Good morning, everyone. My name is Leonor, and I will be your conference operator. Welcome to Tiendas 3B Q2, 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 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 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 thirtieth. 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 MXN 13.6 billion. EBITDA reached MXN 689 million, 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 MXN 1.256 billion. This is an increase of 25% year-on-year. We ended the quarter with a net cash position of approximately MXN 1.2 billion, and there is an additional MXN 2.8 billion in short-term bank deposits. Let's turn to operational performance. We continue to see increased momentum in 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. This, 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 2024 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 Q2, mainly due to improved supplier terms, and this is due to scaling. This number moves quarter to quarter, so you know, I tend to look at it on a cumulative basis. We continue to be a price leader and plan to remain so. I'm gonna 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 MXN 689 million, representing a 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%, up 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. Thanks, Eduardo. Looking ahead, we're maintaining our guidance to open between 380 and 420 stores, and to grow our sales by 28%-32%. Our decentralized approach to store openings continues to be effective, and that's evidenced in the number of stores we opened this quarter. While this quarter's sales were slightly impacted by the Easter weekend occurring in Q1, 2024, decreasing inflation and other reasons due to the June elections, our same-store sales growth remains solidly above industry average. Our growth remains self-funded due to our positive EBITDA margins and efficient working capital management. The strength of our business model lies in its simplicity. Open new stores, provide excellent value to our customers, continue to improve on this value offer, attract more customers, and increase sales per store. This cycle drives efficiency and cash generation, reinforcing our growth trajectory. We appreciate your support and interest. We will now begin the Q&A session. Operator, please go ahead. Thank you. We will now conduct a Q&A session with Anthony Hatoum and Eduardo Pizzuto. If you would like to ask a question, please press the Raise Your Hand button located at the bottom of the screen. If you are connected via telephone, please dial star nine. We remind you that all lines have been placed on mute. When it is your turn to ask a question, you will be given permission to speak. You will then be able to unmute yourself and ask your question. We will now pause for questions. Our first question comes from Andrew Ruben. Please state your company name and ask your question. Hi, great, thanks. Andrew Ruben with Morgan Stanley here. Thanks for the question, and congratulations on crossing over the 2,500 store mark. I'd hope to dig in a bit more onto the dynamic for gross margin, you know, understanding you said it moves quarter to quarter, Anthony, but it was another strong figure this quarter, stepping up, you know, year on year and even from one Q. So trying to better understand if what you saw in the quarter, what you saw in the first half, is this some sort of new normal level to expect from here, or, you know, is there a gap between when you get the benefits from suppliers and when you reflect it in prices? Just trying to better understand, what's driven the strength and how we should think about, what it means for the trajectory going forward. Thanks again. Hi, Andrew. Thank you. Fundamentally, by scaling, we are reaping cost benefits on purchasing across the board, and that's not gonna stop. As we get bigger and we work closer with our suppliers, whether they're private label suppliers or branded good suppliers, we are getting better terms. And I think it's a win-win for everybody on this front. Then the question is, do you pass it on to your customer in the form of lower prices, or do you keep it and see it reflected in a gross margin, which is your question about, you know, is this the new normal? And I don't have an answer apart from this one. We price our products on a product-by-product basis. It's you know optimizing margin in dollar terms and optimizing sales and not necessarily optimizing a percentage gross margin. And our continuous elasticity testing of what prices should be is determining that. And that's very dynamic and that changes as with time because you know it's done on a product-by-product basis. I would say in general there is a tendency to pass on the benefit to the customer so you know if that is going to continue to happen the way we're doing it then we continue to increase value in our proposition. If we do see a decrease in gross margins then we're most likely gonna reap the benefit in increased sales and gaining more customers. So this is a trade-off you know that we're doing on a constant basis and something that's very dynamic. Bottom line, it's a little bit volatile, and bottom line, I wouldn't say that this is the new normal. It's likely to fluctuate over time. Great. No, it makes sense, and helpful to hear the explanation around the continuous elasticity testing. Thank you again. ...Our next question comes from the line of Froilán Méndez. Please state your company name and ask your question. Hello, everyone, this is Froilán Méndez from JP Morgan. Thank you for taking my question. Hi, Anthony. Hi, Eduardo. So I wanted to ask you about how has the fresh and meat been performing in the stores that you have tried these fresh SKUs? And thinking more in the long run, how should we think about the impact of these categories in the gross margin, which has been obviously better than expected, but considering the higher rotation that these products may need, the higher usage of logistics that they may imply, how do you think this will affect your long-term gross margins? Hi. I'm gonna answer this question in two parts. Thanks. First, meat and fruits and vegetables are not part of any projection that we've shared with anybody. And whether it's meat, fruits and vegetables or any other project, we will not launch it officially unless the return on investment is highly attractive. So, you know, it might not even show up on our radar in the future. But let's say that to date, the tests, because that's exactly what they are, are encouraging and would indicate that the numbers would be positive. Hello? Sorry, I wasn't- Are you there? Okay. Sorry, sorry, I was mute. Thank you. Thank you for that. If I can follow up, can you give us some sense on how the same stores or your mature stores are trending so far in the year? I know you usually provide that spaghetti chart, but so far, do you think we're following the same trend, still improving, for the first half of this year, your same store for mature mature stores? Yeah, I think the trend has been as expected and in general, positive. With that, same weakness we've seen in second quarter same-store sales. But there's no indication that it's going to do anything different than what we've seen and what we expect. So, yes, solid growth on same-store sales across the board. Perfect. Thank you so much. Our next question comes from the line of Gustavo Fratini. Please state your company name and ask your question. Hi, guys. Thanks for taking my question. Gustavo Fratini here from Bank of America. I would just like to ask you about if you could give a little bit more details about the dilution and selling expenses and also this increase in talent in IT that you made in G&A. And I would also like to ask you about the increased pace of openings. You already reiterated the guidance, but it feels like you could even be at least at the top of the guidance, but maybe even more. Just would like to hear your thoughts about it. Thank you. Hi, Gustavo. I'm gonna break down your question into the three parts. So the first part is investment in people and in IT. I think it's normal for a company that is growing at the pace we're growing and at our stage of life to make investments in people, which I think are very good investments with high return on investment and in IT, especially when you have the focus we have, which is we don't make an investment unless we are convinced that it has a great return on invested capital. So that's what you're seeing here now with regards to IT and people expenses. The second part of your question had to do with dilution of expansions on the base. I think it, you know, the timing sometimes makes the numbers seem a little bit variable, but there's no doubt that, you know, as you're growing the number of stores and your sales at the pace we're growing, that you're going to see a continued dilution of expenses across the base, because there is, you know, if you look at the trend, our expenses are not even close to growing at the pace at which, you know, we're seeing growth in revenues and growth in store numbers. So that is going to happen over time, mechanically, and, you know, we, we have no worries on that front. There was a third part to your question, and I, I would ask you to repeat it, please. Yeah, it was about the pace of openings, right? If you think you will probably be a little bit closer to the top of the guidance or even surpassing it. You know, I, I'm not gonna budge from the guidance numbers that we've given, because, again, I wish I could tell you that store openings with a straight line, every quarter, everything is nice and smooth. It's a little bit of a lumpy process. So while you might have seen, the second semester outpacing, you might see a slowdown in the third semester. I'm not saying that there is one, but again, my only message here to you is that real estate is lumpy, and although we have a very robust pipeline, you're at the mercy of a number of variables, and therefore, you have to look at it over the course of the year. ... Super clear. Thank you so much. Our next question comes from the line of Santiago Alvarez Bringas. Please state your company name and ask your question. Hi, this is Paul Ayers with Summit Management. Thanks for taking my question. Just following on the gross profit margin, you mentioned that the improvement was due to effective price negotiations. Can you give us some color if the improvement was also impacted by the product sales mix between private and branded products? Or are you seeing the same levels in, in product sales mix and improvements in margins in both segments? Thank you. Santiago, I'll go back to my previous response by, you know, starting and saying to you that there is continuous improvement on the purchasing side, and that is simply driven by scale and by better working with our suppliers. In terms of, then, you know, product mix, yes, it does impact, and over time, you will see an impact due to maybe an increasing number of private label sales versus branded sales. But this is not gonna be a quarterly to quarterly event that you're gonna be able to notice. It's more like a multi-year kind of tendency that you should look out for. So again, I would say that at the core, you're gonna always see improvements on the purchasing side, and the costs. But then whether you retain these as a gross margin that appears in your income statement, or this translates into increased sales and maybe a lower gross margin, but in terms of dollar margin, possibly an improvement, this remains to be seen. Net-net, it's an improvement. You know, whether it appears in, one line or the other, the tendency is positive. Very clear. Thank you. Our next question comes from the line of Jorge Izquierdo. Please state your company name and ask your question. Hi, good morning. This is Jorge Izquierdo from BTG Pactual. Good morning, Anthony, Eduardo. Hope you are well. My question is on the two distribution centers that you opened year to date. I was wondering if you could share how many stores they are currently serving. Thank you, and congrats on the results. Hi, Jorge. Eduardo, do you wanna take this one? Yeah, sure. Hi, Jorge. Yes, we opened two distribution centers. We have about 100 stores in one of them, and then about 150 in the second one. So if you remember our presentations, the way we do this is that we go by stretching, and every time we open a new distribution center, it starts off with a number of stores already, so it doesn't start from zero. So that is what we have currently. Very clear. Thank you very much. Our next question comes from the line of Sergio Guerrero. Please state your company name and ask your question. Sorry, good morning. This is Sergio Guerrero from RSH Family Office. We're based in Guadalajara, and you still have no stores, basically, in the state of Jalisco. So I would just wanna have a little bit of an idea of what's your geographical expansion plans, and if you think you could face increased competition as you grow towards the north part of the country, and the second question is regarding the peso depreciation. Should we expect any impact on your cost of goods sold because of the movement in the peso that we've seen recently? Eduardo, do you wanna take this one? Sure. Sergio, hi, Eduardo here. We do have stores in the state of Jalisco. Not in Guadalajara, but in the state of Jalisco. You can probably also google them, and I encourage you to visit them. The second. Your second question on the peso, on the cost of goods sold, are you talking about if the depreciation of the peso affected our cost of goods sold? Is that, was that- Yes. Yes. I mean, not immediately. This is something that we lived before. Typically, what happens, Sergio, is that when we get a peso depreciation, what happens is that this is mostly a pass-through. It takes few months for that to happen. So not in the immediate terms has been impacted. Okay, thanks. We will pause for further questions. Our next question comes from the line of Froilan Mendez. Please state your company name and ask your question. Hi, Anthony and Eduardo. Just a quick follow-up. From your 121 openings during the quarter, how many of them were, like, in the last part of the quarter? Trying to understand the higher expenses that we saw, diluting a little bit of the gross margin gain, if it was mostly on pre-opening expenses, given the timing on when these stores were actually opened. So if you could tell us how many of the 121 were, like, backloaded to the last part of the quarter? Hi, Froilán. Would be about roughly 40% of the openings were in the last month of the quarter. Perfect. Thank you so much. We will pause once more for any further questions. Our next question comes from the line of Madhu Kodali. Please state your company name and ask your question. Thank you. Yeah, well, Madhu Kodali here with Yaksha Capital. Thanks for taking my question. I want to ask a follow-up question on the cost of goods, so, related to the peso question earlier. I was wondering, out of the merchandise you sell through the store, how many of them are as a percentage of total cost of goods in terms of imports versus made in Mexico? And, on a longer term, how should we think about the changes in the cost of goods that you might be buying using USD, and if this peso devaluation goes the opposite direction or the current direction it is in? Hi, Madhu. Let me answer this question by looking at history. Over the course of our life, we have seen already two, if not three, devaluations of the peso, and what we have observed is the following: If it's a permanent devaluation, in a sense that's, it's a little bit longer term, as opposed to, you know, volatility that we might be seeing right now. The input costs, which I would say all raw materials in Mexico, are pretty much dollarized for the vast majority of the goods that are sold. You would see that fast in the form of inflation and prices over time. If I had to put a stake in the ground, I've always seen it happen in the course of twelve to eighteen months. So if it's short term, you're not gonna see much change, but if it's long term, you're gonna see an inflation in in costs, and therefore, back to, you know, whether it gets passed on to the customer and with what speed it gets passed on. Right. Would you be able to share in terms of percentage of items or costs, in terms of imports versus manufactured within Mexico? I think it's fairly common sense and applicable to any country in the world, but let's say all manufactured goods in Mexico, in terms of variable costs, are very, you know, dollarized. The non-variable cost is labor related. The non-dollarized cost is labor related, but let's say, I don't know, if you take diapers, for example, we sell diapers. The super absorbent powder is dollarized, the cellulose is dollarized, the elastic band on that diaper is dollarized. You know, the machine was bought in hard currency at some point. The non-dollarized part is basically labor and, to some degree, with a delay, energy. So if you ask me to give you an exact percentage, I'd be hard pressed to come up with a number, but, you know, I'll leave you with this thought as to, you know, the underlying forces here are similar for every single product you look at. Sure. I really appreciate that. Thank you. I have one follow-up question on the pace of number of stores and forecast, and the operating metrics around your investment, return on investment, rather. What you have outlined in your SEC filings is, I believe, it's quite attractive in terms of, like, if I remember right, it's roughly 2 million pesos or so per location, and your cash return on investment is probably somewhere around 12 months or so. That's an excellent return, obviously. I was wondering, is that something you think you can achieve over the next 2-3 years, or is it de-depe... I'm sure it is dependent on markets and, you know, where you are heading in terms of the growth areas and how good they are, and so on, and, of course, the competition, if there is any regional competition in that area. Just wondering, what can you give us in terms of directional view, if you can maintain that return on CapEx, CapEx return on investment? Well, Madhu, I'm gonna answer this question by giving you the principles, and then I'll let you come up with your own conclusion. Unless you see a significant change in CapEx costs due to whatever reason, the tendency is for an improvement on returns, because what we're seeing is every new vintage of stores performing better than previous vintages. And underlying that improved performance are two, two things. One, the brand, Tiendas 3B, is better known, so you have stores that basically start much stronger because people know who you are and what you are... And even more important behind that is continued improvement in the value proposition to our customer. So basically, what you see and what we offer the customer today is significantly better than what you saw five years ago and what we offered the customer. and this improvement, and it's continuous, is what's driving continued improvements in same-store sales and, you know, faster ramp-ups of new vintages. And as long as we believe that that's the case, then coming back to your first question, you know, the return on invested capital on a store should continue to improve. Great. Thank you so much. Our next question comes from the line of Daniela Bretthauer. Please state your company name and ask your question. Morning, everyone. Congratulations on a strong quarter and thanks for taking my question. Quick question on the exchange rate variation, which resulted in a non-cash gain of 304 million MXN in Q2. And you disclosed that the company holds $2.7 million denominated investments in the form of short-term bank deposits at the end of June. So what is the strategy? And in terms of our forecast, should we assume that the same amount remains for the rest of this year, so that it better, you know, helps us to forecast the non-FX, you know, non-cash, sorry, gains or losses? Eduardo, do you wanna take this one? Yes, absolutely. Hi, Daniela, good to hear your voice. I think for the remainder of the year, yes, let's assume that we will continue to have this investment overseas. As we explained, we have roughly about $150 million in US deposits. We also have $50 million in cash and cash equivalents overseas as well. So at least for the remainder of the year, yes, you should assume that we will continue to keep that money overseas. Okay. So a total of $200 million? Close to 170. 170. Okay. Thank you, Eduardo. And just in terms of your working capital, you have a, this favorable ratio between inventory days and payables. Any room to improve there or anything that you can comment on that? You already do a phenomenal job. I mean, yeah, and that's a great question. Thank you. This is something that, well, first of all, I would encourage to look this, and that's why we did it on a half a year versus half a year, because looking at it quarter by quarter, it's very, it could be misleading- Yeah. It's lumpy. Now, in terms of your question about improvements, for the time being, of course, we can improve. However, for the time being, we're not assuming any improvements for the balance of the year. However, we know that the greater rotation of inventories we have, the lesser the days of inventory would be. But for now, we're not assuming any improvements, so you can, if you wanna model that for the balance of the year, that's how we are thinking about it. That's very clear. Thank you so much, and congrats again on the strong results. Thank you, Daniela. We will pause once more for any further questions. We have not received any further questions. I would like to hand the call back over to Anthony for his closing remarks. Then thank you very much for participating and for your questions. I want to say thank you and extend my gratitude to our investors and analysts for your continued support and your confidence in our business plan and strategy. I also would want to thank all our employees for their hard work and commitment. They have been instrumental in achieving all of the results that you're seeing. And Eduardo and I remain available. If you have any questions, just feel free to contact us. Thank you again, and have a great day. That concludes today's call. You may now disconnect.