Grupo Aeroportuario del Sureste, S. A. B. de C. V.

Good day, ladies and gentlemen, and welcome to ASUR's first quarter 2022 results conference call. My name is Orlando, and I will be your operator. At this time, all participants are in a listen-only mode. We will conduct a question and answer session towards the end of today's conference. If you would like to ask a question, please press star followed by one. If you want to withdraw your question at any time, please press star followed by two. If you are using a speakerphone, please lift the handset before making a selection. As a reminder, today's call is being recorded. Now I'd like to turn the call over to Mr. Adolfo Castro, Chief Executive Officer. Please go ahead, sir.

Thank you, Orlando. And good morning, everyone. I hope you enjoyed the recent holidays with your family and friends, and you're looking forward for more such occasions. Now the pandemic appears to be ending. Additional details about the quarterly result can be found in our press release, which was issued yesterday after market closed, and is available on our website in the investor relations section. Let me remind you that certain statements may use the code may constitute forward-looking statements, which are based on current management expectations and beliefs, and are subject to a number of risks and uncertainties that would cause active results to differ materially, including factors that may be beyond our company's control, including the impact from COVID-19. Starting with the annual Azure shareholders meeting, two dividends were approved last week, in addition to an ordinary cash dividend of $9.03 per share. We are also paying holders of Asus Series B and BB shares an external dividend of six pesos. Both dividends will be paid in a single installment on or after June the 1st this year. This represents 4.5 billion pesos payments. Before we move on a review on our results, let me also note that we recently published our 20F report and the 2021 21 Sustainability Report. Through the COVID-19 pandemic, we used the time as an opportunity to reflect and determine where we could best improve ASUS EHE performance for the benefit of the company and all of our shareholders. We decided that most significant group-level strategic objectives that should be implemented in the short and medium term as follows. Establish a board-level sustainability committee. Set new targets for emission reductions and energy efficiency, including the installation on both on-site and off-site solar panel generation. Supplement our water consumption with systems that capture and use rainwater. Promote greater diversity on our workforce and on the company's board. Ensure equal compensation between genders. It is important to note that all of these objectives were presented and approved by Azure's board. And to help ensure that incentives are aligned with the ESG goals and commitments, far to 15% of the annual performance bonus of the executive officers who have ESG responsibilities is based on them meeting their ESG targets. Our long-term objectives include achieving carbon neutrality by 2030 with 95% of energy source from clean, renewable sources. Notable improvements to ASUR's governance include the overboarding. These are just a few meaningful ESG improvements we are making. I invite you to read our sustainability report to learn about many others. Now, moving on to a review of our operational financial results together with some color on travel demand during the quarter. Starting with passenger traffic, total traffic was up over 70% year-on-year and surpassed first quarter 19 levels by nearly 9%, reaching close to 15 million passengers driven by clothes across the three geographies. While the Omicron variant mainly impacted traffic in Mexico and Puerto Rico and slowed the pace of recovery in January, we saw better performance starting in the second half of February. Again this quarter, Colombia posted the strongest recovery, exceeding first quarter 19 traffic by 30% with similar growth rates for domestic and international travel. Puerto Rico also performed well with traffic up nearly 4% against first quarter 19. mainly driven by a 7% increase in domestic traffic, while international traffic continued to improve gradually, reaching 78% of the first quarter 19 levels. Traffic in Mexico, first quarter 19, beating levels by slightly over 3%, driven by similar growth rates in both international traffic and domestic traffic. Domestic traffic at Cancun Airport increased nearly 10%, while international traffic was up middle single digits, supported by the harsh winter season in North America and continued recovery in the European passenger traffic, particularly in the second half of the quarter as concerns of Omicron subside. As anticipated, we're also seeing a recovery in European passengers, although somewhat damped by the Omicron variant. However, it remains to be seen how the war in Ukraine will impact Europe's economy and the rest of the world. Although the rate at which Mexico's economy recovers is unknown at this time, we expect domestic traffic to continue its gradual recovery. The lifting of other countries' travel restrictions and their own economies recover also expected to benefit our Mexican efforts. As noted in prior calls, business travel is expected to last the recovery in the future. Therefore, we expect traffic at our Merida, Veracruz, Minatitlan, and Villamosa airports, which were an average of 18% below 2019 traffic levels this quarter, to recover at a slower pace. In short, we remain cautiously optimistic about global travel demand, and if travel is not hindered by a fourth wave of or higher jet fuel prices or other forms of inflation, We expect total passenger traffic to reach 2019 levels by the second quarter this year. Looking at our balance sheet, we maintain a strong capital structure and a healthy debt maturity profile. We ended the quarter with cash and cash equivalents of 9.7 billion pesos, nearly 14% above December 21 levels. Mexico and Colombia contributed with $1.7 billion and $328 million in cash, while Puerto Rico reported an $824 million decline in its cash position. Net debt to last 12 months' EBITDA was 0.3 times at close of the quarter, with interest coverage at 9.2 times also, Only 3.4 of the principal debt payments are due later this year. Account receivables were up 22% year-on-year and increased over 100% in Mexico, reflects increased business traffic activity. And partially upset by declines of around 90% and 30% in Puerto Rico and Colombia. Moving now to the P&L, starting with our top line, Revenue sex construction increased 90% year-on-year, reaching 5.2 billion pesos in the first quarter, and we're up 31% when compared to first quarter 2019, driven by growth in aeronautical and non-aeronautical revenues. We saw improved performance across geographies, with Mexico accounting 71% of the total ex-construction revenues in the quarter, Puerto Rico 17%, and Colombia 12%. Commercial revenues increased 92% year-over-year, driven mainly by the 87% recovery in passenger traffic, with increases of 118 in Mexico, 53% in Puerto Rico, and nearly 82% in Colombia. Commercial revenues per passenger reached 121 pesos in the first quarter, above the 108 pesos reported in first quarter 21 and 105 in first quarter 19. By geography, commercial revenues were in the range of 146 to 149 pesos in Mexico and Puerto Rico and 41 pesos in Colombia. We also saw an improvement in traffic mixed with water, with a share of higher spending Europeans back to levels observed in 2019, and with a continued growth in the U.S. tourism. The share of domestic traffic returned to 2019 levels, but the major difference is that the number of Canadian travelers is still far below pre-pandemic levels. Operating expenses and ex-construction were up 30% year-over-year and just 5% higher when we compared with first quarter 2019 levels. This was significantly below of the 91% and 31% increase in revenues ex-construction when compared with first quarter 21 and first quarter 2019. In Mexico, ex-construction increased 37% year-over-year mainly due to the higher technical assistance and concession fees resulting from higher revenues and EVA, along with a higher cost of services. Higher cost of sales from directly operating stores are also contributing to the increasing cost, as many passengers are buying meals to go at their convenience stores instead of going to the restaurants. Compared to the first quarter of 19, operating costs and expenses and construction were up 26% with revenues and construction up 33%. In Puerto Rico, costs were up 21%. The court benefited from a 9.5 million pesos high reimbursement of expenses on the Coronavirus Response and Relief Supplement and Appropriation Act when compared to the recovery and expenses under the CARES Act in the same quarter last year. When compared to the first quarter of 2019, comparable costs were down 20%, while revenues increased 20%. Final expenses in Colombia increased 23% year-on-year, mainly driven by higher concession fees from higher travel activity. Compared to the first quarter of 2019, revenues were up 29%, while costs declined 9%, both ex-construction. With regards to profitability, consolidated EVDA was up 130% to 3.7 billion pesos, with increases across countries' operations. Mexico posted a 149 increase in EBDA, reaching 2.8 billion pesos, while EBDA increased 41% to 502 million pesos in Puerto Rico, and 239% to 373 million pesos in Colombia. Compared to the first quarter, 19, EVDA increased 38%, with increases of 38% in Mexico, 19% in Puerto Rico, and 95% in Colombia. Driven by passenger traffic growth, increased commercial revenue per passenger, higher tariffs, and operational leverage. Adjusted DVDM margin exit-free growth reached 71% this year out of the 59 posted in the first quarter 21 and the 68 achieved in the first quarter 19. By country of operations compared to the first quarter 19, adjusted DVDM margin expanded 119 basis points in Mexico to nearly 76%. and by 18 percentage points to 62% in Puerto Rico, while Colombia saw a 30 basis points contraction to slightly over 57%. In terms of capex, we invested a total of 316 million pesos in the quarter, mainly in Mexico, to a lesser extent in Puerto Rico and Colombia. Let me provide an update of the key projects. The expansion of the terminal building in Mérida remains on schedule with the third phase of the project that we expect to conclude by the year end. At Cancún Airport, we're working on the first phase of the terminal for expansion that is scheduled to be completed by the year end. This phase entails adding two boarding gates of the International Front. And finally, in Mexico, the terminal expansion at Tapachula should be completed during the second quarter. In Puerto Rico, we continue with major maintenance and repairs to the runways and taxiways and the remodeling of Terminal D. This concludes my remarks of the first quarter results. Orlando, please open the lines for questions.

Thank you. Again, to the audience, it is star, then one for questions. And again, please make sure your mute function is turned off or the handset is picked up before pressing the corresponding digits. All right. And we'll take our first question from Alan Macias with Bank of America. Please go ahead.