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

Good morning and welcome to GAP's fourth quarter 2024 conference call. All lines have been placed on mute to prevent any background noise. After the presentation, we will open the floor for questions. I am pleased to turn the call over to GAP's investor relations team. Please go ahead.

Thank you and welcome to Grupo Reportario del Pacifico's fourth quarter 2024 conference call. Presenting from the company today, we have Mr. Raul Revuelta, GAPS Chief Executive Officer, and Mr. Saul 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, 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. At this time, I'd like to turn the call back over to Mr. Revuelto for his opening remarks. Please begin, sir.

Good morning, everyone, and thank you for joining us for our fourth quarter and full year 2024 earnings conference. It is a pleasure to be with you here today to share GAAP's financial and operational development. Let me begin with the financial highlights. This quarter has been a period of recovery. After various industry challenges, both revenues and profitability have remained positive. Total revenues without I3 plots increased by 16.4% compared to the same quarter of the last year. The 32.7 percent increase in non-aeronautical revenue was the main driver for the growth we experienced. Overall, passenger traffic grew by 1.4 percent year-over-year, driven by the opening of 22 international and 11 domestic routes, in addition to more capacity from Volaris and VivaFleet. The non-aeronautical revenue segment rose by 32.7 percent being the top contributor to our revenue growth. Here we saw a remarkable improvement to the consolidation of the cargo facility businesses, better performance on VIP lounges, and the operation of the hotel. In addition to the good performance in the retail, duty-free, and food and beverage divisions, the new businesses have contributed significantly to overall revenue diversification which make it one of our main strategic growth pillars going forward. From an expenses perspective, service costs have increased by 29%, largely driven by consolidation of the cargo facilities and the cost of operation of the hotel, besides additional headcount for airport operations and salary increases in Mexico, derived from several changes in labor law. On the other hand, New operational areas have implied higher consumptions of energy, security, and cleaning services, which are unavoidable despite the efforts for management to control costs. Evidence increases by 14.9% year-over-year, reaching 4.8 billion pesos, with an evident margin of 66.9%, excluding the effect of the IFRIC Trust. Slightly below, our EBITDA margin in fall quarter 2023, mainly due to the increase in the concession fee in our Mexican airports, which changes from 5% to 9% in 2024. Moving to a macroeconomic perspective, the 14.1% peso to dollar depreciation has played a dual role. While it has caused high revenues generated in U.S. dollars, it has also led to higher financial costs. particularly in terms of debt services. Moreover, inflation in Mexico and U.S. CPI decreased in 2024, increasing pressure to the future interest rates for loans denominated in pesos and U.S. dollars. We continue to carefully track and manage these impacts to ensure continued financial stability. If we look at full-year financial results, 2024 was a year of strategic growth, and one where GAAP demonstrated resilience once again. There were industry challenges, such as the grounding of Volais and VivaFlip, and increase of the concession fee. However, revenue and profitability remained in a positive trend. As a result, full-year results were in line with our expectations. Total revenue rose by 5.3%. This growth was primarily driven by the 24.4% decrease in commercial revenues, which more than offset the slight 0.8% decrease in analytical revenues. The significant growth was mainly due to the business line operated directly by us, which saw a 58.4% increase. It is essential to note that in 2024, we commenced operations on mixed-use buildings and acquired GWTC, both located in Guadalajara. Regarding the business lines operated by third parties, it increased by 10.5%, mainly due to the food and beverage, car rentals, retail, and leasing office space. Cost of service increased by 20.2%, mainly driven by increasing headcounts and higher salaries. security and insurance, maintenance expenses, and utility costs. The consolidation of the cargo facilities and the operation of the hotel contributed to a higher cost of operations, and the additional square meters of the terminal buildings resulted from all the expansions, as well as added personnel and minimum wage increases. EBITDA grew by 2.4%, reaching roughly 18.1 billion pesos, while EBITDA margin, excluding AFRIC 12, reached 67.6 percent. Gas overall financial position remaining robust. As of December 31, 2024, we reported total asset increase of 14.2 billion pesos, an increase primarily driven by the improvements to concession assets, a stronger gas position, and strategic investment. Total liabilities increased by 10.5 billion pesos, mainly due to the issuance of long-term debt securities and bank loans, thus reinforcing our capital structure for future growth. Moving on to the capex, we deployed 7.9 billion pesos during the year, thereby compiling the committed investment for 2020-2024 period in addition to the commercial product. In the next five years, we are planning unprecedented growth in our infrastructure, and it's reflected in many of our reports. Just a few weeks ago, GATT presented its 2025-2029 Master Development Program for Guadalajara and Puerto Vallarta with a large event in Jalisco. The event, titled Transforming for You, featured the upcoming investment plan for our major airports in Jalisco. We invite you to take a look at our social media accounts where we illustrate our commitment to regional development and our strategic focus on infrastructure enhancement to meet the growing demand in the market. Most importantly, this investment reflects our confidence in the long-term growth potential of our main markets. The main projects include the second terminal of the airport in Guadalajara, which will add around 7 to 3 percent capacity, as well as new vehicle access roads, which will make it easier for traffic to flow to this airport. In Puerto Vallarta, we will conclude the second term of increasing capacity by 134 percent. Please note that the investment amounts disclosed at the end are the upper-asset figures by our regulator, but included annual projected inflation at a rate of 4 percent using the construction price index. Looking ahead, we are pleased to announce our growth guidance for the full year of 2025 compared to 2024, reflecting a strategic development across our operations. In terms of passenger traffic, we expect to grow from 4 to 6 percent, driven by the consolidation of existing routes, increasing flight frequencies and additional seat capacity. Regarding aeronautical revenues, we expect to grow for 23 percent to 25 percent, supported by the implementation of new tariffs approved by the Authority for our airports in Mexico, alongside positive traffic performance, inflation adjustments, and expected exchange rates. We anticipate an increase of 24 to 26 percent on new aeronautical revenues Due to the improved contract conditions, the full year operations of our cargo facility, the hotel, and corporate office, as well as the development of the additional business lands managed directly by the company. In terms of the margin, we expect it to be 66 plus minus 1%. This is mainly due to the change in the concession fee, which has increased from 5% to 9% for our percentage. To finalize, CAPEX will be around $13 billion. This includes $8.8 billion for committed investment at airports in Mexico on their master development programs, $1.7 billion for the continued construction of the new terminal building in Puerto Vallarta, $1.5 billion for the investment at airports in Jamaica, and $1 billion for the commercial investments. This work guidance reflects our commitment to strategic development and value creation, setting a solid foundation for the continued success in 2025. We are confident and excited about our strategic direction. We believe that diversifying revenue streams, enhancing commercial operations, and leveraging the cargo facilities will be key to our continued growth. Therefore, we are extremely focused on these areas and on their success. Now we must continue to strengthen our infrastructure as well as optimize operational efficiencies in order to deliver long-term value to our stakeholders. We appreciate your continued trust and support in GAP. Thank you for joining us today, and we now open the floor to your questions.