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

Good morning, and welcome to Axtel's Second Quarter 2026 Earnings Webcast. My name is Nancy Llovera, Axtel's Investor Relations and Corporate Finance Manager, and today I am joined by Armando de la Peña, Chief Executive Officer, and Adrián de los Santos, Chief Financial Officer. Financial information for both Axtel and Controladora Axtel, including the honorific Second 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. Accel assumes no obligation to update or revise any forward-looking statements, whether as a result of new information Thank you, Nancy.

Welcome, everyone, to our conference call. I hope everybody is doing well. Let me start with an overview of our second quarter performance and relevant events. Second quarter results showed an improving trend, primarily in comparable EVTA. which increased 17% sequentially with the first quarter. Compared to recent quarters, we are also seeing improving momentum in both enterprise and government segment revenue. Enterprise segment revenue remains stable year over year, reflecting the slowdown in the acquisition of recurring contracts during the fourth quarter of 2025 and the first two months of 2026. Since March, we have seen a recovery in the enterprise segment alongside improving macroeconomic indicators. New recurring contracts increased 38% sequential, which we expect will translate into higher revenues in the coming months. The decline in recurring revenues was offset by stronger non-recurring revenues. allowing enterprise segment sales excluding voice to increase 1% year-over-year. We expect enterprise segment to do well in the second semester. The wholesale segment achieved an 18% sequential increase in revenue during the quarter, supported by a new high-capacity dark fiber conference. The pipeline for both high-capacity Leap Services and high-capacity dark fiber opportunities remain attractive, although sales cycles continue to be extended. We continue to see demand for capacity across our transport network, particularly our next-generation fiber infrastructure connecting Querétaro data centers with Mackay. In the government segment, recurring revenues grew 34% in the second quarter. helping offset the decline in non-recurring contracts. We expect a larger number of opportunities with federal entities as activity in this segment typically leans toward the latter part of the year. This should support revenue growth in a full year, 2026, compared with 2025. As part of our artificial intelligence strategy, We signed an agreement with the old solutions to commercialize its supply chain data analytics platform in Mexico. We also held an internal AI hackathon in collaboration with AWS, bringing together more than 80 engineers to develop and implement agentic AI use cases focused on improving Excel operational efficiency and customer experience. In June, we hosted customer events with Freshworks, Fortinet, and Microsoft, focused on how automation, cybersecurity, and artificial intelligence solutions can help organizations to improve efficiency, resilience, and data-driven decision-making. In cybersecurity, Axtel was recognized by Cato Networks as Partner of the Year in Latin America. and achieve premier certified partner status by no before. At ITW in Washington, D.C., we showcase our digital infrastructure and cross-border connectivity capabilities. We have more than 100 meetings with international carriers and service providers. Through Axtel Networks, we have built the first generation cross-border network between Mexico and the United States. designed to scale and support demanding digital ecosystems for hyperscalers and data centers. The organizational adjustment implemented in March contributed to maintain personal expenses below second quarter of 2025 levels, despite inflationary pressures and new labor regulations in Mexico. At the same time, together, we seem to ask a Canadian partner, we continue to advance internal initiatives focused on translating the adoption of artificial intelligence into tangible business results in the medium and long term. In May, we distributed a $10 million dividend approved at our annual shareholders meeting. In addition, we continue reducing our debt. repaying more than $25 million during the first half of this year. We expect to continue improving our operational and financial performance throughout the remainder of the year, driven by a stronger momentum in enterprise and government segments. In LexNet, we continue to see growth opportunities for both lead and dark fiber capacity demand. As always, we maintain a strict discipline in resources Thank you Armando, Nancy, and good morning to all.

We executed a $210 million credit agreement with four financial institutions to refinance $160 million of existing debt and secure a $50 million committed revolving fatigue. This financing enables the company to extend its maturity profile with no significant maturities until 2029 while also obtaining more favorable financing conditions. The new credit agreement has an initial term of three years with an option to extend for an additional year on the first anniversary and exercise a second one-year extension on the second anniversary. Concerning our ongoing hedging strategy, we maintained slightly over 60% of our U.S. dollar denominated topics, expenses, and interest payments hedged throughout the third quarter of this year. In July, we began executing special dollar hedging contracts for a portion of our four-quarter dollar obligation. Let me now move on to review our financial results for the second quarter. Second quarter revenues decreased 3% year-over-year, primarily reflecting lower revenues in the wholesale and government sector. Enterprise segment revenues remained stable compared to the same period last year. IT and cybersecurity revenues increased 5%, driven by continued growth in cloud and cybersecurity solutions. supported by expanded services for existing clients and execution of non-recurring projects. Telecom revenues decreased 1% year-over-year, mainly due to lower collaboration solutions revenues, partially offset by solid growth in managed network and mobile services. Voice revenues declined 12%, and represented approximately 6% of enterprise segment revenues, reflecting the ongoing migration from traditional voice services towards digital communication solutions. Government segment revenues declined 6% year-over-year, mainly due to lower non-reference systems integration revenues within the federal segment and less contribution from state and local entities. This decline was partially offset by strong growth in connectivity solutions. Year to date, the revenue mix was approximately 70% federal and 30% state and local government. Wholesale infrastructure revenues declined 13% year over year, reflecting a difficult comparison against the second quarter of 2025, which benefits from higher upfront revenues associated with the large high-capacity contracts obtained in 2025. The segment continues to experience the travel termination of legacy direct access services to international carriers that serve their global clients through Accel in Mexico. Cost of revenues, including depreciation and amortization, remains flat year-over-year, primarily driven by lower costs in the government and wholesale segments, mitigated by increased costs in enterprise segments. As a result, gross profit decreased 4% with gross margin reaching 72% compared to 73% in the prior year's quarter. Enterprise segment costs increased 6% year-over-year, resulting in lower contribution margins. It was mainly driven by a higher proportion of non-recurrent revenues compared to the prior year, which carries lower margins than recurrent revenues. Government segment costs declined 15% year-over-year, driving an increase in gross profit and margin expansion. Performance benefited from a more favorable revenue mix with a higher contribution from recurring services and connectivity solutions. Wholesale segment costs declined 6% year-over-year. Profit declined 15%, reflecting lower revenues and changes in revenue mix during the quarter. Commercial and operating expenses are allocated to the three business segments, while corporate expenses remain centralized. During the quarter, commercial and operating expenses declined 1% year-over-year, while corporate expenses decreased 2%, reflecting efficiencies generated from the organizational restructuring implemented during the first quarter of the year. EBTA for the quarter reached $862 million, although very positive on a sequential basis, it represented a 10% decline compared to the second quarter of 2025. This decline reflects lower contribution from the operating segments, as well as a $25 million negative swing in net other income versus the prior year quarter. As a result, comparable EBITDA margin stood at 29% for the quarter, compared to 32% a year ago. CapEx for the second quarter, total $19 million, equivalent to 11% of total revenue, compared to $21 million, or 13% of revenues in the same period of last year. Cash balance at the end of the second quarter was $38 million compared to $35 million at the beginning of the quarter. Pre-cash flow was positive $35 million in the quarter, resulting from $50 million of EBTA, $80 million of positive working capital, $19 million of CAPEX, and $13 million of interest expenses. Additionally, during the quarter, were reported $19 million in debt reductions and $10 million in dividend pay. At the end of the quarter, net debt stood at $472 million, resulting in a net debt to comparable EBITDA ratio of 2.5 times compared to 2.3 times a year ago. With that, we conclude our presentation and open the call for questions regarding Axtel and Controladora Axtel. Nancy, if you could please go ahead and open the webcast for questions from participants.