basis points over the last year, largely explained by our increase in scale, and negotiating better terms with our suppliers. Some of you are familiar with the positive sales trend for 2005 to 2022 store vintages. What you see on this chart are the sales curves of each of our vintage of stores since inception, and this is adjusted for inflation. I know three things. All our vintages continue to grow their sales. No vintage has yet flattened them. Each vintage, each newer vintage has a steeper sales curve than the one preceding it. And the starting sales points of each new vintage are getting higher. In other words, our stores are breaking even faster. And what drives that is the continuous improvement in our value proposition to our customers. which, for example, is far superior today to what we offered customers five years ago. We have more private labels, we have better quality private labels, and we're giving our customers more value for money. That in turn builds trust, existing customers will buy more, and we continue to get more customers. And it also helps that the 3B brand is getting stronger. It's also true that as we have more stores, word of mouth on our value proposition spreads further and faster. And although we are not showing it here on this chart, as we don't have yet full year numbers, our 2023 vintage appears to be following the same trend. So if I had to summarize, I would say We continue to increase penetration of private labels, which went from 43 to 47% of our sales. In turn, these private labels are offering tremendous value to our customers. That in turn will drive and is driving increasing traffic to our stores and the positive trends in our average ticket size. So we're generating this virtuous circle. Outstanding value proposition generates higher traffic, generates higher sales, generates increasing cash flow, then in turn finances are growing. I'll pass the mic now to Eduardo, who will go over the financial results for the fourth quarter and for the full year.

Thank you, Anthony. Good morning, everyone. Our EBITDA continues to grow exponentially. As seen in the chart, our EBITDA grew 32.9% in the fourth quarter and 44.3% during 2023. Let me give you a few highlights to better appreciate the context of the quarter. 40% of our total store openings happened in the fourth quarter. Therefore, we show full expenses, but we had yet to show full revenues. Admin expenses were affected by the hiring of talent to support our growth, and to fulfill our obligations as a public company. And finally, we reported a number of non-recurrent expenses, specifically 80 million related to hurricane Otis in Acapulco and 14 million in pre-IPO expenses in Deporto. As illustrated in the graph, if we exclude the expenses from the IPO and the impact of hurricane Otis, EBITDA would have been approximately 17% and 5% higher for fourth quarter in 2023, respectively. Therefore, adjusted EBITDA margins would stand at 5.3% and 4.5%, respectively. It's important to know that, over time, we expect expenses to decrease as a percentage of sales, as our revenues base grows, fixed costs are spread out, and the one-off costs do not recur. Hard discount is a unique business model. It generates a significant amount of cash through changes in negative working capital. We are not the exception. We turn our inventories three times before we pay suppliers. As you can see in this chart, negative working capital represents 10% of revenues. We generated 1.4 billion pesos during 2023, given this dynamic. This trend will continue as long as we continue to increase our sales. And finally, let me give you some guidance for 2024. We plan to open anywhere from 380 stores to 420 new stores. We expect the revenue to grow anywhere from 28% to 32% and same store sales We're expecting it to grow mid-teens. I will now turn back the call back to Anthony for some final remarks. Thanks.