Grupo Aeroportuario del Centro Norte S.A.B. de C.V.

Ladies and gentlemen, greetings and welcome to the Grupo Aeroportuario del Centro Norte Omaha first quarter 2025 earnings conference call. At this time, all participants are in the listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star and zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Emmanuel Camacho, Investor Relations Officer. Please go ahead, sir.

Thank you, Enrico. Hello, everyone. Welcome to OMA's first quarter 2025 earnings conference call. We're delighted to have you join us today as we discuss our company's performance and financial results for the past quarter. Joining us today are our CEO, Ricardo Reyes, and CFO, Rufo Perez-Priego. Please be reminded that certain statements made during the course of our discussion today may constitute forward-looking statements which are based on credit management expectations and beliefs 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 Nunez for his opening remarks.

Thank you, Emmanuel. Good morning, everyone. We appreciate your presence on this call today. This morning, Rufo and I will review our quarterly operational financial results, and then we will be pleased to answer your questions. In the first quarter of this year, OHA's passenger traffic totaled 6.4 million passengers, a 9.1% increase year over year. This increase was mainly attributable to an increase in seat capacity of 13.4% during the quarter. On the domestic front, passenger traffic grew by 8%, driven primarily by the Monterey Airport, which saw increases on routes to Querétaro, the metropolitan area of Mexico City, including the Mexico City, IFA, and Toluca airports. Hermosillo, Ciudad Juárez, Guadalajara, and Culiacán. These routes collectively added over 285,000 passengers during the quarter, representing 72% of the total domestic passenger growth. International passenger traffic increased 15.1%. This growth was also driven by the Monterey Airport, with passenger traffic increases on routes to San Antonio, Chicago, Los Angeles, Orlando, San Francisco, Oakland, Miami, Austin, and Denver. These routes collectively added over 132,000 passengers during the quarter, accounting for 94% of the total international passenger increase in the first quarter. During the first quarter, we launched 16 new routes, five of which were international. In terms of airline participation, Viva de Luz represented 49% of our total traffic during the quarter, with an 11% increase in terminal passenger numbers compared to the first quarter of 24, while Volaris, which accounted for 22% of our total traffic, recorded a 20% passenger increase during the quarter. Moving on to NOMAS for quarter financial highlights. Aeronautical revenues increased 13.8%, with aeronautical revenue per passenger rising 4.3% in the quarter. Commercial revenues had a strong double-digit growth, with commercial revenue per passenger growing 13% to 66 pesos. As compared to the first quarter of 2024, driven by VIP lounges, restaurants, and retail, VIP lounges benefit from higher access rates and a larger number of users, as well as the effect of the previously opened lounges. The restaurant and retail line items benefited from the consolidation of new business units open across our airports during past quarters. Occupants' rate of commercial space stood at 96% at the end of the quarter. On the diversification front, revenues increased 22%. OMA Cargo contributed most to this growth, mainly as a result of an increase in revenue related to air cargo operations in Monterey. Revenue from industrial services increased 56.4% year-over-year, reaching 42 million pesos, primarily driven by a higher number of square meters leased in our industrial park. During the quarter, we completed construction of a warehouse measuring about 9,200 square meters, as well as 2,400 square meters expansion of an existing facility. Additionally, we are currently building a 5,000 square meters warehouse, which we expect to complete in the second quarter of this year. OMA's first quarter adjusted EBITDA increased by 16% to 2.4 billion pesos and an adjusted EBITDA margin of 74.9%. On the capital expenditure front, total investments in the quarter, including MDP investment, major maintenance, and strategic investments, were 502 million pesos. Lastly, I want to mention that last Friday we held our 2025 Annual Shareholders Meeting, where shareholders voted on several matters, including the declaration and payment of a 4.5 billion peso cash dividend. I would now like to turn the call over to Rufo Perez-Piego, who will discuss our financial highlights for the quarter.

RUFO PEREZ- Thank you, Ricardo, and good morning, everyone. I will briefly walk you through our financial results of the quarter, and then we'll open the call for your questions. Industrial revenues increased 13.8 percent relative to the first quarter of 24. driven primarily by higher aeronautical yields, as well as increasing both domestic and international passenger traffic. Non-aerial revenues increased by 20.9%. Commercial revenues increased by 2.8%, and the nine items with the highest growth were VIP lounges, restaurants, and retail. VIP lounges rose 80%, mainly due to an increase in rates and higher number of users, as well as the opening and the consolidation of the Cihuatanejo Lounge, which started operations last year. Restaurants increased 32.8% driven by greater customer penetration and the opening or replacement of outlets in previous quarters in airports such as Monterey, Ciudad Juarez, and Durango. Retail increased 50.9% as a result of the contribution of new spaces opened or replacement of existing spaces in previous quarters, as well as a higher penetration, primarily in airports like Juarez, Monterrey, Torreón, and Culiacán. Diversification activities increased 22%, mainly due to high revenues from Omacarga and the industrial park. Total aeronautical and non-aeronautical revenues grew 15.6% to 3.1 billion pesos in the quarter. Construction revenues amounted to 403 million pesos in the first quarter, a decrease of 60% as a result of lower MVP investment execution. The cost of services and G&A expense increased 10.2% year-over-year, primarily due to a 42% rise in other costs and expenses. Payroll increased by 9.9%, while contracted services grew 8.8%, mainly due to higher costs for security and cleaning services following contract renewals in private quarters. Concession tax increased 16 percent to 259 million, in line with the increase in revenues. Major maintenance provision was 53.4 million pesos, as compared to 71.3 million pesos in the first quarter of 24. As Ricardo mentioned, HOMA's first quarter adjusted EBITDA was 2.4 billion pesos, and adjusted EBITDA margin reached 74.9 percent. Our financing expense reached 312 million pesos, an increase of 13 percent, mainly due to a lower interest income as a result of lower average cash balance during the quarter as compared to the same period of the last year. Consolidated net income reached 1.3 billion pesos, which showed an increase of 19.7 percent versus the first quarter of 24. Turning to our cash position, Cash generated from operating activities in the first quarter amounted to 1.9 billion pesos, and cash at the end of the quarter stood at 2.3 billion pesos. At the end of the quarter, total debt amounted to 11.3 billion pesos. We maintained a strong balance sheet, ending the quarter with a net debt to adjusted EBITDA ratio of one time. This concludes our prepared remarks. Zico, please open the call for questions.

Thank you. Ladies and gentlemen, we will now be conducting a question and answer session. If you would like to ask a question, please press star and 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star and 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Ladies and gentlemen, we will wait for a moment while we poll for questions. The first question comes from Alan Macias with Bank of America. Please go ahead.

Hi, good morning and thank you for the call. Just a question on your expectations for traffic. Traffic in Monterey has continued to be very strong. I understand there's more capacity, but how are you looking at demand and how was April so far? Thank you.

Hello, Alan. Thank you for your question. Yes, first quarter traffic was looking good numbers. April, remember April, we're going to have the holidays, the Holy Week on April. We didn't have that one last year, so month to month, the numbers are going to be good. We're still looking at the same expectation as we mentioned on the previous call, somewhere around the mid-single digits. We are cautious for the rest of the year as we're monitoring the macro landscape and the international markets. news coming there.

Thank you. Thank you. The next question comes from the line of Pablo Montseve with Barclays. Please go ahead.

Hi. Thanks for taking my question. This is just a more broad question. In case that your MDP has low CAPEX requirements and you don't have major investment opportunities abroad, what do you think the right strategy for dividends will be for OMA going forward? Thank you.

Hi, Pablo. So, over the past few years, we have been try to distribute as much cash as possible to shareholders in the form of dividends. That strategy, I don't think it's going to change in the foreseeable future. So as we are able to generate higher free cash flow, that should be translated into higher dividend distributions.

Thank you.

Thank you. The next question comes from Jen Spies with Morgan Stanley. Please go ahead.

Yes, hello. Congrats on the results. I have two questions. The first one is on capital allocation. CCER is, as you probably know, selling some of their assets in Brazil. Would you be interested in those assets or part of those assets or all of them It would be much appreciated if you could give any perspective on that. My second question is on the traffic guidance. We're seeing that the low-cost carriers have retrenched some of their capacity, Volaris, Viva, but still things are pointing to quite good capacity increases for you guys for the rest of the year. double digits. So your guidance does surprise me a bit. Maybe could you elaborate how conservative you're being? And even if things kind of collapse in the second half of the year due to the macro environment, wouldn't that set the stage better for you guys compared to the other airport operators? Because it would lower the base of your traffic that you will be settling or negotiating in your next MDP? Thank you.

I'll take the first one. Yes, we took a look at the CCR assets, but at the moment we decided not to participate in that process. And for the second part, beautiful.

Yes, the capacity situation is somewhat volatile. There were some announcements made last week, and some capacity cuts are being reflected starting May and June by some of the low-cost carriers. Remember also that in the fourth quarter of 24, several routes were opened, so there will be a much higher base of comparison in the fourth quarter as well. So yeah, it might be a bit conservative, but there are some uncertainties and we don't want to be over-optimistic on capacity growth at this time. And regarding the second half of your question on if this is going to benefit us in MDP negotiation that will occur towards the second half of the year, remember that the current formula looks at the traffic for the first five years and actually through 2040 in our case. So any... minor changes in capacity in a certain year wouldn't move that much the needle when you are looking at the next 15-year traffic forecast. So I don't think it's going to be necessarily a huge positive to have a lower traffic expectation this year.

Okay, perfect. So it probably helps in the negotiations, but only marginally. Perfect. I appreciate the clarity. Thank you. Thank you.

Thank you. The next question comes from Alberto Valerio with UBS. Please go ahead.

Hi. Thank you, gentlemen, for taking my question. My question is on non-aeronautical revenues per tax. It was shown this quarter, a jump from fourth quarter last year and also year over year from first quarter. I'm wondering if you can see another jump for the following quarters or it will be something more stable in inflation index for looking forward for that line. Thank you.

Yeah, I think that the results in XTRAERON reflect the strategy that we have been implementing over the last couple of years, especially since VNC started. uh acquisition um for the next uh quarters in terms of uh commercial revenue per packs we expect a similar outcome as to the first uh quarter and uh most likely uh in 2026 uh we'll see a a higher yield as as the new spaces in in monterey starts to to to be opened

Perfect. Those spaces will be open before World Cup, isn't it?

Yes, correct.

Perfect. Thank you very much, gentlemen.

Thank you. The next question comes from Pablo Ricardo with Itao. Please go ahead.

Hi, good morning. I have two questions. The first one is on the roofs. I remember when your new partner came in, Vinci, with all these plans of adding roots, like local roots. Is that still on the table, or given all these macro concerns, that's on hold for now? I'm actually going to put some notes on that.

Can you start again, Pablo? Maybe the question is, use your handset, please.

I don't know if you can hear me now.

Yeah, we can hear you. Yes, sir, please, go ahead.

So, my first question is on the new routes. I remember when Beach came in, there was, like, all these plans of adding new routes, like, local routes. Is that still on the table, or that's on hold for now?

In terms of new routes opened, it's... We have a constant dialogue with airlines. We are focusing both in building our international connectivity and the increase that you saw in the last few quarters, particularly from Monterey Airport, pointed towards that strategy of building good connectivity out of Monterey. But we also have two strong players in the local markets. And therefore, we also focus on building greater regional connectivity.

Okay, thanks.

Thank you. The next question comes from the line of Jay Singh with Citibank. Please go ahead.

Thanks for taking my questions. Jay dialing on for Stephen Trent. First thing I want to ask is, do you see any regulators pushing to adjust the TUA at Mexico City import? And to the extent that you could talk about it, maybe could this have any tariff implications for OMA?

Sorry, the question again, the regulator pushing TUA again?

To adjust the airport use fees at Mexico City airport?

Well, the tour for Mexico City Airport is $13, and it increases by US CPI inflation. We have not heard that that process or mechanics of adjustment is going to change. So I believe that's adjusted at the beginning of every year. So probably the adjustment already took place in January, and we wouldn't expect an increase to us in the Mexico City Airport for the rest of the year.

Okay, got it. And my second question is, how much do you interact with Vinci on strategic matters, such as the MDP or any potential foreign investments?

We have a very close communication with them. They're involved in the MDP, of course. In non-air, they have been very active in CapEx execution as well. So it's a very close communication with them.

Got it. Thanks so much, gentlemen.

Thank you. As there are no further questions, I would now like to hand the conference over to Ricardo Duenas, CEO for Closing Comments.

We would like to thank everyone for participating in today's call. We appreciate your insightful questions, engagement, and continued support. Rufo, Emmanuel, and I are always available should you have any further questions or require additional information. Thank you once again, and have a great day.

Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.