Good morning, everyone. My name is Leonard and I will be your conference host. Welcome to Tiendas 3B Second Quarter 2025 Conference Call. 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 are joined by Tiendas 3B's Chairman and 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, everyone, and thank you for joining Tiendas 3B's Second Quarter 2025 Earnings Call. I will begin with a review of our operating results for the quarter, followed by our CFO, Eduardo Pizzuto, who will provide an overview of our financial performance. We will conclude with a Q&A session to answer any questions you may have. We continue to add breadth and depth to our management team. Today, I would like to take the opportunity to welcome two new members: Amparo Martinez, who joins us as General Counsel, and Joaquín Ley, who will head Investor Relations. Welcome. We delivered another quarter of exceptional growth, far outperforming other listed grocery retailers in Mexico due to our unrivaled value proposition. In Q2, we opened 142 net new stores for a total of 3,031 stores. Our store opening rate is accelerating. Together with the acceleration of store openings, we have invested in 4 new regions that we will open in the second half of this year, which includes new distribution centers, logistics, and all the personnel required to run it and its operations. Same store sales grew by 17.7% versus 10.7% in the second quarter of last year. Total revenues increased by 38.3% to reach MXN 18.8 billion. EBITDA increased by 22.5% to reach MXN 844 million. If we exclude our share-based payment expense, which is non-cash, then our EBITDA would have increased by 32%. During this first semester, cash flow generated by operating activities reached MXN 1.9 billion or a 56% increase versus 2024. We ended with a net local cash position of approximately MXN 1.1 billion, and we have a $150 million cash position, mostly from funds we raised at the IPO. Let's turn to operational performance. We are increasing the number and the rate of store openings. In the first 6 months of this year, we opened 259 stores compared to the 215 stores we opened in the first half of the previous year. If we look at this on a 12-month basis, we opened 528 stores versus 460 stores in the previous 12 months. Our revenue growth remains rapid. We continue to be one of the fastest-growing retailers in Mexico and possibly globally. Total revenues reached MXN 18.8 billion, an increase of 38% year-over-year, with very strong same store sales growth rates of 17.7%. Same store sales growth continues to be driven by continuous improvements in our value proposition to our customers. We are seeing an increasing number of tickets as well as an increasing number of items per ticket. When compared to ANTAD, we appear to be increasing the gap in the growth rate of same store sales. We see in the second quarter a larger gap of 15 percentage points. I will now pass the mic to Eduardo.

Thank you, Anthony. Good morning, everyone. Sales expenses as a percentage of revenue slightly increased from 10.4% to 10.5%. This increase had two main drivers. Due to our accelerated rate of store openings, we see higher store personnel and depreciation and amortization expenses. This is normal. 45% of our total store base was opened during the last 3 years. As our older store vintages mature, sales expenses naturally decrease as a percentage of revenue. This is what happened with our older vintages. Moving on to admin expenses. Admin expenses as a percentage of revenue increased by 31 basis points from 3.6% to 3.9%. This includes recognizing an incremental MXN 111 million in non-cash share-based payment expenses. To recap our share-based compensation plans, it consists of a legacy plan of 20 years that terminated at IPO and a new standard plan that started at IPO. In addition, this June, our Board granted share-based awards tied to our IPO. This award announced in our IPO and follow-on documentation does not change our fully diluted share count; it was already factored in. It just results now in an accounting recognition of non-cash expenses upon granting. For those investors who prefer to look at this non-cash expense, we have made it easy to review by providing a breakdown in the appendix of our earnings release. We encourage you to read it. Moving on to EBITDA. EBITDA reached MXN 844 million, a 22.5% increase year-over-year. EBITDA margin was 4.5%, down 58 basis points. The margin impact mainly comes from higher logistics costs associated with our opening of 4 new regions in the second half of this year, non-cash share-based payment expenses, and the acceleration of our store opening rate. If we exclude non-cash share-based payments, then the EBITDA margin would have been 5.8%, down 27 basis points, and our EBITDA would have increased 32% year-over-year. I would like to anticipate the very normal question about operating leverage. It is real, but hard to see when viewed on a consolidated basis, given the increasing rate of store openings. When looking at it on a store vintage basis, we see it clearly. Therefore, we're confident that when our store opening rates flatten, it will become very evident. However, we chose to go for the higher growth rates, which will maximize shareholder value creation. Finally, on working capital, our business model generates significant negative working capital, and in turn, we generate significant cash flow from the changes in negative working capital. We can see, for example, that in June '24, we had MXN 5 billion compared to a negative working capital of MXN 7 billion in the second quarter of '25, excluding IPO proceeds. We are roughly at 10.5% of total revenue LTM, excluding IPO proceeds. Our accelerated growth continues to be self-funded. I will now turn the call back to Anthony for final remarks.

We are exceeding our targets. We are accelerating the rate of store openings. This, along with related investments affects our consolidated margin. But across the board and especially at the vintage level, we continue to see the benefits of scale and operating leverage. Sales and same store sales are booming, reflecting our unrivaled value proposition. We are funding all this growth and investment internally from increasing cash flows. We continue to invest to sustain accelerating growth because by doing so, we are creating additional shareholder value, and we are increasing our lead versus the rest of the market. Ours is a winning business model; we will keep on executing, and we will continue to do it just faster and better. We will now move to start the Q&A session. Please go ahead, operator.

Our first question comes from Bob Ford. Please state your company name and ask your question.

Bob Ford, Bank of America Merrill Lynch. Anthony, Eduardo, congratulations on the quarter. What do you attribute the acceleration in same store sales to? And how should we think about ticket traffic, items per basket trends in the quarter, the inflation rates in your assortments, and maybe the momentum as you come out of the shift of Easter into July and early August?

Bob, you asked many parts of your question, so I'll try to segregate it. I think fundamentally, it's an amazing value proposition that we keep on improving in everything we offer our customers. That has not changed at all since inception. We continue to improve our products, whether it's quality, price, packaging, or assortment, and fundamentally, that's what's driving more traffic into our stores and enticing existing customers to pick up one more item. In terms of where that same store sales growth is coming from quantitatively, we're seeing a notable increase in the number of tickets, as well as a real increase in the ticket size. When we analyze it in more detail, part of it is an increase in the number of items picked up, and the mix has changed, which has increased the ticket size. Of course, we always monitor inflation, but in our case, it's a minimal part of the ticket increase. In fact, I might even say that internally we are experiencing deflation of prices. Did I cover all parts of the question?

No, I think you did. I was just curious; if you look at your meat and produce pilots, I think you're creating a lot of excitement. How are those developing? And to what extent is scaling that having an impact, if at all? How should we think about it moving forward?

Look, we're cautiously optimistic and fairly conservative when we assess it. Keep in mind that this is still at a test level, so by no means is it impacting the sales numbers that you see today. Even if we never introduced fresh fruits, vegetables, and meats in the future, you would still see significant and notable same store sales growth. That said, there’s absolutely no doubt that introducing new categories like meat or vegetables will automatically increase the ticket size. Regarding test results, I would say I am cautiously optimistic. We are very conservative when it comes to rolling out a new category. We want to ensure that everything behind the scenes is functioning perfectly—that our logistics are efficient, our sourcing is efficient, and that we can scale effectively. It's crucial to remember that our company has been growing at 30% plus for many years with no hiccups. I believe this cautious optimism is part of why we're successful.

Our next question comes from the line of Andrew Ruben.

Andrew Ruben at Morgan Stanley. You mentioned the 4 new regional openings, which are pretty sizable. I'm curious about some of the opening and ramp-up expenses you mentioned logistics. Is there anything different in terms of intensity for new regions versus existing stores or your existing regions? When we think about the ramp-up period, should we consider it similar or longer? Just really any implications given that you have the 4 planned for the back half?

Let me take the first part of this question, and then I'll let Eduardo comment on ramp-ups and costs. There is absolutely no change in how we have been operating since inception. We stretch; we don't leap. Therefore, when we open a new region—and as you know, our region is essentially a distribution center along with the associated stores and all the functional areas to support these stores running autonomously—we tend to open that new region next to an existing region. This way, we mitigate any risk of branding and name recognition; in fact, when we open, people already know who we are, and this shortens the ramp-up of the new region. It doesn't start from scratch; instead, it inherits a number of stores from existing regions. We compact distances, improving logistics efficiency as well. Typically, a region might open with about 40 to 60 stores, and as it adds stores, it becomes efficient. I don't think we've seen any change in the time of ramp-up, and I don't think we see any change in how we operate it. So overall, the process has been very smooth. Eduardo, do you want to add something?

Yes. I would just add that, Andrew, for reference, additional expenses primarily involve personnel transportation and training for managing these 4 new regions. However, there are no major changes from what you've seen in the past in terms of ramp-up. Adding more regions is advantageous for us because we become much more efficient. As Anthony mentioned, we compact distances between the distribution centers and the stores. Additionally, we gain one more new real estate team, which positions us better for our continued expansion. Overall, good things are expected for the rest of the year in terms of these 4 new regions.

Our next question comes from the line of Joseph Giordano.

I want to explore two things. First, regarding the top line, I would like to understand the evolution of the private label here. You mentioned larger baskets, so more items. How is the penetration of private label evolving in the first half of the year, and is the value proposition making a substantial difference in same store acceleration versus the market? The second question pertains to leases. The total lease expense is higher this quarter than previously. Could you elaborate on refrigeration equipment and the potential impact of new leases? What might the recurring level look like given that you may have upfront lease payments with new contracts?

In terms of private label development, it’s been our bread and butter. We are continuously improving the portfolio of private labels and all products we sell, and this is a dynamic process. Between 2023 and 2024, we experienced a major increase in private label penetration. I wouldn't be surprised if this trend continues in 2025. We typically provide the number in Q4 of this year regarding our private label penetration, but it’s undoubtedly a main driver of net increases in same store sales. Essentially, we're offering more value for money through improving private labels. Eduardo, would you like to provide some insight on leases?

Yes, Joe, you broke up a little. Can you repeat your second question, please?

Yes. The total lease expenses seem higher than anticipated this quarter. I'm attributing that to refrigeration costs related to the 4 new leases. I'd like to understand if there are any upfront payments, and what could the recurring level be moving forward?

Yes, it did go up a little. The increase is due to more leases arising from store growth, as well as equipment at the stores and the future new regions, where we are equipping them with cold and frozen rooms. This combination is responsible for the increase in leases.

Is there any kind of upfront payment, Eduardo, to understand the expected new level?

No, there are no upfront payments.

Our next question comes from the line of Álvaro García.

Álvaro Garcia from Pactual. I have a couple of questions, first regarding the 2024 equity incentive plan. In 2Q '25, we saw an increase in both RSUs and options related to this plan. Was this performance-specific or what drove that increase in 2Q? Additionally, if you have some sort of guidance regarding full year '24 numbers?

Yes. We typically prefer to leave all of this until the end of the year, but events like hiring key personnel may require granting options or RSUs midstream. I wouldn’t see this as the norm. Regarding guidance for the year, we're well within market parameters for what you would expect from a high-growth company.

For my second question, based on conversations with people on the ground, I sense that the brand resonates well with higher-income segments. Are you observing this in your data? Can you comment if higher-income cohorts are driving performance at Tiendas 3B, especially concerning Gamma versus other private labels?

Yes and no. The stores we have in neighborhoods with higher economic power represent a relatively small percentage of our total stores. However, customers with greater purchasing power tend to buy more, resulting in higher ticket sizes and purchase frequency. We have observed this also at BIM, where they are present in all types of neighborhoods. Anyone seeking value for money, irrespective of socioeconomic status, is drawn to our store. Our criteria for opening stores are not limited; as long as we have clients, we will open a store. It's been quite successful across all socioeconomic levels.

Our next question comes from the line of Alejandro Fuchs.

Alejandro Fuchs from Itau BBA. Congratulations on the results. I have two brief questions. First, regarding competition, you have consistently outperformed the market. Have you noticed any changes in your competitors' reactions to this, or do you expect anything different in the second half of the year? Second, regarding the regions you're entering, are they in the north or the south of Mexico? Do you expect competitive dynamics and store performance to be similar to those already in the center of the country?

In terms of competition, we have seen no real change in the environment. The market in Mexico has always been highly competitive, and that's positive for consumers, as it encourages us to provide more value. However, at a granular level, I see no change in market dynamics in the last two quarters; it seems to be more of the same. Regarding the new regions, as we expand from our current locations, buying patterns remain consistent. We are selling basic goods that everyone consumes regardless of geography and socioeconomic level. Store ramp-ups and customer behavior have been stable and predictable. There may be changes when we approach the U.S. border concerning tastes, but for now, it remains fundamentally consistent.

Our next question comes from the line of Irma Sgarz.

I wanted to touch upon gross margin pressure, which I think was largely expected due to branching out into new regions. How should we think about the ramp-up or dilution in the back half with expenses layered in anticipation of this build-out? Assuming we grow into those new expenses, can we expect to see improvements relatively quickly? My second question relates to mature stores; could you comment on their same store sales growth and the magnitude you're observing, especially regarding new stores buoying the overall same store sales numbers?

Irma, let me start with your last question, which is same store sales growth. There’s no doubt that having a significant number of new stores that we opened would likely bias same store sales numbers upwards. However, I can assure everyone that even with our oldest vintages, stores that are 20 years old are still growing healthily, surpassing inflation. They are posting solid same store sales growth. This is primarily due to the continuously improving portfolio of products across all our stores. As for the margin, our commercial margin is quite healthy. The margin decrease we are witnessing is primarily driven by the acceleration of store openings and the related expenses. You have to pay upfront for these expenses before sales materialize. As you correctly noted, as we grow, these expenses will get diluted, but the faster we accelerate, the more expenses we incur, even though we are generating significant shareholder value. Ultimately, we're focused on accelerating our growth rates to create substantial value for shareholders. I believe it's worthwhile despite potentially lower margins in the short term compared to what would have been in a slower growth trajectory.

That's very helpful. If I do the math on stores in year 4 or 5 of your overall store base, which are closer to mature margins. That percentage is actually up a bit year-over-year, although you’re obviously accelerating at the margin, and the store base is larger while past cohorts are maturing. I was wondering why that wouldn't already drive some benefits regarding dilution of selling expenses, at least given that G&A is also witnessing some upgrades to internal structures, which is well understood from last quarters.

I wouldn't read too much into that other than the awareness that as you accelerate, you'll incur these expenses upfront. If we drastically cut our store opening rate to zero, you would see an immediate improvement in margin and EBITDA. However, that’s not what we will do. We will continue to open as many healthy stores as we can because every successful store we launch is accretive to value. Eduardo, do you want to add more information on how the 4 to 5 year cohorts compare in relation to their share of the total stores?

Irma, I'm here. Sorry we lost you for a moment. Go ahead.

No worries. Please go ahead.

Our next question comes from the line of Héctor Maya.

Anthony, Eduardo, always a pleasure and congrats on the results. Just wondering if you believe that same store sales performance could be sustainable at this level during the second half of 2025 or if you are noticing any signals of moderation that concern you. Even with the further opening acceleration and the acceptance levels from consumers, there are still many people who may be unfamiliar with the industry. Are you considering allocating a budget for marketing to raise brand awareness?

Hector, you're asking extremely tough questions. Regarding same store sales expectations, I'm hesitant to provide a direct answer. However, I can say that we do not see any signals indicating flattening or decrease right now, but I cannot ascertain if it will be 17% next quarter, 16%, or 15%. That said, the numbers have remained consistently healthy, and I do expect them to continue in the next quarter. As for marketing spending, that's also challenging. Our most effective marketing is word of mouth. Furthermore, great marketing has been generated via social media, which is a modern take on word of mouth. This has driven many new customers to our stores. We have formally spent on marketing in the past but found it difficult to connect the marketing expenditure with sales increases. We're experiencing revenue growth but cannot definitively link it to our marketing spend. Ultimately, improvements in our value proposition largely drive the sales increase, which generates the word of mouth, creating a cycle of rising same store sales. We don’t dismiss the idea of formal marketing, but it certainly has challenges.

Our next question comes from the line of Ulises Argote.

Ulises Argote from Santander. I have a couple of questions. First, on the supply chain side, as you continue expanding further across the country at this fast pace, are your private label suppliers keeping up with this expansion? Are you bringing new suppliers on board? I'm trying to understand how this is evolving. My second question is somewhat obvious: Is there room to revise the store opening guidance you provided at the start of the year, given your current store opening run rate?

Ulises, I'll start with the last question. We're not revising our guidance; we typically don't. However, we are confident that our set guidance will be achieved. Regarding supply chain, everything is long-term planned. We anticipate our future store requirements, ensuring our suppliers can meet those demands in advance. Our supply and product quality are discussed ahead of time, allowing us to manage risks effectively and ensuring that our growth—notably at high rates—remains smooth and continuous.

Our next question comes from the line of Andrés Ortiz.

Andrés Ortiz from BT Pactual Asset Management. I would like to ask about compensation; once the 2024 equity incentive plan concludes. You've indicated non-cash expenses will finish by 2028, but how should we perceive management compensation after this plan ends? Should we expect additional equity incentive plans going forward or merely higher wages? I’m trying to grasp that.

Andrés, I'll tackle the question conceptually, and then I'll let Eduardo address the expenses. From the start, we've firmly believed that equity-linked compensation is vital for attracting the right talent and aligning our employees with shareholder interests. Our success to date has largely been a result of attracting individuals with a decisive mindset focused on creating value. We will continue this approach moving forward. The new equity-linked compensation plan for 2024 is ongoing with yearly allocations of equity based on leadership demonstrated by our employees. Our Board pays keen attention to how much equity-linked compensation we distribute and operates within market parameters for future planning. I personally deem that the benefits of equity compensation greatly outweigh any potential drawbacks of cash compensation.

I would add, Andrés, that Anthony briefly touched on this matter. Just to clarify: regarding the non-cash expenses, we laid out a table for clarity in the document we disclosed.

We will now pause for further questions.

Well, thank you—sorry, go ahead, operator.

We have not received any further questions. I would like to hand the call back over to Anthony for his closing remarks.

Don't hesitate if you have any questions to reach out to myself, Eduardo, or Martin now, who is part of our Investor Relations team.

That concludes today's call. You may now disconnect.