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

Good day, ladies and gentlemen, and welcome to Assure's fourth quarter 2022 results conference call. My name's Colin, and I'll be your conference operator. At this time, I'd like to welcome all participants, or at this time, all participants are in listen-only mode. We'll conduct a question and answer session towards the end of today's conference. If you'd 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're using a speakerphone, please lift the handset for making a selection. As a reminder, today's call is being recorded. I would now like to turn the conference over to Mr. Adolfo Castro, the Chief Executive Officer. Please go ahead.

Thank you, Colin. And good morning, everyone. Before I begin discussing our results, let me remind you that certain statements made during this call 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. As usual, additional details about our quarterly results can be found in our press release. which was issued yesterday after markets closed, and is available in our website in the Best of Relations section. Following my presentation, it will be available for Q&A. Now onto the results. We closed the year with another strong quarter, reporting record high passenger traffic revenues and EVTA. We are pleased to continue seeking an uptick in passenger flying. travel demand remains strong with a record of 17.6 million passengers taking the skies and passing through our airports. An 80% year-on-year increase and nearly 26% higher when we compare with full quarter 2019. For the full year, a total 66.3 million passengers travel through our airports. Our three geographies contributed to this solid performance. Now taking a look at by country of operations compared against four quarter 2019. Colombia again posted the strongest recovery, maintaining a steady 37% increase in traffic with domestic travel expanding in the low 30s and international travel in the high 60s. On the cautious side, we do not expect this strong level to continue over the coming months, as VAT in Colombia was raised to 19 from 5% effective this year and may have an impact on traffic trends. Traffic in Mexico rose 26% during the quarter, driven by growth across all airports. International traffic increased in the high 20s, while growth in domestic lagged, slightly increasing in the mid-20s. This overall robust performance was driven by travel demand above 2019 across all the regions, with the exception of Canada, which remains at 77% of 2019 levels. Going forward, travel from Canada is likely to return to winter season levels during the first quarter of this year, while traffic from the United States and Europe is expected to continue boasting a steady growth. In turn, Domestic corporate travel is expected to continue lagging leisure travel. As anticipated in our prior call, traffic at Mérida Airport recovered this quarter, beating 2019 levels, while we continue to expect Veracruz, Minatitlan, and Villahermosa airports to fully recover this year. Lastly, in Puerto Rico, increased by a single digit. domestic travel was up over 10%, partially offset by nearly 1% decline in international travel. In sum, we forecast good traffic demand over the winter season, with recoveries expected in certain remaining regions, such as Canada, in the first quarter, helping to compensate for any possible slowdown caused by inflationary global environment. Now, turning to a review of a source income statement, As a reminder, all reference to revenues and costs exclude construction revenues. Starting with our top-line results, revenue were up 23% year-on-year to a record of 5.9 billion pesos and up nearly 54% when we compare to pre-pandemic levels of fall quarter 2019. This strong performance was driven by both aeronautical and non-aeronautical revenues across our three geographies. Mexico accounted 74% of total revenues, Puerto Rico 15%, and Colombia 11%. Commercial revenues maintained their solid trend, up 50% against Fogwater 2019, and in the mid-teens, year-on-year reflecting increases of 16% in Mexico, 14% in Colombia, and 7% in Puerto Rico. On a per-passenger basis, commercial revenues contracted by a low single digit normalizing to nearly 112 pesos, but above the 92 pesos posted in FOCWATER 2019. By region, commercial revenues per passenger were in the range of 137 to 147 pesos in Mexico and Puerto Rico, up 25% and 39% from FOCWATER 2019 levels. Of note, these figures include the effect of the strong Mexican peso. Our results in Colombia were impacted more by the currency depreciation declining 11% in Mexico peso terms. By contrast, commercial revenues per passenger increased 18% when measured in the local currency, driven by the opening of 38 commercial spaces over the past 12 months. The share of domestic travel over the total traffic remains steady at 65% when compared with fall quarter 2019. Moving down to the P&L, total operating expenses increase in the mid-teens, but below the 20% revenue growth in the quarter. Costs in Mexico were up slightly, but below revenue growth, mainly driven by higher cost of energy, personal cost, and as well increasing dental assistance and concessions fee in line with the higher EVDA. Puerto Rico cost declined by the mid-single digit as a reduction in the maintenance reserve and savings in water consumption more than offset higher cost of services. Costs in Colombia were up nearly 12% reflecting the sustained pickup in business activity, higher cost of energy, concession fees, and cost of services. However, this was below the 20% year-on-year increase in revenues. When compared to pre-pandemic level for quarter 2019 levels, costs under our control increased in the low 20s and significantly below the 60% increase in revenues, reflecting the efficiency measure implemented over the past few years. As a reminder, cost under our control refers to total cost minus construction depreciation and amortization, together with the technical and concession fees. We achieved another quarter of record high EBDA reaching 4.4 billion pesos, up 38% year-on-year, and 82% from 2019 levels. This also translated to higher margins with adjusted EBDA margin reaching 75%, improving six percentage points year-on-year, and over 11 percentage points when compared to pre-pandemic full quarter 2019 levels. Again, this quarter's solid passenger traffic growth, along with increased commercial revenues and operating leverage, more than offset higher concession fees. Importantly, we achieve high profitability across our three regions of operations. EVDA in Mexico increased by 30% year-on-year to $3.2 billion, Pesos, Colombia, we saw an EBDA up 25% to nearly 420 million pesos. In Puerto Rico, EBDA increased nearly 5% year-on-year on a comparable basis. Note, this excludes the recognition of a non-recurrent of a revenues of 300.4 million, this quarter from a judgment ruling in favor of Aerostar in connection with the right to charge a fee for each gallon of aviation fuel that was dispatched at the airport during 2013 to 21. By geography, adjusted DVDM margin in Mexico was relatively stable at nearly 75%. In turn, Colombia and Puerto Rico continued to deliver year-over-year margin improvements, both up two percentage points to 63% and over 53%, respectively. Compared to pre-pandemic levels for quarter 2019, the adjusted dividend margin increased nearly half a percentage point in Mexico and 19 percentage points in Colombia, and was stable in Puerto Rico when excluding the one-time event this quarter. In summary, we deliver another robust quarter with traffic and revenues at record highs, which together with operating leverage resulted in a 27% increase in net majority income to 2.6 billion pesos in the quarter, up from 2 billion in full quarter 21 and 1.3 billion in full quarter 2019. Looking at the balance sheet, we maintain a strong cash position and healthy debt profile. We ended the quarter with just over 13 billion pesos in cash and cash equivalent. Net debt to last 12 months in DA and interest coverage stood at healthy levels of 0.1 times and 12.6 times. Account receivables were up 35% when compared to prior year, reflecting the higher passenger traffic across our airports. together with an increase in Puerto Rico in connection with a non-recurring revenue recognition I mentioned earlier, which we expect to collect during the first half of 2023. Lastly, we remain capital investments on nearly 1.5 billion pesos during the quarter, the majority of which was allocated to Mexico, slightly over 14% to Puerto Rico, and nearly 10 million were invested in Colombia. During the full year, capital expenditures total 2.3 billion pesos. For 2023, we are planning CapEx program of almost 1.2 billion pesos with funds expended mainly in Mexico and Puerto Rico. Before we move to the Q&A portion of the call, some brief closing remarks. We deliver extraordinary 22 results including a record passenger traffic revenue and EVDA. These results underscore the higher consumer demand for travel and our ability to consistently deliver strong profitability while investing for the future. Our balance sheet remains strong. With the same time, we remain mindful of maintaining our financial flexibility. We look to 2023, many uncertainties, remain in the macroeconomic weather from economic policies, consumer demand, inflation, supply chain, war, and geopolitics. And while Canadian traffic still lags over other markets, we're cautiously optimistic that we will see a pickup in the winter traffic and being able to recuperate 2019 levels during the first quarter of 2023. Our solid results throughout the year are a great testament of the quality of our team and consistent execution of our strategy. As I mentioned earlier, we will continue to invest in the business to fuel and sustain growth. With the underlying strength of the core business, and we are confident we have positioned ourselves for sustained profitable growth, a strong cash flow generation, and value creation for our shareholders. Operator, please call the floor. open and close the call for questions.

Thank you. Again, to the audience, it is start, then one for questions. And again, please make sure your mute function is turned off or the headset is picked up before pressing the corresponding digits. Your first question comes from Juan Ponce from Bradesco BBI. Please go ahead.