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

Good day, everyone. You're on hold for today's GAAP conference call and will be starting shortly. Please stand by as we continue admitting additional participants. Thank you. Thank you. Good day, everyone, and welcome to GAP's conference call. At this time, all lines have been placed on mute to prevent any background noise. After the presentation, we will open the floor for questions, and at that time, instructions will be given if you would like to ask a question. Now it's my pleasure to turn the call over to GAAP's investor relations team. Please go ahead.

Thank you and welcome to GAAP's second quarter 2025 conference call. Prior to introducing GAAP's management team, I would like to take a few moments to read the forward-looking statements as described in the financial disclosure statement. Please be advised that the information shared today may include forward-looking statements. These may not account for future economic circumstances industry conditions, the company's future performance, or financial results. As such, any information discussed is based on several assumptions and factors that could change causing actual results to materially differ from the current expectations. For a complete note on forward-looking statements, please refer to the quarterly report. Thank you so much for your attention. I'd like to present our speakers today, Mr. Raul Revuelta, Chief Executive Officer, and Mr. Saúl Villarreal, Chief Financial Officer. At this time, I will turn the call over to Minister Taweta for his opening remarks. Please begin.

Good morning, everyone, and thank you for joining us today. I am pleased to be able to share with you GAAP's key operational and financial highlights for the second quarter of this year. Overall, it was a solid quarter marked by a continued growth in revenue, EBITDA, and net income. This was achieved despite ongoing headwinds due to the draft economics issue and FX volatility. Let me begin with a discussion of total positive traffic. We reached 15.8 million, representing a 4.1% increase if we compare it to the same quarter of 2024. It is also important to mention that eight new routes were added to this quarter, seven domestic and one international, which brings us to 21 total new routes so far this year. I should mention that we are still expecting to announce additional routes and frequencies during the second half of 2025. In this regard, we have already announced additional frequencies and new international routes starting November to Canada, including services from Guadalajara to Montreal, Toronto, and Calgary, from Puerto Vallarta to Toronto, Ottawa, and Hamilton. and from Montego Bay to Halifax and Ottawa. Canada continues to be an increasingly relevant market to leisure and VFR, especially during the winter season. These new routes will not only expand our network, but also enhance our ability to capture seasonal demand and strengthen our position in key international markets. That said, market conditions change rapidly as you know, would make us cautious when looking ahead at the upcoming traffic trends. Thus, we will closely watch any changes as they occur and make adjustments as needed. Mainly, our concerns include the stricter U.S. migration and enforcement policies under the current administration, which tends to discourage travel among the BFR international passenger space. By our estimates, The segment represents approximately 38% of GAP's international traffic. As a result, what we see is that a portion of these travelers may opt not to travel outside the U.S. in order to avoid any potential compensation with their immigration status. We believe this could impact international traffic, specifically in the U.S.-Mexico routes. But overall, we expect to maintain our initial annual guidance Guidance has previously been announced. Having said that, revenues generation through Africa 12 grew by 30.6% year-over-year, reaching 8.2 billion pesos, driven by a 26.4% increase in aeronautical revenues and 41.8% increase in aeronautical revenues. Excluding the acquisition of the cargo facility, it represents a solid 14% increase. This strong top-line performance was mainly supported by the implementation of tariffs that took effect in March 2025. The continued pressure depreciation, which averaged around 13.6% versus the second quarter of 2014, as well as a 41% of total passenger traffic increase across our 14 airports. On the non-aeronautical side, commercial performance was solid. Revenues from business lines operated directly by GAP increased by 113%, driven by the consolidation of the cargo and bonded warehouse business. Third-party operated business also grew by 10.7%, with significant contribution from food and beverage retail, duty-free, ground transportation, and timeshares. EBITDA increases by 31.1%, reaching 5.5 billion pesos, with an EBITDA margin of 67.1%, excluding IFRIC costs. As we discussed in previous quarters, the margin reflects the operating cost integration of the new business, such as bounded warehouse business and the hotel, which while contributing positively in absolute terms, have lower individual margins. The cost increase during the quarter the impact of higher operational expenses. Additionally, maintenance expenses increased by 57.3 percent related to the airfield improvements, the opening of new operational areas, as well as the operation of the jet bridges and the air buses, as tasks that previously were managed by third parties must now be operated directly by GAP due to the new regulations. Despite the higher pressure on the cost of services, our focus remained on controlling costs while at the same time ensuring that service quality across our airports remains top-rate. Operating income increased by 30.4% and net income by 17.9%, reflecting GAAP's solid underlying fundamentals. Turning to our financial position, as of June 30, we held by 9.7 billion pesos in cash and cash equivalents. During the quarter, we paid the 2.5 billion pesos CAHPS 21 bond, the first tranche of dividends approved in the last shareholder's meeting, and additionally, we secured a 3.4 billion pesos credit facility from Banamex. These funds were used to concentrate short-term debt with Banamex and Berubea on a five-year loan. We continue to actively manage liabilities and maintain a healthy balance sheet with a net debt evident ratio of 1.8 times. Let me now touch briefly on CAPEX. During the first half of 2025, GAAP executed capital investments of about 12.8 billion pesos in the line with our annual plans of 13.3 billion. This quarter, the investments were mainly focused on the international of key projects, with early-stage construction activities already underway. This includes works on both airsides, infrastructure, and commercial areas. Looking ahead, we remain cautiously optimistic, while pace of volatility and U.S. macroeconomics conditions may impact discretionary travel. We are confident that our diversified airport portfolio and resilient domestic markets position as well to finish the year strong. I would like to mention that at the shareholders meeting held last April, a dividend of 16.84 pesos per share was approved for payment throughout 2025. The first tranche was already distributed in May. with a remanded schedule for the second half of the year, reinforcing our commitment to delivering value to shareholders while supporting growth through our disciplined investments. We are focused on continuing to execute our investment plan while prudently navigating traffic and maintaining the operational and financial excellence that we are known for. We are confident that our diversified revenue base and solid financial position will support the creation of long-term value shareholders moving forward. Before concluding, I wish to mention that, as we informed during the previous conference call, we continue to pursue strategic expansion opportunities. As such, the outcome of the TORS and CACOS tender process was not being announced, and we are waiting on that. We also continue to evaluate our participation in the potential acquisition of CCR Air Force assets. Thank you again for your time. Operator, please open the line for questions.

At this time, we'll open the question and answer session. If you'd like to ask a question, please press star 1 on your phone now, and you'll be placed into the queue in the order received. You may remove yourself from the queue at any time by pressing pound 1. Again, to ask a question, press star 1. And we'll pause for a moment. Our first question comes from Steven Trent from Citigroup. Please go ahead.

Good morning, Raul. Good morning, Saul. And thanks for taking my question. Appreciate the color on the potential intergranting opportunities with Turks and Caicos and CCR. You know, when you look at the broader environment, Is there a lot else out there? You know, I recall Barbados was pushing, doing something that seems to have stopped. Or do you see these opportunities as, you know, relatively rare in terms of what else you might be able to buy? Thank you.

Thank you, Stephen. I mean, their process, the ones that we are pursuing in some way, are always the ones that have this potential future growth in passengers, but also, let me say, the correct level of possible profitability on the asset. In that way, I would say that there's, in all the Latin America and the Caribbean, there will be some different opportunities But not necessarily all of these opportunities will have the correct return that we are looking for. I will close saying that the correct assets would be, in some way, not a lot as we see in the market. In other words, today we are analyzing some of the rare assets that in some way has the correct return for or could have the correct return for GATT.

Great stuff. That's very helpful Raul. Appreciate that. Just one quick follow-up question and apologies if I missed it. I recall that there was some opportunity for you to do something with a hotel in the Guadalajara Airport. And if you could just refresh my memory where things stand with that potential. Thanks.

Thank you, Steven. I mean, the hotel in Guadalajara is doing pretty good. I mean, we have our first year of operation on the first week of April. Let me say that we are achieving a really interesting level of tariffs in one hand in average around the 2,500 pesos in average. And also, we are getting the occupancy rate around 80%. So for our first year, I will say that it's a really great beginning of operation of our first hotel.

Great color. Thank you again, Raul.

Our next question comes from Pablo Montivais of Barclays.

Hi, Raul, Saúl, Ale. Thanks for taking my question. My first one is about the tariffs. As of now, how much of the authorized tariff increase have you already incorporated? And what should we expect in terms of further adjustments going forward? Thank you.

Pablo, could you repeat it? I mean, we have a loss of communication for a second.

Yes. I was referring to the tariffs. As of now, how much of the authorized tariff increase have you already incorporated? And what should we expect in terms of further adjustments going forward of the tariff?

Hi, Pablo. This is Saul. Well, as we mentioned in the previous conference calls, we are seeing how is the market trend, and we will try to make it in different stages. The first one was already implemented in last March. We are expecting to have in January 26. We are analyzing if it's possible to have another one during 2025. That is complicated, say, now, and it's complicated to see because the decreasing in train traffic, and we are waiting to see what is that, that train, the train considering the aggression action from US government and could imply a little decrease in terms of VFR market to our airport. So we will analyze it, but what is pretty sure to have a second adjustment at the beginning of 26. And just for... Sorry. Yeah, I mean, the main idea would be that, I mean, trying to close as close as possible to 90% of fulfillment of this year. And for sure, in the coming year, we are trying to do an important adjustment. Just for the reminder of everybody, it is important to mention that fixed rate on the possible application of the PESO in some way and pressure the fulfillment of the maximum target. So that is another variable to review really, really closer in the coming months.

Of course, and kind of a follow-up to this, have you seen this particular negotiation airlines being much more vocal or pushing back harder in terms of tariff increase or has been business as usual?

I would say that the normal is nothing different, I would say, on the market. It's not only of Mexico, it's a national, it's an international, I would say, trend that always in some way the airlines would be more vocal about any changes on the tariff of an airport. But I'm seeing, Pablo, that still in the same way that in the past, I'm not seeing any, I would say, change on how vocal are the airlines about the possible change on tariff. Perfect. Thank you.

Our next question comes from Fernanda Recchia from BTG.

Hey, Raul, Saúl, Ale, thank you for taking my question. Two here from our side as well. The first, just wanted to dive deeper on the traffic trend. Yesterday, Volaris mentioned stabilization in the softness of demand in the cross-border region by mid Q2. Just wondering if you have seen the same trend and if we should anticipate and improve it second half of this year. And second, I just wanted to dive deeper on the inorganic growth that you mentioned. If you could share with us any timeline for the answers from Turks and Caicos and the CCR process. And also, I wanted to understand if you have appetite for the whole portfolio of CCR or just the international airport. Thank you.

Thank you, Fernanda. In terms of the traffic trends, yeah, we are seeing that after some changes on migration policies under the Trump administration, we saw some decrease in number of passengers in BFR routes that could be some of Guadalajara, Los Angeles, Moreno, Los Angeles, Moreno, Oakland, the most, I would say, biggest BFR routes. Saying that, I think that day by day, it's more clear for our passengers and for the BFR market, which would be the possible policies, and they are, I think, could begin to feel more, I mean, comfortable to fly on the coming months as soon as they know that clear rules about the coming back to home, that the green cards are working, as always, for coming back. that they have not seen cancellation of green cards on the border and this kind of thing. So I would say that in the same way that Polaris mentioned in their conference call that we expect that some of the passengers that in some way change their plans for flying to Mexico because all the changes of migration policies For today, they have more clear information, and they will finally fly on the coming months. Again, it's something really changing day by day, so that is important to have in mind. The other part I would say that still be the elephant in the room is that We continue to not have complete information about the fleet or the grounder fleet of Vivalo and Silo Volaris, mainly, due to the Pratt and Grigni ninjas. I will say that one of the key factors for understanding the trend in the coming months and the coming years will be when all these planes will come back to flight again. That will be an important part to understand on coming months. In terms of the inorganic growth, we are expecting and continue expecting the annual for Turks and Caicos, and we are expecting that in some moment during this year, we're going to have the final decision for that government. And for the case of CCR, We are still on the analysis. I mean, for the moment, the way that the company has released the opportunity is for all the portfolio, but we are analyzing asset by asset, and as soon as we are ready to make a formal position or a possible bid, I mean, all the markets will know. But I would say that we are analyzing all the different assets that are in the portfolio of CCR.

Okay, thank you very much.

Our next question comes from Guillerme Mendez of JPMorgan.

Hey, good morning, Raul, Saul. Thanks for taking my question. The first one's a follow-up on the Motiva slash CCR's portfolio. You think that assuming that you buy the whole portfolio that would require some kind of new equity injection or you'd be comfortable to increase your leverage for a period of time. And if that's the case, if dividends could be impacted somehow. And the second point, it's a question related to what Volaris mentioned yesterday on the conference call about unbundling the airport fees. Our understanding is that there's no impact to GAPS or any of the airport operators, but just wanted to confirm this understanding. Thank you.

Thank you, Guilherme. In terms of the CCR portfolio, I mean, we're still on the analysis, but even with that, I would say that we have a really healthy balance sheet, and the numbers that we are working with about this potential transaction would not include injection of capital. We think that we have enough space on our balance sheet, if that is the case, under the number that we are thinking for this possible asset. So in general terms, we are not thinking on any kind of injection of capital for this specific transaction. In terms of the separation of the TUA for, I mean, it's something that, for instance, have implemented more than four years ago, and even have implemented for some time ago also. I mean, so it's just another flexible way for our passengers to acquire a ticket for flying. So we are not seeing any, I would say, big difference trend on that, because it has been on the market for the last years. So we really don't see any kind of potential change on the trend of traffic, because this possible change on Bonari is going to save the tickets.

That's very clear. Thank you, Raul.

Next, we have Jens Spies of Morgan Stanley.

Hello. Yes, thank you, Raoul. So I have basically two follow-ups on answers you already gave. One is on the question that Pablo did on the maximum tariff. Based on our calculations, we get that you could increase tariffs by around 15% to 20%. Does that number make sense to you? Just see if we are in the ballpark. And the second one is on BFR demand. Obviously, the situation remains quite fluid and uncertain, I guess. So first of all, we're seeing quite strong capacity growth in the fourth quarter for you. So almost 10% of seed capacity being allocated according to schedules. That's quite strong. So are you seeing the same? And is here like the key variable maybe the load factors of the airlines? I don't know. What are your thoughts on like the fourth quarter and how much capacity is being allocated to your airports? Thank you. In Mexico, by the way.

Thank you, James. In terms of the maximum tariff, we need to perfectly understand in the coming months how going to be the forecasting of the effects of the dollar and also the inflation on the product price index for earning the final number for how it could be the increase on tariff for the coming year. I would say that in some of our airports, remember that the maximum tariff is a tariff independent for each one of the airports. I would say that for some of our airports, we will try to achieve a double-digit increase on passenger's fee. From some other of our airports, it will be just inflation. but it will depend on the airport cost. I will say that in general terms, that will be the answer. In terms of the demand, yes, when we see OEG and all the asking of a slot for the last quarter, we are seeing a double-digit increase in terms of capacity for airlines in the Mexico airports. It's great, and we are really optimistic, but the thing is to really follow the low factors of the airlines for those moments. I would say that it will depend on how the Mexican economy is doing at the end of the day, and also if there are any kind of changes on policies on migration from the U.S. that in some way could affect the VFR market. But in general terms, I would say that we continue to be optimistic about the last quarter of the year, seeing the additional capacity that different airlines are bringing to our airports, for sure in the domestic market, but also related with the leisure market and other markets that in the past have not been I mean, completely exploded in our airports. That could be the additional seats from Canadian markets that we already talked, for Vallarta, for Motivo Bay, and for Guadalajara, but also other lines that are beginning to develop for the first time as, for instance, the service of COPA from Panama to Los Cabos that is completely A new market that could be in some way that we want to see in the coming years, but I would say that it's a great news for Los Cabos that have the opportunity that bringing all these beyond passengers, beyond the hubs of Panama and also South America coming to Los Cabos. we are still optimistic about the last quarter and the next half a year of this year.

All right, perfect. Yeah, that's very clear. And just, if I may, one quick follow-up on the first question. As of the second quarter, are you at around 85% of the maximum tariff that you're allowed to charge, or Does that make sense for you, that number, 85?

Depends for sure on all the needs of the airport. But I mean, would you see it as a general number would be correct. Just remember that on the first six months of the year, January and February, we have zero increase sometimes. So the next six months is going to be a little bit different.

Got it, got it. All right, perfect. Thank you, Raúl.

Next we have Pablo Ricalde of ITAU.

Hi, good morning, Gap. This question is more maybe for Saúl because we have seen a huge increase in depreciation in the past couple of years. So I don't know how this affects your dividend policy or your needs of leverage to fund your CapEx program. That's my first question. And the other one, it's on the Madrid route. We have been rumored that Iberia is planning to open a Guadalajara-Madrid route. I don't know if you can confirm that.

Hi, Pablo. It's correct. The recession is increasing due to the capitalization of the assets. But also, we have to consider the acquisition of the cargo-bonded facility. That is included in the full half of that this year. That's why the decrease also into the depreciation and amortization.

But that should change how you fund your CAPEX program, or we should continue to expect that most of the CAPEX program will be funded with that?

We will continue the same.

Okay, perfect.

And related of the with Iberia. A couple of weeks ago, Iberia announced the beginning of several routes in Latin America and, for the case of Mexico, in Monterey related with the operation of a new plane, the 321 Large, that could achieve Monterey and some other markets with more, I would say, smaller demand. In that way, also, they announced potential increase or potential opening of a route from Guadalajara to Madrid. Today, this has not been concluded, the negotiation, or, I would say, announced by Iberia. But in some moment, the same moment that they announced the Monterrey to Madrid route, they announced also the potential route for Guadalajara. But for the moment, it has not been, I would say, outreacted. Yeah. Okay.

Perfect. Thanks, Raul.

Thank you.

Next, we have Jorge Vargas of GBM.

Hi, good morning. Thank you for taking my questions. With growing capex, higher concession fees, and a larger debt balance, how are you thinking about sustainability of distributions in the medium term? Should we expect a more cautious dividend policy? And my second question is, traffic at Montego Bay has continued to soften. Now that you have renegotiated that concession, are there any initiatives in place to reactivate growth and strengthen its conductivity? Thank you.

Thank Jorge. This is Jorge. Well, the effect of the concession fee affects directly to our EBITDA, and considering the cap is that we are making also the base of our tariff increase, tariff increase related to our revenue increase. So at the end, we believe that our distributions will continue in the same. The effect, obviously, of the concession fee over the EBITDA is affecting directly, but is upset by the acquisition of the new carrier facility. So at the end, I would say that in general terms, the EBITDA margin will be around 66, 67, 7%. So in some way, we are having a little effect on that EBITDA level. In terms of the traffic in MBJ, we are having some effects due to the... Raul, you want to... Yeah, I mean, talking about in the last year, we saw, I mean, It was a trend not only in Montego Bay, but I will say that mainly in all the Caribbean. We saw a decrease in number of seats mainly from American Airlines, and it was mainly from New York and Miami. If you remember, just after the COVID emergency ends, the biggest airlines in the U.S., the biggest U.S. airlines, just push a huge amount of additional things on Leisure, generated a really big increase on traffic in mainly all the Caribbean. What we saw in the last year is, I would say, a reaccommodation on some of these additional offers that they push into the Leisure market. But we are seeing and we are optimistic on what we're going to see for the case of MDJ in the coming years. First of all, different announcement of additional hotel rooms in the area is a really important effect coming on coming years, but also the Tourist Minister and the Tourist Board of Jamaica is doing a really important job trying to bring back some of the different and attacking some of the different markets. So in general terms, what we are seeing in the coming years of MEG is after all these that we saw in the last year, we think that we just touched The base and the coming months and years will be of increasing number of seats. And on the long term, we're going to see also an important increase of number of rooms that will bring additional tourists to the island. So we are really optimistic on the long term for Jamaica.

Thank you.

As a reminder, everyone, you may ask questions either through the webcast or the phone lines. To ask a question on the phone, press star one. And our next question comes from Abraham Fuentes of Banco Santander.

Hello, good morning. Two questions from the side. The first one, could you give us more color about the non-agronomic converting for passenger going forward? How much space is there to continue growing, or when we can expect normalization? And the second question is about the U.S. Department of Transportation cleaning that Mexico has engaged in anti-competitive behavior. Is there any opportunity or risk? Are you seeing ? Thanks.

I mean, in terms of commercial revenue for passengers, for sure, we have a big jump due to the acquisition of JWTC, the cargo facility. But also, we have experienced an important increase on cargo passenger just as we open new infrastructure. For instance, the expansion of Terminal 1 in Guadalajara, the expansion of Tijuana, the expansion of Los Cabos. So the next, I would say, jump that we're going to see on passengers per traffic It will depend on the opening of new additional areas that is related with the new master plan. Let me put it this way. For instance, in the new master plan, we will have a complete brand new terminal two for Guadalajara that will be operating for the end of 28. At that moment, we're going to see an important jump on revenue per pass, commercial revenue per pass in that area. For example, we are expecting on the first quarter of the 2027, the opening of the new terminal building of Puerto Vallarta Airport, that also will bring a great potential for an increase on commercial revenues per passenger. In that way, the new additional space that we could generate from the new terminals and expansion that will come on this new master plan will be completely aligned with the next jumps on the revenue, commercial revenue per passenger. In terms of the Mexico-U.S. new aviation policies, I mean, hard to see on this between all the different movements that is happening on the bilateral relationship with the U.S. On my point of view, it's not only what could happen on the aviation policy. It's a more wider discussion about the bilateral relationship between both countries. But in terms of what was announced, it will depend how many – how much – how much will still place the need of an additional authorization for new slots in the US for the Mexican carriers. Because for the moment, I mean, we just hear it. We have a big part of the fleet of some of the Mexican airlines rounded for the problem of the P&W engine. So on the really short term, I have not foreseen any kind of impact. for this change on the aviation policy from the US to Mexico. But in the long term, it will depend how if this authorization continues and how hard or difficult will be for the Mexican carriers to opening a new route in the US. And for the moment, I really I would be more concerned about a more broad bilateral relationship between countries rather than just the US aviation policy.

Okay, perfect. Very clear. Thanks.

Next we have Alain Macias, the Bank of America.

Hi. Good morning and thank you for the call. Just two questions or clarifications. I guess the exposure of GAP airports to the US, Mexican Airlines, just thinking about the possible restrictions from the US Department of Transportation, is that 38%? Is that the exposure? And also on your guidance, I guess you are maintaining your guidance, right? Thank you.

Yeah, I mean, we are seeing a possible impact on around 38%, but it's more related to the VFR market because the leisure market is, I mean, completely operated for U.S. and Canadian carriers, so it will be not impacted on the leisure market, but for sure it could be an impact on VFR. But also it's important to remember that, for instance, a couple of years ago when the U.S. government the category for Mexico, for the Mexican Authority in Aviation, we saw a really important increase in traffic in Tijuana for the passengers, the VFR passengers, walking through the CDX. Because at the end of the day, all the Southern California catchment area that is covered by the Tijuana Airport through the CDX, could be connected even without the authorization of any additional services to the U.S. for a Mexican carrier. They could put their fleets or their capacity for all the Southern California market through the Tijuana Airport. And that happened a couple of years ago when the decrease on the category If you remember that moment, for instance, Tijuana Airport used to be even bigger than Monterey Airport for a couple of years and was related for that effect. In the same way, again, our portfolio in some manner could help us for any potential slowdown of additional routes or services from Mexican carriers in the U.S.

We have no further questions at this time. Raúl and Saúl, back over to you for any additional or closing comments.

Thank you once again for joining us today for our Second Quiet Results Conference. Please contact our Investor Relations team with any additional questions you may have. Have a great day, and thank you for your attention.

That concludes our meeting today. You may now disconnect.