Good morning, everyone. My name is Danielle, and I will be your conference operator. Welcome to the Tiendas 3B Third Quarter 2025 Conference Call. 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 third quarter earnings call. I will begin with a review of our operating results for the quarter and will be followed by our CFO, Eduardo Pizzuto, who will provide an overview of our financial performance. We will conclude with a Q&A session. We've delivered another quarter of exceptional growth, outperforming other listed players. We opened 131 net new stores in the quarter for a total of 3,162 stores. We opened 2 distribution centers in the quarter for now a total of 18. Our LTM store openings are 528 stores. Same-store sales grew by 17.9%. Total revenues increased by 36.7% to reach MXN 20.3 billion. EBITDA reported a loss of MXN 404 million. If we exclude our noncash share-based payments, then EBITDA increased by 43.6% and reached a positive MXN 1.2 billion. For the 9 months of 2025, cash flow generated by operating activities reached MXN 3 billion or a 30% increase year-on-year. We ended with a net cash position of approximately MXN 1.1 billion. In addition to this, we have $151 million in short-term deposits. Let's turn to operational performance. We are increasing the number of store openings. In the first 9 months of 2025, we opened 390 stores. This compares to 346 stores opened in the first 9 months of last year. Revenue growth remains rapid. We continue to be one of the fastest-growing retailers globally. Total revenues reached MXN 20.3 billion or an increase of 36.7% year-over-year, this, with a very strong same-store sales growth of 17.9%. Same-store sales is being driven by the continuous improvement of our value proposition to customers and more consumers realizing that. When comparing to ANTAD, our gap continues to increase. Our gap versus ANTAD is almost 17 percentage points today. I will now pass the microphone to Eduardo.

Thank you, Anthony. Good morning, everyone. Sales expenses as a percentage of revenue increased from 10.1% to 10.2%. On one hand, we see real operational leverage as our stores mature. On the other, we see this quarter an increase in D&A expenses as a percentage of revenue. I expect that next quarter, the comparison will be more favorable. Admin expenses, excluding share-based payments, increased by 16 basis points due to investments in new regions and hiring more talent. With respect to share-based payment expense, these are noncash and already reflected in our fully diluted share count. Please see the appendix of this earnings release. You can also see the projection of this noncash expense in the appendix. EBITDA increased 43.6% to reach 5.8%, driven by sales and margin growth and operational efficiency. I want to touch on operational leverage and margins. Close to half of our stores were opened in the last 3 years. When we look at our older vintages, their EBITDA margins are close to those you would see at other hard discounters. As you know, we don't drive to an EBITDA. It will naturally increase over time as a consequence of all the good things we are doing. Ours is a business model that 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 September '25, we had MXN 7.8 billion compared to a negative working capital of MXN 5.4 billion in the third quarter of '24, excluding IPO proceeds. We are roughly at 10.8% of total revenue, excluding IPO proceeds. I will now turn the call back over to Anthony for some final remarks.

We are hitting or exceeding our targets with same-store sales that stand out versus the industry. Our business is robust, noncyclical, and battle-tested. In terms of store growth, we have significant runway with room for no less than 14,000 3B stores in Mexico. Today, we are opening more stores and faster. Our same-store sales growth is not only due to our newer stores; our older vintages continue to grow their same-store sales faster than inflation. This is driven by the continuous improvements in the products we sell both in terms of quality and price. Our brand equity continues to strengthen. This drives a faster sales ramp-up of our newer stores and draws new clients to our stores. Our older vintages are already showing EBITDA margins that are in line with those recorded by other listed hard discounters. We continue to invest in talent. We believe that this is a key success factor. The talent density within our team stands out in the market. Our share-based compensation approach has been a key driver of our success. It attracts entrepreneurial talent and aligns everyone with shareholders. Just as a note, our Board of Directors decided in its last meeting not to make additional reserves for our equity incentive plan for the year 2026. We continue to do the same; just better and faster. The future looks bright. We'll now start the Q&A session.

Our first question is from Bob Ford at Bank of America.

Congratulations on the quarter. Anthony, I know your gross margin is a dependent variable, but can you comment a little bit on how you're thinking about your current value propositions and the volume response? And do you see any need to further sharpen value propositions? It looks like there's been some additional price reinvestment in the marketplace. And then I was wondering if you could also tell us how we should think about market share in the trade areas around your oldest cohorts and the implications for some of the younger units. And then as you scale, I was curious if you're beginning to see unsolicited interest from national suppliers, right? And as you scale, how should we think about your use of national suppliers, particularly as you go into new categories and segments just because those smaller vendors may not be able to supply you in terms of the quantities that you'll need as you continue to grow?

Let's discuss margins. As we scale, we anticipate an improvement in our commercial margin over time due to reduced purchasing costs and enhanced logistics efficiency. The challenge we've encountered is how this translates into percentage margin compared to pricing investments. I've mentioned previously that our pricing is set dynamically through elasticity testing. Ultimately, we are enhancing our value proposition for customers. We're expanding our scale and opening new stores, which helps us secure better purchasing terms overall. We expect to see a natural increase in margins over time, though it's important to note that there will be quarter-to-quarter volatility, which is normal. We do not set specific margin targets, but we are confident that the number will rise over time. If you observe other publicly traded hard discounters, you may see where this might ultimately lead. Regarding market share related to our oldest cohorts, we're pleased to report that our oldest vintage continues to experience same-store sales growth significantly above inflation. The primary driver for this growth is an improved value proposition; what we offer today is vastly better than what was available five years ago. This improvement leads to two key outcomes: it attracts new customers and drives existing customers to purchase more from us. Numerically, this translates into more transactions and larger ticket sizes. Internally, we reflect on how long this trend can continue and when we might reach saturation with these older cohorts. Our extensive market research on these cohorts indicates that we still have considerable opportunity to increase our market penetration, not even factoring in potential new categories we may introduce. Regarding suppliers, you asked two questions. First, whether we're receiving unsolicited requests from national suppliers, and the answer is yes; we've become a significant player in the market, leading suppliers to express interest in working with us. This is a positive development. Second, about whether our existing suppliers can keep pace, and the answer is yes. We've been proactive in our planning, strategizing our supply chain three years in advance, which helps mitigate risks associated with ensuring timely supply. This long-term planning effectively reduces operational risks commonly faced by businesses like ours.

Our next question is coming in from Joseph Giordano at JPMorgan.

I want to discuss something you mentioned in the release regarding the fact that new store vintages are maturing faster than expected. My first question is whether you believe that the maturation level and sales performance are still fluctuating. As you pointed out, you're seeing an increasing number of transactions, more customers, and larger basket sizes. My second question concerns the return levels. I remember you mentioned a 60% cash-on-cash return on new stores. I would like to understand how the new cohorts are performing in terms of returns, as they seem to be yielding higher returns. In that context, how should we view the potential for accelerated expansion going forward?

You're completely correct in noting that new vintages mature more quickly, leading to a better return on invested capital compared to those we've opened a decade ago. Simply put, our brand is now more widely recognized, and our value proposition has significantly strengthened. As a result, when we open a new store, customers are drawn in much faster and make purchases more quickly than before, instead of taking their time to learn about us and our products. I anticipate this trend will continue. As long as we keep enhancing our value proposition to customers—which is essentially our focus every day—you can expect to see this pattern persist. Regarding older cohorts and their returns compared to today's, I believe the returns remain just as strong, if not stronger, due to the acceleration you've rightly mentioned. We are not observing anything but improved figures for everything new we open. Even in cases where we establish a new store next to an existing one, which might lead to some cannibalization, those situations are rare. We evaluate the performance of both stores together, and their combined results surpass what either could achieve alone as a single location. Overall, there is a clear enhancement in returns and performance for the newer vintages.

And Joe, it's Eduardo. Just to finalize on your questions, as we do on a yearly basis, we update our models, and we continue to update the models. And you're right on the moving target because we have not seen maturation yet. Even for our 2005 vintage, we continue to see very strong increases. So yes, we will do the same modeling this year, and it will be with improved numbers for the coming years.

Now eventually, like I mentioned in the previous question, theoretically, you reach a point of saturation where there is no more real growth because you're selling everything you can to everybody that is within reach of your stores. But all our research points out that we're far from that point. And like I mentioned before, that's not even taking into account any new potential categories that might come to market via our stores.

Our next question is from Álvaro García at BTG Pactual.

I have two questions. Eduardo, in your remarks, you indicated that next quarter we might see improved comparisons regarding sales expenses. Could you elaborate on that? Also, as a follow-up, I'm curious about the quicker opening of new stores. Can you provide some insight on a regional level? Specifically, as you open new regions and distribution centers, is this faster ramp-up occurring primarily in the central area of Mexico, or are you also observing it in other new regions?

Thank you, Alvaro. Regarding selling expenses, it is primarily linked to depreciation and amortization. I mentioned this during the call in the fourth quarter of last year. A portion of depreciation and amortization was accounted for in the fourth quarter of 2024 instead of the third quarter of 2024. This is the reason you will notice a more favorable figure in the fourth quarter of 2025 related to selling expenses.

In terms of faster ramp-ups, we're seeing them across the board. There is no notable differences geographically or by type of store or by their location. And fundamentally, when we ask ourselves, should there be, and the answer is not really because at the end of the day, we're selling basic goods, things that everybody consumes all the time. And we haven't seen a real change in behavior geographically as we're expanding into new regions. Also, keep in mind that in terms of real estate strategy, we have been extremely balanced in where we open our stores on purpose in order to see maybe there is something different as we expand. And the answer is no. It's been very, very consistent.

Our next question is coming from Alejandro Fuchs.

Congratulations on the results. I just have very 2 brief ones, maybe to dig a little bit deeper into Álvaro's question in terms of the expansion. Obviously, you're opening a lot of stores quarter by quarter. I wanted to see if maybe you could share if you see any difference in terms of competition depending on the region that you're entering in Mexico, maybe some of these new regions that you are penetrating or anything that has been interesting that you can share from the new regions? And then second, in terms of same-store sales, you mentioned, Anthony, that this is because of volume, right, number of tickets and mix as more SKUs in the ticket. If you have to pick those 2, how is the proportion? Who is maybe growing a little bit more or adding more to the same-store sales? Is it more volume? Or is it more mix? That will be all.

Okay. With regards to competition as we are expanding, let me step back and say that Mexico has always been a very competitive market, very dynamic and healthily so. And so we have seen no increase or change in this competitive landscape. And if anything, we are becoming more competitive. So bottom line is no changes in terms of encountering new competition or a different kind of competition. Let me just say that it's strong and healthy competition across the board and has always been the case with a 3B that's becoming more competitive over time versus everything else.

Alejandro, regarding your second question on same-store sales, what we're observing is consistent with past trends: there are more transactions happening in the stores. Additionally, we're seeing customers adding more products to their baskets. While we don't share the specific percentages, the increase primarily stems from having more customers visit the stores and purchasing more items. That's essentially what it comes down to.

And that's versus price inflation, which is minimal in our case.

Our next question comes from Héctor Maya at Scotiabank.

Congratulations on your results. Two key things on your very strong same-store sales growth, how confident are you on maintaining this space, I mean, particularly next year? And if you think we could continue to see this kind of levels as older stores continue to mature. That would be number one. And the second one is related to the higher commercial margin. I know this comes from your elasticity analysis, scale efficiencies and price negotiations with suppliers, but could you please guide us through your decision process here to define what to do with the savings that you achieved? Like how do you decide how much to take from that? And when do you decide to pass the full savings to consumers just to get a better sense of margins despite quarter-to-quarter volatility?

Hector, let me start with the last part of your question. So we are generating real savings in purchasing given scale, given stronger relationships with suppliers, given efficiencies across the board that we particularly focus on. I mean we're very focused at seeing where can we save money, where can we improve the value proposition and therefore, where can we increase now volumes because people are buying more of this better product. And you can see the positive flywheel effect. And so comes your question about, okay, so how much of this goes into margin and how much of this goes into price. And we do it on a product-by-product basis, very much driven by elasticity testing in the market. At any point in time, in 3B, you'll have about 60 products that are being tested across the board for pricing elasticity. And we optimize them for volumes and dollar margin. And the result of doing this all the time across all our products is the margin that you see today in our numbers. So it's extremely hard for me to guide you and say, well, this is going to be this much next quarter. But what I can tell you from previous experience and if you look also at other hard discounters, you will see that naturally over time, a certain amount of these savings are going into percent margin and a certain amount are reflected in higher sales curves. So basically, that also drives same-store sales across the board. So again, apologies, but very hard to give you specific guidance, but I can give you the tendency, the trend as one where, over time, it does improve; quarter-to-quarter, it remains volatile. So this sort of leads into your first part of the question, what can I guide you in terms of same-store sales for next year? Would it be as robust? And I can say with a high degree of confidence based on all the work and research we've done that we see no reason why same-store sales would be any weaker than this year. So we expect them to continue to be strong, mainly driven by the fact that we know and we have in the pipeline, significant improvements in the products that we're going to be bringing to market over the next 12 months. If you ask me, does it remain strong 10 years from now, I can probably say, I don't know. But I can say that for the very immediate future for the next couple of years, it remains very strong.

Our next question comes from Alexandre Namioka at Morgan Stanley.

The majority of my questions have already been answered. However, I would like to touch on what Anthony mentioned about innovating in the product categories. Can you provide an update on how the pilot test for the perishables category is progressing? Should we expect to see some of these newer categories in stores next year?

We are continuously innovating not just in perishables but across all product categories. One recent example that I’m very excited about is our new ice cream bar, which features banana covered in chocolate, and it has been a huge success. Our focus on innovation and adding value for our customers through exciting new products remains strong. We believe we still have plenty of room for growth while adhering to our principles as a hard discounter, which involve having a limited assortment and quickly rotating products. This approach generates a significant amount of negative capital, which we see as a competitive advantage. Specifically regarding perishables, these categories have a lot of potential. However, we maintain very high standards for quality and other metrics related to efficiency. We want to ensure that the entire value chain operates perfectly before launching new products. Our tests so far have yielded extremely positive results, and we are very optimistic about the future.

Our next question comes from Irma Sgarz at Goldman Sachs.

I have a couple of follow-up questions on product development and mix. Anthony, it was fascinating to hear your insights on the various products you're introducing. I also found your earlier comments about mature customer cohorts migrating up and increasing their basket size intriguing. Could you share some insights on the typical customer journey and what typically encourages them to visit the store? Are there specific categories they tend to add to their baskets first before moving on to new categories? What have you discovered about your customers' journeys, especially regarding the oldest cohorts? Additionally, I know you're planning for expansion and your product pipeline. It would be interesting to hear how you've adapted your product mix in response to demographic changes in the Mexican population. I’ve seen some examples with health-related items. Moving forward, what trends are you monitoring, and how do you plan to address them? Lastly, regarding operating expense leverage for next year, given the significant groundwork you've laid this year, should we anticipate that operating expenses will grow at a rate below same-store sales next year?

Thank you, Irma. Let's begin by discussing the customer journey. Generally, it starts with word of mouth; your neighbor shares their positive experience about a store, which prompts you to visit, especially since it’s within walking distance. You enter and notice various brands that you're unfamiliar with. Our private label products are treated as brands, marketed and communicated just like any fast-moving consumer goods company would do, even though you might not recognize them. Typically, you would start with essential items, purchasing eggs, oil, and rice because of their great prices and freshness. Gradually, as you pointed out, you might explore other products, like canned goods and detergent, especially since everything comes with a 100% money-back guarantee with no questions asked, which builds trust. Over time, you might try our cosmetics, find them excellent and reasonably priced, and have little reason to revert to the more expensive options you used before. We've noticed this progression in customer journeys, which remains true today, especially when we launch new products. Looking ahead, we are conducting tests on perishables and many other categories that might not be immediately noticeable in-store. Even though we focus on basic and high-turnover goods, we still have significant room to expand our offerings. Our stores are designed to accommodate a larger number of SKUs without needing changes in size, logistics, or back-office operations. This capacity allows us to grow our product range efficiently as we scale up. I'll now turn it over to Eduardo to discuss the question regarding operating leverage and what we anticipate for next year.

So Irma, without providing any type of guidance, truly, the answer becomes on how fast we expand. And as you know, we've been rapidly expanding, and we believe that will continue to be the case. What's been very helpful for us and the way we view things is what I mentioned in the release is that when we're looking at leverage for the older stores, we're seeing very strong leverage there. And if we divide the company into 2, the stores that have been open for more than, let's say, 2, 3 years, we've seen very strong leverage. You don't see that immediately because of the pace of growth. I mean, we've opened close to 50% of our stores in the past 3 years. That's a massive amount of store openings in a very short period of time. So that drags the number down. And as I mentioned in our last call, it's a little bit perverse because the faster we grow, the less leverage you'll see in the very short term. However, that provides and that increases shareholder value drastically. So we will continue to operate in the same way. And we'll provide guidance for the next year in our next call.

But mechanically, the operating leverage is real and very powerful. Any of you, if you model it, you see it.

Our next question comes from Alex Wright at Jefferies.

Yes. So you've given some indications of the long-term runway in terms of the number of stores that you're targeting. And you've consistently spoken about people constraints really being the main constraint on growth and the pace of expansion. So I wanted to ask, really, as you grow larger, you're obviously increasing the internal talent pool and the average experience of your teams quite rapidly. So is that something that you see alleviating some of those HR pressures that could allow you to expand more rapidly in terms of new store openings than you already are? And then the second question I have is on the CapEx for this year. I believe your budget was about MXN 3.65 billion. You've done about MXN 2.4 billion in the first 9 months whilst being well on track to meet your store openings. Obviously, still have a couple of DCs to open in the fourth quarter. Is it fair to say there's some headroom there to come in below CapEx budget? Or are there certain investments that you expect to make in Q4 that will lead to a pickup in CapEx in the fourth quarter?

Regarding our personnel, I want to emphasize that we set a very high standard. We take pride in our commitment to talent development and human resources because we believe that this is one of the key factors behind our success, enabling us to grow at over 30% for more than 12 years without any setbacks, which is quite rare. Therefore, we will keep investing heavily in human resources and talent development. I’m proud to say that we likely have one of the highest concentrations of talent in the market. Looking ahead, is this a challenge for our expansion? It has always been a critical factor. However, in everything we do, we plan long-term and work backwards. We determine how many stores we want to open in three years and assess how many people we will need for that. We then evaluate where those people are currently and what steps we need to take today to ensure we have qualified candidates with the right profiles in three years to successfully open the targeted number of stores and maintain the quality and efficiency standards we desire. So yes, it remains a priority for us, but we have a solid strategy to address it, and our actions speak for themselves. We are currently opening more stores, all of which are performing well. Now, I'll let Eduardo address the CapEx question.

Sure. Alex, yes, so you're right. We still have a couple of more DCs to open for the back half of the year. So we opened one. So there's an additional one that will happen in early December and the balance of the year with more store openings. So I think we're going to be very close to the number that we projected late last year around the MXN 3.7 billion.

Our next question comes from Santiago Alvarez.

Congrats on the quarter. We really appreciate the color on growth and EBITDA margins on the older cohorts. Can you provide any information regarding on how the product sales mix is behaving on those older cohorts? Is private label sales as a percentage of merchandise reaching the levels you were expecting?

Santiago, regarding EBITDA, we don't disclose this number, but I can share that our stores are achieving results similar to those of other hard discounters in different regions, targeting around 7% EBITDA margins. Our older cohorts are beginning to hit that number. The sales penetration in these stores is higher than the overall consolidated basis, driven by significant operational leverage that helps us reach the 7% EBITDA margin. In terms of private label penetration, the profile of these stores remains consistent; as Anthony noted, we primarily sell basic goods that the typical Mexican consumer buys regularly. There are no major differences in product offerings between store types; it's just a matter of time before newer cohorts achieve that sales level and corresponding profitability. For your second question on private label penetration, we are indeed seeing results as we expected. By the end of 2023, we were in the mid-40s, and by the end of 2024, we're looking at the mid-50s. This number is still evolving. If you've visited our stores recently, you would have noticed we've introduced more products, and they are performing excellently. We are very pleased with these results.

Our following question comes from Gullie Arshad.

Yes. Anthony and Eduardo, congratulations on a great quarter. I have a kind of a sensitive topic I would like to ask you. Have there been any interest from larger national and/or international players about your business? And what are your thoughts on a potential bear hug from them? And I ask this question because I consider your shares very undervalued and your growth is incredible. So would you comment on that?

The short answer, Gullie, is not to my knowledge. We've talked with international players in terms of cooperating on certain matters, but the topic of a bear hug has not emerged today. In terms of the shares being undervalued or not, I'll let the market judge on that. This is a company that continues to show extremely high growth, healthy growth and improving returns across every single metric. So hopefully, the market recognizes that at some point.

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

Thank you to our investors who continue to be very supportive and very enthusiastic. Thank you for the analysts who are covering us who keep us challenged with interesting questions. And thank you overall for participating in this call. I'd like to leave you with the thought that our company continues to perform very strongly, and the future looks very bright for us. Thank you again.

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