Grupo Aeroportuario Del Pacifico, S.A. B. de C.V.

Good morning, and welcome to GAP's conference call. The lines have been placed on mute to prevent any background noise. After the speaker's presentation, we will open the floor for questions, and at that time, instructions will be given if you would like to ask a question. It is now my pleasure to turn the call over to GAP's investor relations team. Please go ahead.

Thank you, and welcome to the Lupo a lo Portuario del Pacifico's first quarter 2023 conference call. Presenting from the company today, we welcome Mr. Raul Revuelta, GAP's Chief Executive Officer, and Mr. Saúl Villarreal, Chief Financial Officer. Please be advised that forward-looking statements may be made during this conference call. These do not account for future economic circumstances, industry conditions, the company's future performance, or financial results. As such, Statements made are 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 that was issued previously. At this point, I would like to turn the call over to Mr. Pobleta for his opening remarks. Please go ahead, sir.

Thank you, Maria. Hello, everyone, and welcome. This year is a factor of a strong and we deliver a great performance across key operational and financial metrics. The number of passengers this quarter was almost 16 million passengers, an increase of nearly 24% compared to 2022. Supporting this passenger traffic growth was the solid demand experienced at the Montego Bay, Guadalajara, and Puerto Vallarta airports, as well as the greater number of routes and frequencies across our network. Note that, for a comparison purpose, when we look at January and February of 2022, the impact of the Omicron variant did affect passenger traffic, which was not the case in 2023. As a result, aeronautical revenues increased by 31%, driven by a passenger traffic recovery throughout GAPS network, as well as the maximum tariff increases, which fulfilled almost 99% of the maximum tariff in our Mexican airports. It is important to note that the benefit of the American airport consolidation is not fully reflected here because of the fact of operations of Mexican pesos of 9% over the U.S. dollar, which impact the increase in revenues. The American airport represented 15% total increase in aeronautical revenues. Non-aeronautical revenues rose by 26%. Most of the increase came from futon barriers, retail operations, leasing of space, and As we have mentioned in the previous calls, we renegotiated the terms of several contracts, which resulted in financial conditions that were more positive for the company. The only business line that continues to lag is advertising, with a minus 24% versus 2019. However, compared to 2022, it increased 74%. There are several strategies that we are working on to reach and surpass 2019 revenue including the further development of digital advertising, using the actual airport spaces to enhance brand experience, as well as the use of marketing showrooms. As we mentioned before, the appreciation of Mexico pesos is affecting the non-analytical revenues in the contracts that are denominated in U.S. dollars. EBITDA reached 4.7 billion pesos for the quarry, with an EBITDA margin of around 72%. This was the result of the outstanding passenger traffic recovery, higher tariffs, and solid commercial wares that were partially offset by the 28% increase in cost of service. We have worked hard to maintain our cost control policy, but we are facing the changes in the labor load that not only affects the overall cost for salaries, but also the contracts that that involves personnel, such as janitorial, security, and maintenance. Also, we expect some higher costs further down the line in accordance with the air-side thermal expansion in addition to the inflationary effects. In financial performance, cash and key cash equivalents increased by almost 12%, reaching a total of 18.9 billion pesos. The debt figure reached 40.4 billion pesos in the first quarter due to the drawdown of 6.4 billion pesos. This included a credit facility from Citi Banamex of one billion as well as the issuance of another two tranches of label debt bonds in the Mexican market for a total of 5.4 billion pesos. The proceeds will be allocated toward mandatory capex for this year and a portion will be used to pay the bond during June of 6,200 million pesos. These were our third and fourth labeled bonds that are sustainability-linked bonds, evidence of our commitment to sustainability and specifically directed toward reducing carbon emissions. We look forward to further updating this market on our ESG initiatives and continue integrating this philosophy into our operation and infrastructure projects. In accordance with these figures, We continue to maintain healthy leverage level, reaching a net debt-to-earns ratio of 1.3 times for the 12 months, thus complying with all our debt covenants. CABEX continues to be carried out in accordance with the community and master development progress, as well as the commercial investments. The deployment has been and will be our biggest challenge in the five-year period because of the size of the investment and cost increase due to a higher inflation. We have made the highest investment for a single quarter since the beginning of our concession, reaching a total of 2.9 billion pesos. Moving on to another topic, I want to mention that our Ordinary and Extraordinary Shareholding meeting took place last week, where a dividend payment of 14.84 pesos per outstanding share was approved. At the meeting, the creation of a sustainability committee was also approved, which put us in the right track to fulfill our strategy, the Strategic Sustainability Plan 2030. Regarding the ratification or designation of the persons that will serve as independent members of the Company Board of Directors, designated by the Series B, as well as the designation of the independent member of the Nomination and Compensation Committee, Both points were withdrawn, as mentioned, shareholders meeting. In order to have a new ordinary shareholder meeting, that will be held on May 22. That was announced yesterday. Moving on, in the first quarter of 23, we discussed an initiative presented to the Mexican Congress to reform various federal laws enacted by the Mexican president. This rule provides, among others, additional capacity for the Mexican government to revoke concessions and permits. It also provides a mechanism to speed up private property expropriations by this state. It is unclear whether the Congress will pass this bill, and if it passes, the impact it could have on the Mexican economy and the company operations. This rule violates fundamental rights established in the Constitution, and international treaties, such as the right to equality, the warranty of no retroactivity of the law, and the freedom of trade. We will keep an eye on the bill and inform any relevant updates to our shareholders. To conclude, back in March we carried out a very successful GAP Day at the New York Stock Exchange. I want to give a special thanks to all the analysts and investors that attended. as well as to our team who put it together. It was a great opportunity for us to catch up with our colleagues, and we aim to do the next one at one of our airport locations. At this point, that is for my remarks. I will ask the operator to please open the floor for your questions.