BBB Foods Inc.

Good morning, everyone. My name is Leonor, and I will be your conference operator. Welcome to Tiendas 3B first quarter 2024 conference call. All lines have been placed on mute to prevent any background noise. There will be a question and answer session after the speaker's remarks, and instructions will be given at that time. Please ensure that your full name is displayed correctly on Zoom. If not, please take a moment to edit your display name. Also, please note that this call is for investors and analysts only. Questions from the media will not be taken. Any forward-looking statements made during this conference call are based on information that is currently available. Today, we're joined by Tiendas 3B Chief Executive Officer Anthony Hatton and Chief Financial Officer Eduardo Pizut. I will now turn the call over to Anthony. Please go ahead.

Good morning, everybody. Welcome to our first quarter 2024 earnings call. We will review our key results for the quarter. Special welcome to those of you joining us for the first time. Eduardo Pizzuto, our CFO, will follow, presenting our financial results. This will be a brief and to-the-point presentation so that we can have more time for the Q&A session. Some highlights. As expected, we delivered strong results for this first quarter of 2024. We opened 94 stores this quarter to bring the total number of stores to 2,382. Compared to the same quarter of last year, same-store sales grew by 14.8% and revenues by 13.9%. Operating cash flow grew by 36.4%, supported by EBITDA growth of 57.9%. We ended the quarter with a net cash of 4.3 billion pesos due to the proceeds from our IPO and organic operating cash flow generation. Let's turn to operational performance. The momentum continues with our store openings. In terms of store expansion, we maintain the brisk rate of store openings in what is traditionally a soft quarter for new stores. We opened 94 stores, bringing the total number of stores to 2,382. This is a 27% increase in the number of stores opened this quarter compared to Q1 2023. We have been very consistent with our growth. From 2019 to 2023, we have maintained a compound annual growth rate of store openings of 15 plus percent. In our last earnings call, I mentioned that we have a significant runway to sustain these growth rates. And we maintain our view that Mexico offers a potential of no less than 12,000 3B stores. I would mention successful 3B stores. The strong performance of our stores opened in the last two years supports that view. If we look at revenues and gross margins, we see that our first quarter of 2024 revenues reached 12.7 billion pesos. That's a 30.9% growth over the first quarter of last year. Our gross margins increased by 80 basis points over last year's quarter, largely explained by our increase in scale and negotiating better terms with our suppliers, most of which we passed on to our customers. I'll pass on the mic to Eduardo now.

Thank you, Anthony. Good morning, everyone. Our EBITDA and EBITDA margin is a consequence of everything we do. In Q1, we increase our sales, increase our gross margins, and reduce our expenses as a percentage of sales. As a result, a growing EBITDA and EBITDA margin. As illustrated in the graph, our EBITDA grew 57.9% from 396 million pesos to 626 million pesos, and our EBITDA margin from 4.1% to 4.9%. If we exclude expenses from the IPO of 70 million pesos incurred in Q1, our adjusted EBITDA would have been 695 million pesos and a margin of 5.5%. As we've mentioned in our last call, our discount is a unique business model. It generates a significant amount of cash through changes in negative working capital. In Q1, this trend continued. If we adjust our working capital by excluding IPO proceeds, net of cash used to pay down the promissory and convertible notes, then our negative working capital stands at 4.8 billion pesos versus 4.6 billion at the end of last year. That is an increase of 287 million pesos in Q1. As explained before, this trend will continue as long as we continue to increase our sales.