Grupo Aeroportuario del Centro Norte, S.A.B. de C.V. ($OMAB)

Greetings, and welcome to OMA's First Quarter 2026 Earnings Conference Call. [Operator Instructions] This conference is being recorded. It is now my pleasure to introduce your host, Emmanuel Camacho, Investor Relations Officer. Thank you. You may begin.

Thank you, Christine. Good morning, everyone. Thank you for standing by, and welcome to OMA's First Quarter 2026 Earnings Conference Call. We appreciate you joining us today as we discuss our company's performance and financial results for the past quarter. Joining us today are our CEO, Ricardo Duenas; and CFO, Ruffo Perez Pliego. Please be reminded that certain statements made during the course of our discussion today may constitute forward-looking statements, which are based on current management expectations and are subject to a number of risks and uncertainties that could cause actual results to differ materially, including factors that may be beyond our control. And now I'll turn the call over to Ricardo Duenas for his opening remarks.

Thank you, Emmanuel. Good morning, everyone, and thank you for joining us today. This morning, Ruffo and I will review our quarterly operation and our financial results and then we will be pleased to answer your questions. In the first quarter of '26, OMA passenger traffic totaled 6.7 million, a 4.7% increase versus last year. Seat capacity increased by 3.9% during the quarter. Domestic passenger traffic grew by 5.7%, driven primarily by the Monterrey Airport with increases on routes to the metropolitan area of Mexico City made to Toluca, Mexico City Airport, Bajio, Puerto Vallarta, Merida and Cancun. These routes collectively added over 265,000 passengers during the quarter, representing 87% of the total domestic passenger growth. International passenger traffic decreased by 0.5%. The decrease was mainly driven by Monterrey with lower traffic on the routes to San Antonio, Chicago and Los Angeles and [ Mazatlan ] on the route of Minneapolis, Dallas and Los Angeles. This decrease were partially offset by a positive performance in San Luis Potosi, which saw higher passenger activity on the routes to Dallas and Antonio and Houston. In terms of growth by airline, Volaris which accounted for 25% of our total passenger traffic in the quarter recorded a 15% increase in passenger traffic compared to the first quarter of 2025 and while Lima, which accounted for 48% of our total passenger traffic recorded a 3% passenger increase during the quarter. Turning around to our financial performance. Aeronautical revenues increased 4.3%, domestic passenger charges revenue increased by 9%, driven by passenger growth of 5.7%. Our international passenger charges revenue declined by 11% year-over-year, mostly due to the depreciation of the Mexican peso against the dollar. Commercial revenues grew by 4.9% compared to the first quarter of 2025, and commercial revenue per passenger stood at MXN 66.4. Commercial revenue growth was mainly driven by retail parking VIP lounges and restaurants as we continue to benefit from higher penetration levels and increased passenger traffic. Occupancy rate for commercial space stood at 93% at the end of the quarter. On the diversification front, revenues decreased 1.1% year-over-year, reflecting a mixed performance across our portfolio. Hotel Services declined 7.8%, mainly driven by our Hilton Garden in hotel, where results were impacted by the appreciation of the Mexican peso against the dollar and lower occupancy. Other services decreased by MXN 13 million, mainly due to a onetime effect in the first quarter of '25 related to industrial park activities, which did not repeat this quarter. These effects were partially offset by strong performance in OMA Carga, which grew by 8%, supported by a more than threefold increase in operations at our [ Chua ] warehouses as the business continues to scale, while Industrial Services grew 19%, driven by a higher number of leased square meters. OMA's first quarter adjusted EBITDA increased by 2.1% to MXN 2.4 billion with a margin of 73.4%. On the capital expenditure front, total investments in the quarter, including MDP investments, major maintenance and strategic investments were MXN 605 million. Before concluding, I would like to highlight that during the quarter, we agreed with the Mexico City International Airport, to extend the lease term of the NH Collection Hotel at Terminal 2 by another 5 years from its original maturity of 2029 to April 2034, under the same terms and conditions as the existing lease agreement. This extension allows us to secure revenues over a longer period from a business that has proven to be highly successful within our diversification strategy while providing greater visibility on the long-term contributions of this asset to our non-aeronautical revenues. Finally, on April 24, we held our 2026 Annual Shareholders Meeting, where shareholders approved among other matters, the declaration and payment of a MXN 4.9 billion cash dividend. I would now like to turn the call over to Ruffo Perez Pliego, who will discuss the financial highlights for the quarter.

Thank you, Ricardo, and good morning, everyone. I will briefly go over our financial results for the quarter before opening the call for questions. Aeronautical revenues increased 4.3% relative to 1Q '25 mainly due to the increase in domestic passenger traffic despite a 10.5% decrease in traditional passenger revenues, a result of appreciation of the Mexican peso. Non-[indiscernible] revenues increased by 3.8%. Commercial revenues increased 4.9% and the line items with the highest growth were car parking, retail, restaurants and VIP lounges. . Parking increased 8.5%, driven by higher passenger traffic as well as higher tariffs. Retail and restaurants grew by 8.9% and 5.0%, respectively, both mainly as a result of higher passenger traffic, higher penetration rates and the opening or replacement of outlets from previous quarters. VIP lounges increased by 8.1% driven by a higher capture rate. In March, we opened a new VIP lounge at our Torreon airport, and we currently operate OMA premium lounges in 11 of our 13 airports. Diversification activities decreased 1.1% in the quarter. Total aeronautical and nonaeronautical revenues grew 4.1% to MXN 3.3 billion in the quarter. Construction revenues amounted to MXN 519 million in 1Q '26. Cost of airport services and G&A expense increased 20.0% versus 1Q '25 primarily due to the following line items: Minor maintenance increased 54.2% driven by timing effects of works performed. Contracted services expenses rose 20.8%, mainly due to higher cost of security and cleaning services following contract renewals in prior quarters, reflecting inflationary pressures and tight labor market conditions. Other costs and expenses, which increased by MXN 24 million as a result primarily of higher transportation costs, retirement provision and bad debt expense, among others. Concession tax increased 2.2% to MXN 265 million. Major maintenance provision was MXN 109 million compared to MXN 53.4 million in 1Q '25. The increase reflects the reassessment of our maintenance requirements in line with the investments included in our 2026, 2030 MDP consistent with guidance provided in the previous quarter. OMA's first quarter adjusted EBITDA grew 2.1% to MXN 2.4 billion and adjusted EBITDA margin stood at 73.4%. Our financing expense decreased by 0.6% to [ MXN 310 million ]. Consolidated net income was MXN 1.2 billion in the quarter, a decrease of 4.1% versus 1Q '25. Turning to our cash position. Cash generated from operating activities in the first quarter amounted to MXN 1.7 billion. Investing and financing activities used MXN 791 million and MXN 376 million, respectively. As a result, our cash position at the end of the quarter was MXN 3.7 billion. At the end of March, total debt amounted to MXN 13.6 billion and leverage measured as net debt to adjusted EBITDA stood at 1.0x. This concludes our prepared remarks. Christine, please open the call for questions.

[Operator Instructions] Our first question comes from the line of Rodolfo Ramos with Bradesco.

Just a couple from my side. The first 1 is -- you can help us get a sense of the potential for route development and the time line. It was interesting to hear during your remarks that 87% of domestic traffic during the quarter came from new routes. So when you look at these recently open routes, if you can remind us what kind of maturation curves do you expect in these routes? And maybe if you can quantify as a percentage of your total traffic, what do you see in terms of route development. I'm not sure how these discussions are going with airlines in the current context of more constrained seat supply. And then the second if you can remind us where you stand on your maximum tariff execution? And what should we expect at the end of this year?

This is Ruffo. So as you know, we have a very good dialogue with all of our airline carriers. We have, right now, 19 confirmed routes for the rest of the year. Most of them opening in June, primarily with Viva [indiscernible] and Volaris, and also, we have 1 come from routes to Madrid with Iberia. And as we announced recently, we continue to position Monterrey as a long-haul connecting point. We have now direct flights to Paris as of last week. And also, we see some recovery in the Canadian market for the winter season, so especially in [indiscernible] as well. So I think that will also help our results towards 4Q. And with respect to maximum tariff compliance, we currently are around 91%, 92%. We started our pass-through of the tariff increase starting this month, and we would expect to end of the year close to 95%.

Our next question comes from the line of Alberto Valerio with UBS.

It's a follow-up to the first question as well. We had a guidance that MDP tariffs would be a start point in April. I would like to know if -- how it's proceeding this increasing price for tariffs? And another question is about the international operations due to strengthening of Mexican peso how have been the pass through? Or do you think that Mexican peso may weaken further in the year, you might be holding to pass-through tariffs on these routes, just a follow on tariffs as well.

Yes. So during the first 3 months, we made little adjustments to our regulated tariffs, most of the tariffs increased in April 10 of this month. And we have already limited that as of April 10. I think that we are not right now holding any tariff increase considering the FX potential variation. So we'll have to assess that in the future, depending on the peso exchange rate. But right now, we did implement the contemplate tariff increase, this earlier this month.

Our next question comes from the line of Jens Spiess with Morgan Stanley.

So just on the April tariff increase, if you could give just some additional color on how much you increased it for domestic versus international. I mean, in peso terms and just to get a better understanding of how much room there is to increase it further? Because my sense is that with the appreciation of the Mexican peso, you could probably do a bit more pronounced increases on the international side? And just to confirm a follow-up on your response earlier. So the 92% that's based on first quarter numbers, right? Or how should we understand that 92%?

Okay, James, thank you for your question. So in terms of the increase, it was as of April 10, it was a 6.9% across the board for domestic and for international Dua and airport services as well. Those a nominal increase of 6.9%.

And regarding the Mexican tariff, yes, the 91%, 92% is in the 1Q, and we would expect to go higher around 95% towards the end of the year.

Okay. So -- and when is the next step up planned for this year?

We don't have any other step-up contemplated for the rest of the year. Any increase would be on the next year, still TBD and the timing of that.

Okay. So even if the Mexican base appreciates further, any adjustment would be implemented next year.

Correct. Yes.

Our next question comes from the line of [indiscernible] with GBM.

On the commercial side, commercial revenue per pack was quite stable quarter -- well, sorry, year-on-year. I was just wondering, as you look ahead, how are you thinking about the next phase of monetizing the commercial side across the portfolio? And where do you see the biggest opportunities structurally to increase the spend per passenger.

Sure. We did have flattish tax income this quarter versus last year. Most of that is explained because of a reconfiguration of commercial spaces in our Monterrey Airport as a result of the terminal expansion works that we are doing in that airport. As we open new areas and works in [indiscernible] are completed, we should see the benefit of those works, probably starting mid-2027 and kicking in, in full in 2028. . And in addition, we have a couple of line items that are also quite peso linked -- sorry, U.S. dollar linked, primarily the VIP lounge operation is basically fully dollarized as well as the duty free. So appreciation of the peso also affected those 2 particular line items.

Our next question comes from the line of Enrique Cantu with GBM.

Congratulations on the results. My question is on profitability. We saw a meaningful increase in operating costs, particularly in service costs, which pressured margins. How much of this cost increase would you consider as a one-off? And how should we think about the margin trends in the coming quarters?

So we had some advanced minor maintenance expenses that were advanced in the first quarter due to timing execution of the works, we should expect that line item to normalize going forward. And also in the other costs and expenses, we did have some nonrecurring items related to bad debt provisioning, certain litigation provisions and IT expenses that should level off in coming quarters. Now regarding the major maintenance provision, and we just highlight it's a noncash item. So even though it does affect the EBITDA margin, it is not affecting the cash position of the company.

Our next question comes from the line of Pablo Monsivais with GBM. Our next question comes from the line of Alan Macias with Bank of America.

Just a question on jet fuel, any risks there of availability in Mexico? Any scarcity you have you've seen? And what have jet fuel prices been doing in Mexico? And any risk of airlines such as delta that suspend flights from the U.S. to Mexico, anything you've seen from U.S. airlines or in that case, Mexican.

Yes. Fortunately, we're not having the issue that we're seeing in Europe, where you've seen shortages of jet fuel. Fortunately, in Mexico, we don't see a problem of shortage. We've also spoken directly with the airport authorities, and there's no sign that there is a problem of shortage. We do have the price of oil with less that it's probably having an impact across the board. .

[Operator Instructions] Our next question comes from the line of Vanessa Quiroga with Internal Capital. .

A follow-up regarding the increase in tariffs that are due in April that you are going to implement [indiscernible] exchange rate for the Mexican peso did you assume to decide to increase by 6.9% the tariffs.

So that increase was based or planned earlier in the year, and it does reflect both in inflationary expectations for this year as well as some catch-up of the MDP tariff increase that we obtained in December of last year. So it's consistent with our expectation of passing through the MPD increase in 2 to 3 years.

Okay. And a question about the noncommercial -- sorry, the commercial revenues and what we saw for [indiscernible] hotels. Are you expecting that the hotel performance will remain as we saw in the first quarter with declines?

Part of the decline that you saw in the first quarter was mostly due to FX. So especially the Hilton Garden Inn in Monterrey mostly or 2/3 are Hilton Honors, which are American based. So the currency played an impact there. We expect it to normalize going forward. And we're also exploring 2 additional new hotels.

Our next question comes from the line of [ Julia Orsi ] with JPMorgan.

So just a question on your outlook for traffic for this year. So any changes on your previous estimates of mid to -- low to mid-single-digit growth rate due to airlines reducing capacity and some sort of demand hit due to higher jet fuel costs and how you're seeing the breakdown across domestic and international demand as well.

Julia, even though there is a lot of uncertainty on the number of seats after the summer season. We think that the low to mid-single-digit estimate is still valid. We do see better performance on the domestic side than international. So yes, in the 1Q of this year, U.S. demand has been soft, but it has been compensated by higher noise of the Monterrey Industrial market.

Our next question comes from the line of Federico Galassi with the [indiscernible] Group.

Thank you for taking my question, maybe as a follow-on, but when I see the growth in cost, we see 2 or 3 lines as minor maintenance, other cost and in particular, contracted service. This is was something in particular for this quarter. This is a number that you can continue to grow and in particular, for the project that you are running today. Just to understand how is the decrease in cost only that.

Sure. Federico -- so on -- yes, maintenance cost was impacted by a timing effect. So it should trend down in the following quarters and the same with other costs. On the contracted services line item, it does reflect primarily security and cleaning contracts that we have. And those levels are expected to -- on that particular line item to be maintained for the remainder of the year.

Okay. Other costs and expenses?

Yes. And the cost also, we did have some timing effects as well as some extraordinary events in the 1Q. So that number should also be slightly lower in future quarters.

Okay. It's fair to say that today that in the next quarters, the cost of our revenues should be decreased for those one effect, one-off effects.

That is correct.

Perfect. Very clear. And the second one, Ruffo,if I can is we saw in the last quarter, OMA Carga growing again, almost double digit, if you see the 2 quarters. How do you see the activity in Carga thinking in the rest of the year?

So it continues to be strong. What is driving right now the first Q numbers is primarily our Chihuahua warehouse results, which is picking up in terms of client penetration and operations. But we still see a lot of potential in the Monterrey airport, and we see the [indiscernible] to continue for coming quarters on that line item. .

Our next question comes from the line of Gabriel Himelfarb with Scotiabank.

Just a quick reminder or a quick follow-up on the MDP CapEx, I believe it's the core of the MDP. It's based on expanding the Monterrey commercial areas. I think you mentioned last quarter that you expect a ramp-up between 10% and 15% on revenue per passengers by 2028, it's this number still in line? Or is this an update? Or perhaps can you give us in terms of EBITDA, how much can this be incremental for OMA?

So yes, we -- that number is based in real terms. So yes, we will expect that spend perhaps in the Monterrey Airport to go about [ 15% ] by 2028 as compared to the baseline of 2024 in real terms, yes.

Okay. And how much in terms of EBITDA will be the step up?

Let me confirm -- I'll get back to you because I will have to check what the expected passengers are for that airport. But we'll get back to you. I don't have the numbers in front of me. .

We have no further questions at this time. I'd now like to turn the floor back over to management for closing comments.

We would like to thank everyone for participating in today's call. We appreciate your insightful questions, engagement and continued support. Ruffo, Emmanuel and I are available to answer your questions. Thank you once again, and have a great day.

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.