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

Good morning, and welcome to GAP's conference call. 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. 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 Grupo Aeroportuario del Pacifico's first quarter 2025 conference call. Presenting from the company today, we welcome Mr. Raul Revuelta, GAAP'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 issued previously. At this point, I'd like to turn the call over to Mr. Rewelta for his opening remarks. Please begin, sir.

Thank you, Maria. Good morning, everyone, and thank you for joining our first QUARTER 2025 results call. Let me start with highlighting our financial performance. Despite a challenging macroeconomic and travel demand environment, we delivered a strong first quarter with solid growth across all key financial and operational indicators. Total revenue grew by 26% year-over-year, reaching 8.4 billion pesos, driven by a 20.9% increase in agricultural revenues and 41.3% growth in non-agricultural revenues. This was due to several positive factors that includes higher passenger traffic, the benefit of the new maximum tariff implement on March 1st due to the last MDP revision, the peso depreciation of around 20% and incremental revenues from new commercial spaces, which include the mixed-use building that includes the hotel and the consolidation of the cargo facilities mainly in the Guadalajara airport. On the profitability front, EDIDA increased by 21% reaching 5.6 billion patients with an EBITDA margin of 67.1%. Margin is slightly contracted compared to the first quarter of 24, mainly due to recognition in the P&L of increasing the concession fee from 5% to 9% in our Mexican airports. Although this change was enacted in January 24, it is important to recall that under the new tariff regulation, Any payment to the government exceeding those including the last tariff review will be added to the reference value for the next maximum tariff review. As such, the initial 4% of environmental revenue paid to the government during fiscal year of 2024 was recognized as an intangible asset under the IAS 38 with amortization beginning in January 2025 and continued through the end of the concession period. The related payments were included in the reference value for the determination of the maximum value of 2025-2029. This square marks the first time the full 9% concession fee has been recognized in the P&L. It's also important to highlight that the entry of the new commercial business improves our results but causes a slight resolution on the dividend margins. The reason is that While these business lines significantly contribute to the top line of EBITDA in nominal terms, the output margin levels are lower than those of the core airport operations. For example, JWTC and the new hotel operate with an EBITDA margin of around 50%, which, although healthy, is below our historical EBITDA margin profile. As we continue diversifying our revenue streams, We remain focused on balancing growth with profitability across all sectors. From a financial standpoint, the company remains strong. As of March 31, we have 16.2 billion pesos in cash, following a successful 6 billion pesos bond issuance. We also extend and refinance key credit lines in Mexico and Jamaica, providing financial flexibility to support upcoming investments. Following these figures, We maintain healthy leverage levels, reaching a net debt-to-earnings ratio of 1.7 times for the 12 months, thus complying with all our debt covenants. Moving on to the capital you will acquire, GATA executes approximately 1.7 billion pesos in capital expenditures. Just as a reminder, for the full year, the plan is to deploy around 13 billion pesos, which includes 8.8 billion in community investment across our Mexican airports under the master development program. And in addition to that figure, we have continued the construction of the new Puerto Vallarta terminal, which alone represents about 1.7 billion pesos, plus 1.35 billion of investment in our Jamaican airports and about 1 billion pesos dedicated to commercial development. These investments are central to our strategy of enhancing infrastructure, expanding our commercial footprint, and strengthening the overall passenger experience, along with key pillars for supporting our long-term growth. Let's now turn to the macroeconomics environment. We believe that for GAAP, the risk of a U.S. recession, migration, directives, and the possible tariff impact remain key concerns. We are also closely monitoring the potential effects of passenger traffic, particularly in the discretionary and leisure sectors. And we'll keep the market positive going forward. It is important to note that the Holy Week fell in April this year compared to March last year. So these months do not compare exactly with the last year. We will need a bit more time to fully assess the underlying trend for the leisure destination figures. That said, the data appears consistent with a broader economic slowdown in the United States, which quickly may manifest throughout reduced leisure travel and tourist spending. This is nothing that we have not seen before, and we are actively monitoring these changes so that we may adjust our assumptions accordingly. Very interestingly, we have looked at Canadian travelers and their travel tendencies. Many Canadians are seeking new places to travel instead of the U.S., which could represent an opportunity to attract additional flights from Canada to our airports. I mention this because we believe that these disruptions represent a strategic opportunity for Mexico. As Canadian travelers distance themselves from the U.S. destinations such as Florida and California, For example, they might likely redirect their vacation plans toward Mexican beaches and the Caribbean, whereby the airlines would be inclined to rebalance their network. Most likely, GAP's leisure airports of Puerto Vallarta, Los Cabos, and Montevideo could be well-positioned to benefit from this plan. Expanding connectivity is an opportunity that we are focused on. This year, GAP plans to announce 15 new domestic routes and 19 international routes. further strengthening our network, and these are a key critical advantage in today's landscape. Before I conclude, I'd like to highlight that our ordinary shareholders meeting took place last week, during which a dividend payment of 16.84 pesos per outstanding share was approved. The dividend will be distributed over the course of the year, reflecting our continued commitment to delivering value to our shareholders. Thank you, and we are now happy to open it four questions.

At this time, we'll open the question and answer session. If you would like to ask a question, please press star and one on your telephone keypad, and you will be placed in the queue in the order received. You may remove yourself from the queue at any time by pressing pound and one. Once again, to ask a question, please press star and one on your phone. Our first question comes from Steven Trent from Citi. Please go ahead, Stephen.

Yes, good morning, gentlemen, and thanks very much for the time. I appreciate your comments about, you know, potential Canadian travel flow getting rerouted to, you know, potentially the Mexican beaches. Have you noticed anything from other regions or have maybe any observations that carriers in other regions may also be doing the same thing, rerouting to Mexico versus, you know, Disney World or something like that?

Thank you, Steve. This is Raul. I mean, the first part that we are noting is the case of the Canadians. First, we see an important decrease of seeds from seeds from US, from Canadian markets to US markets. And we are beginning to see some additional slots that are asking from many Canadian markets for the next winter and in some specific case as well for the summer. So we are just seeing for the moment a change in the trend in some way for Canadian market. For the U.S. market, I think that it's still being really early to think if all the economic environment will in some way change the rest of the routes from the U.S. to Mexico or to Jamaica. But what we are seeing right now is just some kind of a slight change on trend of Canadian markets.

Oh, great. Thank you, Earl. Excuse me. I'm sorry. And just one quick follow-up, if I may. When we think about the limitations on air traffic movements in Benito Juarez Airport and the government's push to move some traffic to Felipe Angeles Airport, you know, are there any expectations that we could see some adjustments in one or both assets? in a positive manner that could affect the level of feed that GAP receives from either of those installations?

I mean, it has been, I mean, some kind of news and some kind of discussions, I mean, a public discussion about the possible increase on slots on Mexico City and in some way going back the position that the airport has, I mean, two years ago, the number of operations per hour. For the moment, we have not seen any kind of, I mean, official, I would say, announcement about that possible change. What we are seeing is some specific companies, for instance, I would say more aggressively going to Santa Lucia as an other option for the city. But I mean at the end of the day as in airports we always need to think that we operate as a net. So all kind of efficiency is All efficiencies in any airport is important for the, I would say, for the whole net and the connectivity for all the airports. So, I mean, we are just really closely watching if there are some kind of changes on the policies in terms of the slots in Mexico City Airport. But we are, I would say, seeing really closely also the increase in routes from Santa Lucia Airport, mainly from Liberobus, to other airports in Mexico.

Okay, very helpful, Raul. Thank you for that.

And our next question comes from Guilherme Mendez from JP Morgan. Please go ahead.

Hey, good morning, Raul. Thanks for taking my question. Two points. The first one on the guidance. is given all the escalations on the turf discussions, risks of a U.S. recession, as you point out, Raul, how comfortable are you guys with the full year guidance? We saw Volaris reducing its guidance for the year in the beginning of the week. So how this might impact GAPS traffic going forward. And the second one is on the Turks and Caicos potential new bid. I recall in the last conference call that you mentioned that something could come up in the near term. Just wondering if there's any news on that front. Thank you.

Thank you, Guillermo. The first time, the first part, I mean, in terms of our traffic guidance, we still feel comfortable about the number that we sent. At the end of the day, we always prepare our guidance and all the numbers of the figures that are considered in our guidance are factual rules that are already solicitated for different airlines for all the years. So, for the moment at least, we are not seeing an important, I would say, decrease in terms of seats. The low factor is still being really strong. And when we talk about the domestic market, the low factor still is really high and historical high because the lack of seats for the problem on the engines of the air buses. So, in my point of view, still there be on the market some kind of demand on the domestic market that has not been completely, I would say, for the lack of seats. So, at least for the moment, we are not seeing a completely change on the trend of recovery that our airport has. But, I would say that there is a lot of parts moving right now. I mean, all the possible priorities are changing day by day. I think that it's, I would say, really tough to try to understand how going to be the final result in terms of the macroeconomics of these changes, but at least for the moment we are not seeing any kind of change on our trends and we continue comfortable about our guidance. Yes, and... And the case, yeah, for Turks and Caicos. Yeah, and just for, sorry, Saul was ready to answer, sorry, but we received an official letter from the government of Turks and Caicos that they said that during May they will make the final determination about this process. So we are just waiting for the information.

Very clear. Thank you, Raul.

And our next question comes from Fernanda Recchia from BTG. Please go ahead.

Hey, Saúl, Raul. Two questions here from our side as well. So the first on the commercial revenues, looking at Q1 figures, the year-over-year growth was very strong, plus 40%. Of course, there is the the WTC impact in Q1, but just wondering what level of commercial growth for 2026 can we expect considering that for 2025 we already have your guidance. And second, on capital allocation, you already provided an update on Tuukka and Kaiko, but I'm wondering if You're also looking for other process such as PCR or other opportunity in cargo division as well, such as the WTC. That's it. Thank you.

Thank you, Fernando. Is it Raul?

I mean, yeah, as you say, this first quarter was pretty strong. I mean, more than 40% of increasing revenue, for sure. A big part was also related with the acquisition of JWTC, but even with that, I would say that the increase on non-oriental revenues was about the 15% that we are not considering JWTC. That is really a robust result, just putting in the context of an increase on 4% of the passengers. So, I mean, we are really happy. And for sure, we have the effect of some new commercial businesses that opened during the last year. For instance, the hotel, as you remember, began operations in April of 2024. So, this first query, we have, let me put it this way, an easier comp. But in general terms, we still feel comfortable with our normative revenues guidance. I will say that all the different terminal increases on capacity from our terminal buildings that we built on doing the master plan of 2020-2025 will be fully operating 12 years. So I will say that 2026 is going to be the first year that all the different businesses will be fully operated. So we are expecting I would say something that will be for sure close to the double digit but going to be more I would say normalized and for sure will depend on how it could happen with the traffic on the coming years. But I mean I will conclude that for the case of the revenues We still feel really positive because, I mean, all the different changes and the layouts, all the hard work that our commercial area for develop new experience for our passengers are doing pretty good. So we're still comfortable that our business model will work on coming years and will be really resilient even with that. possible downturn on the economy. In terms of the capital allocation, . Well, we will continue looking for opportunities. We, as Raul said, we are waiting for the final outcome of TUC's and Caicos airport process. And related to CCR, as you were asking, we are analyzing the opportunity. We haven't decided yet to participate or not. as you may know, is in four different countries, more than 20 airports in the pool. So the time to dedicate to analyze this will be very important in order to decide to participate or not. So it's something that we are aware of that, but we haven't decided yet to participate. I mean some additional idea of this just for remember of all our participants on the call. One of the key disciplines of GAAP is the discipline for just acquisitions. So we will continue that line. Always we will analyze the opportunities that make sense for our company, but always look in the correct view of just a creative opportunities for our shareholders. And just for in the case of the cargo acquisitions, I mean, JWTC has a really, I would say, great acquisition with great results, and today we are working really, really hard trying to get the best possible business plan for the long term in some other airports from GAP, taking like, I would say, platform of cargo growth to be JWTC. So today we are analyzing inside that company, which will be the next move of operations, cargo operation in other airports in GAP.

Very clear. Thank you so much for your answers.

And our next question comes from Jen Spieth from Morgan Stanley. Please go ahead.

Yes, hello, thank you for taking my question. I have a question regarding basically also the capacity you're seeing, more specifically the traffic for this year and your guidance. So we saw relative to the previous guidance you gave, what has changed is that local carriers have obviously retrenched a bit of capacity. Your numbers, like the capacity numbers still look good, I think, but any conversations you're having with foreign airlines that might also reduce capacity down the road, or what are you seeing in terms of like the mix going forward? I know you already said that you feel comfortable with the traffic guidance, but just any caller on that would be much appreciated. Thank you.

Thank you, Justin. I would say that in general terms, all the different discussions with airlines are in some way the same line. I mean, the domestic airlines are struggling with the lack of capacity for the engines problems. So, I mean, it's what it is, and it's a problem that in some way is still floating in the industry. For the international companies, I will say the only market where we are seeing some kind of decrease in capacity and some change on planning and networks is the case of Montego Bay. Specifically, American Airlines are changing some of the routes from Charlotte and Miami. Any change on the routes of Miami for American is I would say that is difficult for any airport in the Caribbean because as you know, Miami is one of the biggest hub that on the hub and spoke of strategy for all the Caribbean. So any change of American Airlines in that market is difficult and we are seeing important decrease on passengers on the first quarter of the year for Montego Bay, that minus 8%. But I would say that is the only, I would say, decrease that today are in some way showing us the airline, the one that is happening in Montego. In the other hand, we have, I would say, interesting possible or potential and negotiation with different Canadian airlines. So, I mean, that will be the main parts of our discussions today. Some, I would say, decrease in capacity on Montego that will still even until the winter. And a potential increase in capacity for different Canadian companies maybe in travel Puerto Vallarta and Guadalajara Airport. I would say that are the most important, I would say, discussions with the airlines right now.

Okay, perfect. And just one follow-up. Regarding your tariff implementation in Mexico, does it still... Is the schedule that you gave last time, is it still... or any change there on the expected implementation?

No, it's still in the same way. I mean, as always, we try to look into the market to understand perfectly the moment for a change in tariff. As you know, we just changed on the 1st of March the tariff, and we already get something close to 90% of fulfillment of the maximum tariff. I mean, we're still on the same page of making another change to the end of the year, but I mean, it will be something that we need to perfectly analyze at the moment.

Okay, sounds good. All right, thank you.

Our next question comes from Pablo Monsives from Barclays. Please go ahead.

Hi, good morning. Thanks for taking my question. Just a little bit of follow-up to Jen's questions about the tariff. You just mentioned that you are 90% completion. What are your plans to increase tariffs throughout the year? I remember that you were expecting to increase a little bit during the summer and also early 2026. But can you please shed some light for modeling purposes of what should we expect for tariffs to evolve this year and next year?

Thank you. Hi, Pablo.

I would say that for this year, we don't expect to have another, I would say, additional changes on the tariff. We are expecting to begin on the next change of tariff happens mainly we expect to happen in the first days of January of coming year, but as always, we need to perfectly understand the market at that moment. As you know, for instance, exchange rate and the inflation, it plays a really important role in the fulfillment of the tiles, so I would say that we will be ready make public what would be the change on tariff on the beginning of coming year as soon as we have the full information about what happened with inflation, what is the trend of the dollar, because all the passengers, the international passengers in Mexico are in dollars. So, I mean, at that moment, we wouldn't have been waiting for half the would be the change on tariff. But in general terms, our plan could be to have another change on tariff until the first quarter of the coming year.

And just one follow-up, if I may. This tariff increase also is a reflection on the inflation and the discounts that you are not offering anymore. Is that correct?

Yes, I mean, for in general terms, I mean, really in a way for everybody, we increase all our fifth passenger on 15% on March 1st when we compare with the ones that we were applying on December of the last year.

That was the main number. Okay. Thank you.

Our next question comes from Pablo Ricaldi from ETAL. Please go ahead.

Hi. Good morning, Raul. I have two questions on traffic. The first one is on Montego Bay. When do you expect turnaround in traffic in Montego Bay? And the second one is more long-term related to the World Cup in 2026. Have you quantified how much can impact your traffic numbers in 2026?

Okay.

Thank you, Pablo. For the case of the World Cup, in the case of Guadalajara, we will not have five games here. There's different forecasting that the FIFA Organization Committee has made, I would say, public, but today it's difficult to understand how big could be this impact. the numbers of possible attraction of tourists could be going from the 300,000 to around 600,000. I mean, it depends of the repetition. I mean, one of the things that all the FIFA committee told us is that as soon as we have the teams that will be based on Guadalajara would be easy to understand which is going to be the, I mean, the possible attraction for the airport. It will depend on one of the things that, for instance, we are expecting is a really important use of the Tijuana Airport crossing through CVX from markets, soccer markets of South California to coming to Guadalajara, for instance. But at the end of the day, one of the things that will give us a more, I would say, correct understanding of which could be the potential attraction of additional passengers would be, at the moment, that we know which teams are going to play the games in . Related to traffic, passenger traffic in . We don't foresee right now when we'll come back at the same time we have. We were discussing with different airlines, basically American Airlines, JetBlue, and others, in order to attract more passengers. From the Board of Tourists in Jamaica, they are promoting business travelers to Jamaica from U.S., U.K., and Canada.

So we expect to make and drive more passenger traffic to motivate.

It is complicated to see right now when it will come back because the Caribbean in general, the passenger traffic is moving to other destinations. Yeah, it's a general trend, I would say. All the airports of the different destinations in the Caribbean are having an important decrease of passengers, mainly from the U.S. It's a trend happening right now in the Caribbean. For sure, as I would say, we still have working really close to airlines to the government and the tourist authorities on Jamaica trying to bring back some some of the capacity to make it. But it is important also to remark that we also are working on a cost reduction program, cost reduction strategy for MBJ to be, as always, one of the characteristics of GAP, be prepared to be resilient for any kind of deeper decrease on . We are also working on the OPEX, an important plan for possible reductions on that and be prepared for even a possible deeper increase on passengers.

Perfect. That was very clear. Thanks.

And our next question comes from Alberto Valerio from UBS. Please go ahead.

Hi. Good morning, gentlemen. One question on my side about CAPEX caught my attention at the same level as last year. I was expecting something higher because of the MVP. Do we expect this CAPEX to go high for the year, increase quarter over quarter? And how is the labor force in next credit moment if you have everything hired or if you need to hire the workforce for doing the CAPEX? If you could provide any details, it would be very helpful. Thank you very much.

Thank you, Alberto. This is Raul. I mean, it's time when there's a new master plan at the end of the day, all the, and let me put it in this way. All the clear authorizations of what's going to be your plans for the coming year happened, you know, in the last quarter of the last year. So, always the first year of master plan at the beginning of the first quarter, the first six months of the plan, I would say that we're struggling a little bit on begin to move all our infrastructure department and, you know, to begin all the, to move all of what will be the plan. So for sure we are still optimistic that we will completely fulfill our plans of CAPEX during this year. We are really comfortable because some of the most important plans for this year right now are beginning just to run with the constructors. We are, I would say, We think that all our commitments of investment will be fulfilled for the end of the year. So I will say like a final remark on this is that always each five years, the first six months, it's, I would say, difficult to begin all the, to move all the moving parts of the infrastructure to begin with to deploy all the plans, but we are optimistic that we will be on the target for ending with a community mental ease year.

Thank you very much, . At this time, there are no further phone questions.

Well, we have some questions from the webcast. So we are going to start with the ones from Jorge Vargas from GBM. And he's asking, margins declined 280 basis points year-over-year to 67.1%, mainly due to higher costs and the poor recognition of the 9% concession fee. Do you expect margins to stabilize at this level, or is there potential for further compression in the next quarters?

Yes, this will be the levels of margin that we will see from now. As we explained during the call, we are paying already and recognizing the P&L, the construction fee, full payment to the government, the 90% increase from 5 to 9. So, it is important to understand that talking about the 69, the 70s will be complicated to return to those levels.

So to be in the range of 66 to 67, 67.5 in this year will be the right level. We do not expect any change in the following year. in the following months.

Well, there is another one that says, now that the cargo operations are fully consolidated, how should we think about their margin contribution going forward? Are there any efficiencies initiatives in place to improve profitability in this segment?

Yes, I mean, we are working with the new acquisitions and for sure we are training different of margins on that and efficiencies on that specific acquisition. For sure, one of the key parts is that has a really important technology and automatizations in some of the administrative concepts that we are bringing to JWTC and will bring us additional efficiencies. for the operation of this business. So we are just on that. We are in this process of ingesting all this new business. As soon as we could bring all these efficiencies to this new business, we're going to be ready for looking for another possible development in our airport. I would say that right now we're having use for optimizing the operation of JWTC.

And then we have some questions from Edson Murguia from Sumacap that are like a following question that says regarding cargo and bundled warehouses, how sustainable is their revenue growth for the following quarters?

It's a good question. I mean, on the first quarter of this year, we experienced an important increase in terms of cargo, all the cargo, because with all the noise about the possible tariffs, some companies made or sent additional inventories to their warehouse. It's not pretty clear how much time would be or how longer the increase in revenues from the cargo will continue. I mean, we are really growing that weight base of almost 30% of the first cargo for that for JWTC, but we will, I mean, we will wait and see what's going to happen in coming months.

Well, from Epson as well, She's asking, regarding the employee's cost, can we expect the same cost for the following quarters?

Well, yes, basically, yes. We will see at the same level of cost of personnel and salaries. We have to consider that integration and consolidation of GWTC implies an additional cost. At the end, it is something that we have considered in our guidance. It's something that we plan into our budget.

So it is the level of quantity in the following quarters.

Yeah, and it's on the last one that you're asking about the capex for Puerto Vallarta Airport. Yes, it is going to be $1.7 billion during 2025. That's correct. And, well, this is the last question that we have in the webcast.

Okay.

So thank you once again for joining us today for our first core results conference. Our team is available to address any questions you may have. Have a great day. Thank you.

This does conclude GAP's conference call. Thank you for your participation. You may disconnect at any time.