BBB Foods Inc.

Good morning, everyone. My name is Leonor and I will be your conference operator. Welcome to Tiendas 3B second 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, nor should the call be reported on. Any forward-looking statements made during this conference call are based on information that is currently available to us. Today, we're joined by Tiendas 3B's Chief Executive Officer, Anthony Hatoum, and Chief Financial Officer, Eduardo Pizzuto. I will now turn the call over to Anthony. Please go ahead.

Good morning. Thank you for joining us today for Tiendas 3B's second quarter 2024 earnings call. I will review our operating results for the quarter and Eduardo Pizzuto, our CFO, will provide an overview of our financial performance, and then we will open up for Q&A. I'm pleased to report that Tiendas 3B has delivered another strong quarter. We opened 121 net new stores and one new distribution center. bringing our total store count to 2,503 as of June 30th. This compared to 2,288 stores at the end of 2023. Our same store sales grew by 10.7% and our total revenues increased by 27.5% year on year for the quarter to reach 13.6 billion pesos. EBITDA reached 689 million pesos, a growth of 43.2% year-on-year. Given quarterly volatility in working capital due to the timing of inventory purchases, we prefer to look at cash flows on a cumulative basis year-to-date. The quarterly numbers are available in our earnings report. Over the first half of the year, net cash flows provided by operating activities rose to 1.256 billion pesos. This is an increase of 25% year-on-year. We ended the quarter with a net cash position of approximately 1.2 billion pesos, and there is an additional 2.8 billion pesos in short-term bank deposits. Let's turn to operational performance. We continue to see increased momentum store openings. Our store expansion remains on track. In the second quarter, we opened 121 net new stores. That's 215 net new stores since the beginning of the year. And we believe that we will meet our goal of opening between 380 and 420 new stores in 2024. Our newly opened stores are performing well. The new stores continue to perform better than stores from the past. And we keep on saying that there's plenty of runway in Mexico for Tiendas 3B. We remain very optimistic on store growth opportunities for the future. Revenue growth. When we look at revenue growth and gross margins, our total revenue grew by 27.5% year-on-year for the quarter, driven by the expansion of our store network and a 10.7% growth in same-store sales. Underlying demand remains strong, despite a slowdown in same-store sales growth compared to the second quarter of last year. The main reasons being Easter falling in Q1 of 24 and not in Q2 like last year, lower inflation, the moving of some government payments to the first quarter from the second quarter due to the June elections, restriction on alcohol sales due to the elections in June 2024 in Mexico, and the weather effects. Gross profit margins improved by 60% to reach 16.7% for the second quarter, mainly due to improved supplier terms, and this is due to scaling. This number moves quarter to quarter, so I tend to look at it on a cumulative basis. We continue to be a price leader and plan to remain so. I'm going to pass the microphone to Eduardo now.

Thank you, Anthony. Good morning, everyone. As we have mentioned in our past calls, our EBITDA is a consequence of everything we do. For the second quarter, we reported an EBITDA of 689 million pesos, representing 43.2% increase versus last year. This improvement is a reflection of our strong sales growth, gross margin expansion, and dilution of selling expenses over a higher revenue base and more efficiencies. Our admin expenses rose by 45.8%. This increase is also mainly explained by higher personnel expenses driven by expansion into three new regions, a significant investment in talent in the areas of IT, purchasing, HR, and finance, public company related expenses, and share-based payment expense recognitions. Our EBITDA margin improved to 5.1% of 56 basis points from the same period last year. Moving on to our next slides and talking about working capital. As you know, our business model benefits from significant negative working capital. This is a key driver of cash flows, despite the significant store expansion we're experiencing. Our KPIs continue to be in line with our expectations. Our adjusted negative working capital stands at 10.2% of total revenue, and it reflects the efficiency of our operations and the strength of our business model. I will now turn it back to call to Anthony for some closing remarks.