Axtel, S.A.B. de C.V.

Good morning, and welcome to Axtel's first quarter 2026 earnings webcast. My name is Nancy Llovera, Axtel's investor relations and corporate finance manager, and today I'm joined by Armando de la Peña, chief executive officer, and Adrián de los Santos, chief financial officer. Financial information for both Axtel and Controlador Axtel, including the unnoticed first quarter report, is available on our corporate websites. We will begin today's session with an overview of our business performance, followed by a Q&A segment. For your convenience, this webcast is being recorded and will be available on our website. Before we begin, please note that today's discussion may include forward-looking statements. These statements reflect management's current views and expectations and are subject to risks and uncertainties that could cause actual results to differ. Axtel assumes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. With that, I will now hand the presentation over to Armando.

Thank you, Nancy, and welcome everyone to our conference call. I hope everyone is doing well. Let me start with an overview of our first quarter performance and relevant events. First quarter revenues increased by 6% and 8% in the enterprise and government segment, respectively. Despite solid new contract acquisition in the wholesale segment, comparable revenue and comparable EVDA were affected by the absence of revenue and expenses benefits from the extraordinary agreement with a major wholesaler mobile operator in the first quarter of 2025. We expect EVDA performance to improve progressively over the coming quarters as commercial activity strengthens. During the quarter, we adjusted the organization to better align costs with the cautious economic environment and to mitigate the impact of recent labor law changes in Mexico. The right-sizing of the organization and retirements resulted in an 11% reduction in total headcounts, including 16% in senior management. Sarah and Scott are expected to be recovered in less than 14 months. Optimizing personal expenses while retaining and developing critical talent remains a key priority. From December of 2022 to the end of the first quarter of this year, revenues per employee increased by 42%, and by 72% per measure against senior management. These initiatives are helping us build a more agile company with fewer management layers and refreshed leadership. We consolidated our commercial structure, integrating enterprises, government and business lines, and, as I said, we combine commercial and operation capabilities. New contract acquisitions in the enterprise segment improved as the quarter progressed. The year started at a slower pace during January and February, but picked up in March, when new contract acquisitions increased by 12% compared to January levels. Unlike 2025, when enterprise acquisition began to slow down after June, this year we are seeing an upward trend, supporting favorable expectations for the second half of the year. Performance across the enterprise segment business line resulted in an overall revenue growth of 6%. IT and cybersecurity services grew 16% Telecom increased 4%, including a 10% increase in mobility. In the wholesale segment, excluding the extraordinary benefits from the agreement with a wholesale operator in the first quarter of last year, revenues would have declined slightly, with a single-digit range. However, momentum improved in March, with new contract acquisition 12% above January levels. At Acnet, demand for cross-border connectivity solutions remains strong. We are capitalizing on this opportunity through the recent deployment of the next-generation fiber infrastructure connecting Querétaro to MSTARI. In addition, Axtel became the first operator in Mexico to deploy Cisco 400 GB optical network and its IP core. This technology addresses rising traffic in AI-driven demand, enables a more scalable, efficient, and high-performance network while reducing complexity, operating costs, and energy consumption. The government segment delivers an 8% revenue growth, supported by higher recurring revenues that offset declines in non-recurring revenue. At the federal level, we are observing delays in budget allocation, and we expect funding to begin flowing during the second quarter. At the state and local level, the first quarter is characterized by service revenues renewals, with new public tenders or options emerging in the second quarter and execution or implementation taking place mainly in the second half of the year. In the quarter, S.A.B. entered into a 12-year agreement with Tecnológico de Monterey to operate its Uptime Tier 3 data center located on the Monterey campus. The facility hosts computing, storage, and applications for the entire system. Under this agreement, Tecnológico de Monterrey becomes the anchor tenant and the remaining capacity will be incorporated into AXEL co-location service offerings. This transaction reinforces AXEL evolution as a critical infrastructure operator with long-term vision. AXEL's optimization of key processes through artificial intelligence and advanced automatization focused on simplifying operational workflows and increasing productivity. We are conducting a comprehensive review of transversal and core processes in our company, identifying weak links and progressive implementation of AI solutions in the short and medium term. We estimate savings of at least 75 million pesos in the year, in addition to the opportunity to adapt these internally developed AI capabilities into customized solutions for enterprise customers in the future. On March 12th, we held the annual shareholders meeting for Acstel and Controla, or Acstel. Supported by consistent cash flow generation and reduced leverage, Accel shareholders approved a $10 million dividend payable in early May. Consequently, control of Accel shareholders approved a $5.5 million dividend. This represents the first dividend in Accel history and reflects our improved financial and operational performance. Accel shareholders also approved up to $100 million for share buyback program. consistent with prior use. This action reaffirmed our commitment to shareholder return while maintaining disciplined capital allocation. We expect gradual improvement through the remainder of the year, driven by stronger enterprise contract acquisitions, sustained demand for Wavelength and Dark Fiber ApacheNet, and a more active engagement with federal government entities. S.A.B. de C.V.

Thank you, Armando, Nancy, and good morning to all. In March, we prepaid $10 million under our syndicated term loan. Consistent cash flow from operations enabled us to continue reducing debt and thereby interest expense. In recent weeks, we have initiated refinancing discussions for the remaining balance under the syndicated bank fatality and a bilateral loan with an international export agency. These transactions are expected to further improve interest margins, extend maturities, and optimize the mix between peso and dollar-denominated debt. During the quarter, S&P Global Ratings upgraded Accell's credit rating from BB- to BB, with a stable outlook reflecting the strength of our customer contracts, solid performance across our three business segments, and disciplined financial management resulting in lower debt and improved net leverage. The rating upgrades achieved over the past six months underscore our resilience in uncertain conditions and our continued focus on strengthening our capital structure and cash flow generation. During the quarter, we recorded a one-time reorganization charge of 347 million pesos. Given its extraordinary and non-recurrent nature, our EBITDA guidance for the year would be measured as comparable EBITDA excluding discharge. First quarter revenues decreased 1% year-over-year. Solid performance in the enterprise and government segments partially offset a decline in the wholesale infrastructure segment. Enterprise segment revenues increased 6% in the quarter, primarily driven by a 16% growth in IT and cybersecurity services. This growth reflects higher cybersecurity revenues from existing customers, as well as the contribution of certain one-time projects. Telecom revenues increased 4% year-over-year, supported by solid performance in managed networks and mobile services, partially offset by a decline in collaboration services. Voice revenues declined 15%, representing now 6% of total enterprise segment revenues. Government segment revenues grew 8% year-over-year, driven by a 28% increase in recurring revenues. This performance reflects more penetration of telecom services among existing federal customers. During the quarter, the revenue mix consisted of approximately 70% federal and 30% state and local government entities. Wholesale infrastructure revenues declined 32% year-over-year, reflecting a difficult comparison vis-a-vis first quarter of 2025 from extraordinary revenues from services rendered in prior years to a major wholesale model customer. Excluding this extraordinary effect, Revenues will have declined slightly, mainly due to lower wholesale access connectivity revenues from international wholesale operators. Our infrastructure segment, ORACnet, is facing net disconnections in legacy services from global customers of international carriers that historically source their network services in Mexico through Accent. This data traffic is migrating to modern high-capacity solutions like Cloud Express, where network requirements are increasingly designed and configured in cloud-based environments. First quarter cost of revenues, excluding depreciation and amortization, increased 14% year-over-year, mainly driven by a higher cost in the enterprise segment. As a result, total contribution margin reached 69% compared to 73% in the prior year war. Enterprise segment costs increased 21%, translating into lower contribution margins, mainly due to higher proportion of non-recurrent revenues compared to last year, which carried lower margins. Government segment costs increased 1%, reflecting margin expansion supported by a greater share of recurring revenues. Wholesale segment costs declined 2%, a lower rate than the decline in revenues, resulting in lower margins for the quarter. Commercial and operating expenses are allocated to the three business segments, while corporate expenses remain centralized. Commercial and operating expenses increased 15% year-over-year, mainly reflecting an unfavorable comparison base due to the extraordinary bad debt provision benefit reported in the wholesale segment in the first quarter of last year, as well as a 5% increase in personal expense. General corporate expenses increased 3% during the quarter, driven primarily by higher personal expenses associated with inflationary pressures. Comparable EBITDA reached 739 million pesos in the quarter, a 31% decline compared to the first quarter of last year. This reflects lower contribution margins in the wholesale segment, as well as higher commercial and operating expense. EBDA margins stood at 25%. Comparable EBDA excludes the one-time reorganization charge of $347 million. CapEx for the first quarter totals $19 million, equivalent to 11% of total revenues, compared to $13 million or 9% of revenues in the same period last year. Cash balance at the end of the first quarter was $35 million compared to $73 million at the beginning of the quarter. First quarter free cash flow was negative $3 million resulting from $42 million in EBITDA, $14 million of negative working capital, $19 million in capex and $11 million in interest expenses. Additionally, during the quarter, we reported $15 million in debt reductions and the $20 million charge related to the re-urbanizational process. At the end of the quarter, net debt stood at $481 million, resulting in a net debt to comparable EBITDA ratio of 2.6 times compared to 2.3 times a year ago. With this, we conclude our presentation and open the call for questions concerning ASTEL and Controlador ASTEL. Nancy, please open the call and the webcast for questions from participants.