Grupo Aeroportuario del Sureste, S. A. B. de C. V. ($ASURB)

Good day, ladies and gentlemen, and welcome to ASUR's First Quarter 2026 Results Conference Call. My name is Sachi, and I'll be your operator. [Operator Instructions] As a reminder, today's call is being recorded. Now Mr. David Barlow, Corporate Governance, Strategic Planning Manager and IRO at Asur. Please go ahead, sir.

Thank you, Sachi, and thank you, everyone, for joining us today to discuss Asur's results for the first quarter 2026. With me on today's call is Adolfo Castro, Chief Executive Officer. Additional details about our results can be found in our press release, which was issued yesterday after market calls and is available on our website. As usual, all comparisons discussed on this call will be year-on-year and all figures are expressed in Mexican pesos unless specified otherwise. As a reminder, certain statements made during the call today may constitute forward-looking statements, which are based on current management expectations and beliefs and are subject to several risks and uncertainties that could cause actual results to differ materially, including factors that may be beyond our company's control. Please refer to the forward-looking statements disclosure included in this earnings presentation for additional information. With that, I will now turn the call to Adolfo. Please go ahead, too.

Thank you, David, and good morning, everyone. Before I begin, I would like to note that David Barlow has assumed responsibility for Investor Relations. That David has been with us for more than 20 years and knows the company and operations very well. He attends our Board of Directors meeting and committee sessions. . Now let me start by pinning the quarter. We expected the first quarter 2026 to reflect the period transition for ASUR. We were operating in an environment where the traffic trends on our core Mexican market, we're stabilizing after a period of normalization. Puerto Rico entering a more mature phase following strong post-pandemic growth and Colombia in a growth good momentum. Recall that the first quarter for Mexico is the seasonal, the strongest. Then we were negatively affected by the security-related events beginning on February 22. And after that, the TSA-related disruptions in the U.S. airports, which also impacted Puerto Rico. This effect contributed to increased volatility in traffic trends, particularly towards the end of the quarter. On the positive side, with my progress on 2 key priorities. The first one, the integration of Asur's U.S. airports. This makes the first full quarter of consolidation of our U.S. commercial platform. The business contributed to non-aeronautical revenues, while profitability reflects the early ramp-up operations. We expect renal improvement as the platform scales supported by the new commercial openings in [indiscernible] and the upcoming opening of the Terminal 1 this year, those at which will further expand the commercial base. Second, continued execution of our regional expansion strategy. We remain focused on completing the Motiva transaction, which is now pending remaining regulatory approvals and is expected to close in the second quarter this year. This transaction will significantly expand our footprint and reinforce our long-term growth profile. This transaction represents a step change in scale and geographic diversification. Expanding our presence in new markets and further balancing our portfolio. Our strategy remains consistent, diversifying our revenue base, including a greater focus on nonregulated revenue, selecting expanding into markets with attractive long-term demand and deploying capital in a disciplined and value-accretive manner. Let me now review ASUR's operational performance for the quarter. Total passenger traffic increased 1.9% year-on-year, reaching nearly 90 million passengers driven by strong traffic in Colombia, the stabilization in Mexico and short-term softness in Puerto Rico. Colombia remains our fastest-growing market with traffic up 11%, supported by the increased connectivity and solid demand. Domestic traffic grew 12%, outpacing 7% growth in international [ pastes. ] Mexico remained broadly stable with international traffic showing modest growth, while domestic traffic remained slightly below prior year's levels. Traffic in Cancun declined 2% during the quarter, while the other airports in Mexico grew by 5%. Positive trends in January and February were offset by weaker March. Beginning on February 22, traffic was affected by the security-related bends in Mexico, which impacted traffic from the United States through mid-March. Let that more traffic was affected by TSA-related screening disruptions in the U.S. efforts. We believe these factors were temporary and do not reflect the change in the underlying demand. As we move through the year, we expect to see difficult operating conditions, including higher fuel prices and recent capacity reductions. Passenger volumes from the United States, our largest international service market decreased 4.6% while South America contracted 1.4%. On the positive note, Canada and Europe increased by 11% and 11.4%, respectively. In Puerto Rico traffic trends declined long single digits, driven primarily by domestic demand and the effects of [ ESA, ] while international traffic continued to grow. Turning now to financial performance. As a reminder, all figures exclude construction revenue and cost and comparisons are year-on-year, unless otherwise noted. Total revenues increased 0.2% year-on-year, reaching MXN 8.4 billion. This performance was primarily driven by a nearly 9% increase in non-aeronautical revenues. Supported by the first full consolidation of the U.S. airports, which added approximately MXN 438 million in non-aeronautical revenue during the quarter. In turn, our aeronautical revenues declined low single digits, mainly reflecting the FX conversion impact in Puerto Rico and Colombia, together with lower traffic in Puerto Rico. Commercial revenues increased nearly 7%, primarily reflecting the new commercial operations in the U.S. and mid-single-digit organic growth in Colombia. Performance in Mexico and Puerto Rico remained softer during the quarter, reflecting a combination of FX headwinds, given the strength of the Mexican peso against the U.S. dollar, combined with lower traffic in Puerto Rico. We continue to execute on our strategy to enhance and diversify our revenue base with a growing contribution from nonregulated and dollar-denominated sources. The integration of the U.S. commercial platform is an important step in that direction. And while still in its early stages, it already represents an attractive addition to our portfolio. Over the past year, we also continued to actively expand our commercial footprint across the network. Opening 47 new retail and service units, including 34 in Colombia, in Puerto Rico and 5 in Mexico. On a per passenger basis, commercial revenue increased mid-single to MXN 153.6, benefited from a full quarter of operations from the U.S. commercial operations despite the impact of depreciation of the Mexican and Colombian pesos against the U.S. dollar, and a mixed traffic environment. By geography, Puerto Rico delivered the highest levels with MXN 163.3 per passenger. Despite the 5% decline driven by FX conversion and the slight reduction in traffic levels. Mexico saw a 4% decline mainly reflected the impact of the peso appreciation over the U.S. dollar denominated commercial revenues. Lastly, Colombia posted a mid-single-digit decline despite the strong traffic growth, reflecting FX and mix effects even higher growth domestic traffic. Turning to operation costs. Total expenses increased 25% year-on-year, mainly driven by the integration of U.S. commercial operations, higher depreciation and amortization in Colombia, professional fees related to the U.S. acquisition together with the ongoing inflationary pressures. Excluding these effects, underlying operating cost was moderate. By region, Mexico recorded a 6% increase in expenses. Excluding reduction of fees associated with the U.S. commercial acquisition, expenses would have grown just 0.9%. And mainly reflecting modest increases in labor and service-related costs. In Puerto Rico, expenses declined nearly 7%, benefiting from depreciation of the Mexican peso and the U.S. dollar. Expenses in Colombia increased 33%, largely driven by the higher depreciation and amortization following the change in amortization methodology. Recall this change reflects the expected evolution of the concession. Including the phaseout of regulated revenues starting in 2017 and the remaining life of the asset through 2032. Excluding depreciation and amortization expenses in Colombia would have increased by just 2.6%. In the U.S., we recorded approximately $368 million in operating costs during the quarter. Of this, approximately MXN 70 million related to items attribute to 2025 that were recognized in this period, including lease adjustments, account reconciliation items, provisions for uncollectible accounts and primary year employees on. Moving on to profitability. Consolidated EBITDA decreased nearly 6% to MXN 5.4 billion in the quarter. was lower across regions, down mid-single digits in Mexico and Colombia, high single digits in Puerto Rico. When our U.S. commercial operation posting a negative EBITDA of MXN 50 million in the quarter. The adjusted EBITDA margin declined nearly 600 basis points to 64.1% year-on-year, mainly reflecting the ramp-up of the U.S. operations and the impact of amortization changes in Colombia just mentioned. Net majority income declined 20% year-on-year to MXN 2.8 billion, mainly reflecting higher depreciation and amortization, increased interest expenses following the recent financings and the lower interest income. Importantly, the reported profitability of ASUR's U.S. airport this quarter is not yet indicative of the underlying earnings capacity of the business and costs associated to set up the business. As disclosed in our 20-F report on a pro forma basis, full year consolidation, this commercial operation generated approximately MXN 2.1 billion in revenues and MXN 711 million in net income in the fiscal year 2025. In addition, the launch of the new Terminal 1 at JFK would expected to come online during the third quarter this year, will further support commercial revenue growth as it ramps up further [ intensing ] the performance of this business. Moving into the balance sheet. We closed the quarter with cash of MXN 13.8 billion and net debt-to-EBITDA of 0.8x. Our balance sheet continues to prove significant flexibility to form growth while maintaining conservative leverage. Capital expenditures totaled MXN 544 million, primarily focus on Mexico, where our investment under the master development program continued to advance, including the construction of Terminal 1 in [indiscernible] on track to open on the third quarter this year which will increase capacity, improve passenger growth and optimize commercial mix, supporting higher commercial revenues over time. Note that CapEx for the full year as per our massive plan totaled MXN 7.9 billion. In Puerto Rico, we remain focused on operational improvements and on capital deployment in Colombia, [indiscernible] At the end of March, Airplan signed an addendum to its concision premium authorizing immediate interventions at [ Cosman Cordaro]. To address our expected demand with an estimated investment of approximately COP 165 billion. The project covers a series of capacity expansions a service level improvement works, including domestic and international check-in facilities at appointing baggage handling system security checkpoints, remote boarding areas and aircraft expense and in migration facilities. In summary, as core is becoming a more diverse platform with increasing exposure to U.S. denominated revenues. Clear visibility on key growth drivers, including the ramp-up of U.S. commercial operations and expected closing of [ Motiva ] transaction. While in the near-term traffic trends remain mixed across regions, we continue to see healthy online demand for air travel and remain focused on execution, cost discipline and long-term value creation. The final comment is then ASUR's shareholders meeting will take place at 10 a.m. Mexico City time today with the proposed dividend payment of MXN 10 per share to be paid at the end of May. Now I will open the floor for questions. Sachi, please open the floor.

[Operator Instructions] The first question is from Rod Ramos from Bradesco BBI.

And David, congratulations on your new responsibilities, all the success there. a couple of questions. The first one is in regards with your U.S. commercial business. I'm assuming there is some level of seasonality. Can you give us a sense of how much should sort U.S. should be contributing in EBITDA on a 12-month rolling basis, considering this new commercial space in JFK. And if you expect any material extraordinary expenses in the coming quarter as you close the Motiva acquisition. So that would be my first one. And the second one on traffic. And let me perhaps take a little bit of a different approach here. I mean the Cancun, Mexico route has been an important bottleneck for you guys. I mean do you see a scenario where we could see a short-term pressure during the World Cup as Guadalajara, Monterrey routes are prioritized.

In the case of the U.S., it's important to say that the current operation we have is not exactly what we will have -- what we expect to have at the end of this year. Just to say on the 21st of April, new openings took place John F. Kennedy Terminal 8, and we are expecting the opening of the new terminal on at the end of this year. New terminal today is a project that is under construction is a new terminal. So it's not in operation. So even though -- even if I tell you the 12 months number will not mean anything to give size representation of what this business could be next year. Basically, I would say the EBA this year should be close to, let's say, MXN 20 million that we will be basically investing or reinvesting in the progress we have. In the case of the traffic in Cancun, yes, you're right. Mexico Cairo is or has been a bottleneck for one. If they are going to relocate some traffic because of the work of I don't think so. Remember that the work at the end of the day in Mexico is just 13 games. The most important ones here in Mexico City and probably there's one that is particularly important in the case of [ Wallara ] apart from that, nothing else. On the other side, I have to say that Cancun Airport is probably the only one in the world that has daily connection to the 16 venues of the world if that is a different story for some of the people that lives outside Mexico.

The next question is from Guilherme Mendes from JPMorgan.

David, a follow-up on traffic performance. I hope you mentioned that the trends remain kind of mix in the near term. If you can help us try to understand what to expect, especially in Mexico? I know there's a lot of moving parts, but it looks like some of the negative impact of the first quarter seems to be fading away. . So if it's fair to assume some kind of increase in traffic on a year-over-year basis going forward? And the second one is a follow-up on the Motiva Airport. You can share what kind of synergy sort of upside on the commercial ground you expect to get once you integrate the business into [indiscernible]

And of course, well, in the case of traffic, I have to say that in the case of Mexico traffic and particularly in the case of the most important source of traffic for the first quarter which is the U.S. Everything went well up to February 22 and then basically collapsed. That collapse up to March 14 that we were back on track again and then [indiscernible] appear. So I have to say that the quarter was severely affected by these 2 things. Going forward, the only thing I can say is Holy Week is even different pace as it was last year. So probably the beginning of April is something that we can see on the positive side. On the other side, I'm saying that we will be facing a difficult operational conditions going forward, and we don't know how much basically with the oil price of $100 per barrel is not fit for the line. We have received some capacity reduction from Spirit. So far, the only 1 but we don't know how much this is going to last soon. It is not an easy moment to be saying how the year is going to end up. In terms of Motiva, the word synergy, this is not probably the viable. They have a business that is operating well. we have some common customers. Yes, it's true. The large ones. They are also in the U.S. But I don't see synergy as an important piece of the uprate.

Got it. Have a nice day.

The next question is from Anton Mortenkotter Cotter from GBM.

Just 2 quick ones. One is related to the investments in Colombia. I was wondering if this investment will trigger any amendment to concession or any maybe adjustment or any kind of compensation on that front? . And the second one is related to the maximum tariff. Just wondering if due to the lower -- the peso appreciation, maybe there are some places where you are still slightly below the maximum tariff that we should see some adjustments going forward? Or if you could give us some color on that one.

Absolutely. In the case of Colombia, on March '26, we signed an amendment to our concession agreement. That was the [indiscernible] the importance of this document is that once again, we are able to invest in this country for the moment as an emergency plan for the case of the airport of [indiscernible] And this will improve the level of service there, which is really bad to take. But for the moment, what this document allow us is to invest MXN [indiscernible] And of course, that will be moving the day when our regulated revenues will fade out. So far, we were expecting that to happen on February '27 with this investment, and we are making all the calculations with the current conditions probably will be up to the end of '27. But again, this will give us the opportunity. This is giving us the opportunity to invest more and solve some issues that we have there. So we will keep you posted on how these things evolve in the future. But for the moment, this is a very good news in the case of Colombia. In our maximum tariff, the objective we have for this year is 98%. And for the moment, we do not see why we should not be reaching the [indiscernible]

The next question is from Alberto Valerio from UBS.

Welcome David. [indiscernible] Adolfo a follow-up on the maximum tariff and also on the expenses for this quarter. Remind us how methodology for Maximo tariffs from the MDP on the international flights. If you can adjust later because FX appreciated or not? And also, if you could tell us from the needs that you paid this quarter, if there is any 1 of those that is not recurring we sold 9 million in the Mexican airport and as well 120 for the U.S. operations. Thank you very much.

Yes, Alberto. In the case of maximum tariff, relevers maximum [indiscernible] peso on a capacity basis or on a workload unit basis that we can charge in a year. So when you're saying the national traffic, that is part of the maximum tariff. So you bestsellers, the peso, we will have to just in accordance to try to reach the mounting pesos. So there is no different treatment for international clients versus domestic flight is one basket is peso to nominee. In the case of the onetime events, yes, you are right, MXN 91 million. This is what we have paid as a professional fees to get the U.S. acquisition. And also, I have mentioned that in the case of the U.S., we have the good things that were related to last year so onetime events as well of approximately MXN 70 million more .

The next question is from Gabriel Himelfarb from Scotiabank.

Just a quick question. Have you seen any shift on traffic or store capacity from airlines from both perhaps U.S. and domestic airlines. And what could be like the outlook on the -- or the drivers for the traffic ahead? .

Well, the ship that we have or we have been informed is what I just mentioned. It's the case of peters decrease its capacity for the case of May in comparison of what they have scheduled before. That is the only one we have so far. As I said before, it's difficult times with the fuel prices we have today with the uncertainty that we have about this situation in the Middle East and group this situation in the Middle East so quickly and just the fact, let's say, at the end of April some pieces of May, but that's it. But of course, difficult for me to say when is this going to be over.

Okay. And if I may, another question, perhaps in the terms of commercial revenues, what is like the trend on the passenger profile? Is there like lower expenditure and terminals over time on the terminals? Or what's driving the trends on the commercial revenues?

Well, let me say -- let me start with Puerto Rico because we were facing difficult times, let's say, in the third week of March the PSA lines over the week and reach 4.5 hours was 1 or more for the case of the agricultural filter. So you have to be there more than 6 hours before your flight. And of course, that has an impact on everything. And also on the commercial side, a lot of people lost their flights and a lot flu had to be rescheduled, et cetera. But we are not seeing, let's say, low spending people, some other impacts that have been affecting the situation. the FX that I have mentioned during my call during my initial remarks, remember last year, peters dollar was something and today 17 something. So the difference was -- is important around 14% difference. And it's very clear that you can see into the results of the quarter.

The next question is from Andres Cardona from Citigroup.

From Dave. I have one question about the contribution of the U.S. business. You can share how much do you expect on an annual basis from the -- how much EBITDA contribution you expect from the U.S. business on an annual basis?

But for the moment, what I was saying is, this year, so far, $30 million in EBITDA. But of course, next year should be more as a result of the opening of the new terminal at.

The next question is from Francisco Suarez from Scotiabank.

David, congrats on the new appointments. The question that I have relates with -- also with the U.S. operations, it is about excluding Terminal 1, what would be the overall occupant rates that you see over there? And also a related question, what is the overall outlook, again, excluding Terminal 1 on potential increases in the overall leases that you may see there and your overall strategy to manage those assets.

Well, rent numbers, I would say, Francisco, we have more than 400 contracts there, so 400 units. If you see some of them in the case of LAX or but that doesn't mean that those does not have a contract. Some of them are empty because they're in the process of being remodeled or in the process of new spaces. So basically, I would say we have all or almost all the bases contract.

Okay. And okay, and also if you can disclose a little bit about your overall average life on those leases and what would be the potential to see further increases in rents? Do you have any idea of how likely is to see an improvement on rents once the leases are expire?

Average slide. basically, I would say, between 15 to 17 years. I will invite you to see some news related to Terminal 8 with John F. Kennedy and you can see the new spaces that were opened recently. Those spaces were for a long time. Those were severe remodeling process -- but now we have finished up deals. We are focused now on 2 major projects, 1 is it is, of course, the one and the other one we have is a new agreement that we reached with LAX at last year, where we will be preparing the terminals for the Olympics in any -- some spaces are going to be remodeled or the Super Bowl that is going to explain the first quarter next year. But the most important event, of course, is the Olympics in .

Great color and thanks for the tip. So in other words, I think that the overall tenant improvements and all these investments and the remodelation are linked towards better rents at day because you will be recovering those investments is in it? .

Absolutely. .

[Operator Instructions] This concludes the question-and-answer session of today's conference call. I would like to turn it back over to Mr. Castro for closing remarks.

Thanks, David, and thanks, Sachi. Ladies and gentlemen, that concludes ASUR's First Quarter 2026 Results Conference Call. We would like to thank you again for your participation. Now you may disconnect.

Ladies and gentlemen, that concludes ASUR's First Quarter 2026 Results Conference Call. We would like to thank you again for your participation. You may now disconnect.