Financial Data and Key Metrics Changes - In Q1 2024, revenues reached Ps. 12.7 billion, representing a 30.9% growth compared to the same quarter last year [7] - Same-store sales grew by 14.8% and operating cash flow increased by 36.4% [4] - EBITDA grew by 57.9% from Ps. 396 million to Ps. 626 million, with EBITDA margin increasing from 4.1% to 4.9% [9] - The company ended the quarter with a net cash position of Ps. 4.3 billion due to IPO proceeds and organic cash flow generation [4] Business Line Data and Key Metrics Changes - The company opened 94 new stores in Q1 2024, bringing the total to 2,382, a 27% increase in store openings compared to Q1 2023 [5] - The compound annual growth rate of store openings from 2019 to 2023 was maintained at over 15% [5] Market Data and Key Metrics Changes - The company maintains a view that Mexico has the potential for at least 12,000 successful 3B stores [6] - The minimum wage increases have positively impacted the target customer segments [11] Company Strategy and Development Direction - The company aims to continue its growth trajectory by opening between 380 and 420 stores in 2024 and increasing sales by 28% to 32% [11] - The business model focuses on a cycle of opening new stores, enhancing value for customers, and generating cash flow [13] - The company emphasizes maintaining operational efficiency and cost reduction as it scales [12] Management's Comments on Operating Environment and Future Outlook - Management noted a positive halo effect post-IPO, with increased motivation from suppliers and better terms being negotiated [17] - The management believes that the growth in older store vintages will continue due to improved value offerings [27] - The company is committed to organic growth, although it does not rule out potential M&A opportunities in the future [36] Other Important Information - The gross margin increased by 80 basis points, attributed to better supplier terms and scale [7] - The company is continuously testing new SKUs, with around 50 to 60 in pilot mode at any time [60] Q&A Session Summary Question: Are there any tangible benefits post-IPO? - Management noted a significant positive halo effect from suppliers and increased motivation [17] Question: Are there any concerns about the quality of new store openings? - Management stated that all new store openings are performing well and maintaining discipline in their approach [20] Question: Will gross margins trend upwards? - Management indicated that the increase in gross margin is a normal fluctuation and should not be over-interpreted [23] Question: What is the outlook for mature store performance? - Management confirmed that older vintages continue to perform well, driven by improved customer value [27] Question: Is there any change in the competitive landscape? - Management reported no notable changes from competitors adopting their discount model [35] Question: What is the strategy regarding new categories and fresh products? - Management stated that only fully tested products will be introduced, maintaining a disciplined approach [43] Question: How is the company addressing higher labor costs? - Management confirmed ongoing efficiency projects to offset costs, with no new initiatives specifically tied to the IPO [48]

Financial Reporting - BBB Foods Inc. filed its Annual Report on Form 20-F for the fiscal year ended December 31, 2023, on April 30, 2024[4] Company Overview - The company is a leading grocery hard discounter in Mexico, recognized for its rapid sales and store growth rates[5] - Tiendas 3B was listed on the New York Stock Exchange in February 2024 under the ticker symbol "TBBB"[5]

Business Expansion and Growth - The company has expanded its private label offerings to 95 different brands and over 422 SKUs, representing 46.5% of total sales for 2023[57]. - The company has experienced rapid growth since its inception in 2005, primarily in 15 densely populated states in Mexico, but future growth rates are uncertain[47]. - The company became the leading hard discount retailer in Mexico with 2,288 stores and 21,924 employees as of December 31, 2023[174]. - The number of stores increased from 1,249 as of January 1, 2021, to 2,288 as of December 31, 2023, representing a CAGR of 35.3%[184]. - In 2023, the company averaged a new store opening every 22 hours, indicating rapid expansion capabilities[195]. - The company has an estimated white space for at least 12,000 additional Tiendas 3B stores in Mexico, indicating significant growth potential[195]. Financial Performance and Risks - From 2021 to 2023, the company's total revenue grew at a compounded annual growth rate (CAGR) of 38.2%, reaching Ps.44.1 billion (US$2.6 billion) for 2023[184]. - The company maintains a negative working capital position, which is a significant driver of cash flow from operating activities and is used to finance store expansion[67][69]. - If revenues decrease materially or key suppliers change payment terms, the company may not have enough available cash to meet obligations or fund expansion, potentially requiring delays or reductions in business development efforts[70]. - The company faces significant risks related to competition in the fragmented retail food industry, characterized by narrow profit margins and intense pricing pressures[52]. - Economic factors such as unemployment, inflation, and changes in disposable income may adversely affect customer spending and profitability[42]. Supply Chain and Operations - The company relies on a distribution network that is critical for timely and cost-effective delivery of goods, and any disruptions could negatively impact sales and profits[76]. - As of December 31, 2023, all 14 distribution centers were leased, and any delays in opening new facilities or lease terminations could adversely affect financial performance[77]. - The company’s operational results may be impacted by the introduction of new product categories, particularly perishables, which require substantial investment and effective supply chain management[59]. - The company has experienced threats to its information systems, which could result in data loss, litigation, and reputational harm if security breaches occur[80][81]. - The logistics operation is managed by a Distribution Center manager who oversees all logistics and fulfillment matters[228]. Regulatory and Compliance Challenges - The company must navigate various regulatory requirements and potential changes in labor laws that could increase operational costs[55]. - Changes in governmental regulations could materially increase the cost of doing business, with potential penalties for noncompliance that could adversely affect financial performance[89]. - The company is subject to the provisions of the Mexican Industrial Property Law, which may impose additional compliance costs that could adversely affect operations and financial condition[101]. - The company may face increased regulatory and compliance costs if it loses its foreign private issuer status, requiring adherence to more extensive U.S. reporting requirements[149]. Market and Economic Conditions - The company's operations are entirely based in Mexico, making its financial condition and results of operations highly dependent on the economic conditions prevailing in Mexico[105]. - Recent downward revisions of Mexico's sovereign debt rating by major rating agencies could adversely affect the Mexican economy and, consequently, the company's business and financial condition[106]. - The Mexican peso's fluctuations against the U.S. dollar may materially impact the company's earnings, assets, and cash flows, especially since most suppliers' raw materials are dollarized commodities[126]. - Political instability in Mexico, including upcoming presidential elections in June 2024, could significantly affect the company's business operations and financial results[119]. - High inflation rates in Mexico, currently exceeding those of key trading partners like the U.S. and Canada, may negatively impact the company's operations and financial condition[133]. Customer Demographics and Behavior - Approximately 85.0% of the customer base consists of women, primarily aged 30 to 60, with homemakers making up 46.0% of the demographic[219]. - Customers typically visit stores three to four times a week, purchasing enough for a maximum of two days[220]. - The company maintains a no-questions-asked return policy to enhance customer confidence in private label products[222]. Corporate Governance and Structure - The company's principal shareholder, Bolton Partners Ltd., holds approximately 46.4% of the voting power, significantly influencing corporate decisions[135]. - The company does not anticipate paying cash dividends in the foreseeable future, focusing instead on retaining earnings for growth[142]. - The multiple class capital structure may lead to exclusion from major indices, potentially affecting the trading price and market activity of the company's Class A common shares[143]. Internal Controls and Reporting - The company identified material weaknesses in its internal control over financial reporting, which could impact the accuracy of its financial results and trading price of its securities[152]. - The company is in the process of implementing the Internal Control—Integrated Framework (2013 Framework) and aims to remediate identified weaknesses by 2024 without incurring material costs[155]. - The company has been subject to reporting requirements under the Exchange Act and the Sarbanes-Oxley Act since its IPO, which may strain its management and operational resources[156].