Grupo Traxión, S.A.B. de C.V.

Greetings and welcome to the Traction Third Quarter 2020 Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Abbey Lipson, Executive President for Traction. Thank you, sir. You may begin.

Thank you. Welcome again to Tracción's earnings call. I hope you and your families are safe and healthy. As usual, I will comment on some relevant aspects of the quarter before handing over to Rodolfo Wolf Antonio, who will discuss operating and financial figures in detail. I am very excited to share with you that once again, Tracción delivers solid financial and operating results despite the adverse environment that the contingency has caused. We posted record high financial figures. Tracción continues to conduct business profitably and efficiently. The company generates cash, has taken advantage of opportunities, and serves its clients This is the result of very hard work and how the company is designed. Surely, the most important highlight this quarter is that Traccion placed a 2.5 billion pesos bond with a seven-year maturity and a fixed rate of 8.98%. The deal was oversubscribed, which I take as an additional vote of trust in Traccion. especially given the current macro landscape. With this issuance, Traction replaced outstanding credit facilities, extended the overall maturity profile, will improve cash flows, and will optimize financing costs. After three years of being a publicly traded company, we have achieved this very important milestone that take us to the next level in terms of financing sources. Moving on to the operational side, as you can see, logistics has become a fundamental element of our business, especially those services related to e-commerce. Tracción has almost crippled both revenues related to this channel and daily handling volume compared to the same period of last year. Obviously, the contingency boosted such increase. But please bear in mind that e-commerce activity in Mexico was severely under-penetrated before COVID, and that people were forced to try it during the contingency. In general, people have discovered that e-commerce not only works, but is more convenient and efficient for many things. How do you say that we believe? that a great portion of this increased volume will remain as a trend once we go back to normal. Years back, we saw that growth of e-commerce was imminent. Of course, not driven by COVID, but by natural market forces. Anyway, Traction reacted promptly and planned accordingly. and has taken a portion of such growth that today represents more than 10% of total revenues. Shifting gears to other business lines, we have a stable quarter in terms of cargo operations. We still move our fleet among sectors, but with much more stability compared to when the contingency started. Our personal transportation segment grew. driven by requests for increased capacity that started on the second quarter and continue through the third quarter, driven by social distancing rules. Traction has faced over demand in this business and has been satisfied by temporarily using the fee that normally is dedicated to schools and by outsourcing buses with regional competitors that have spur capacity. Speaking about schools, please be advised that the contracts we have with these clients are still valid, and we have granted some discounts in the interest of strong commercial relationships. When schools return to their normal activity, they will let us know in advance so that we balance our fleet and they can resume their service in a timely manner. With this, I conclude my remarks, and I will hand over to Rodolfo. Please, Rodolfo, go ahead.

Thank you, Abby. Good morning, everyone. Thanks for your attendance. I will now discuss the most important operating highlights in this quarter. As Abby mentioned, logistic operation now represents a relevant portion of our business. Now contributing almost three times what they did on the same period of 2019. Traction increased by more than 66% its domestic last mile capacity. not considering the cross-border e-commerce business that we have developed, which has grown considerably as well. We invested more than 60 million pesos to improve our IT systems. We created RedTrax, an app that allows better tracking, improves internal processes, and provides much more accurate real-time information. It is important to consider that traction works extensively in 2019 to build a robust logistic platform that was launched at the beginning of 2020, which positioned the company in a privileged spot to capture the increasing logistic operating volume that the pandemic brought. Moving on, in terms of innovation, I'm very proud to share with you that Traxy, our people mobility app, launched in July, has now more than 5,000 downloads. and operates 10 daily routes with six different timetables, both in Mexico City and Guadalajara. In this service, we develop an app that monitors and controls riding capacity by using QR codes. In the personnel and student transportation segment, we have conducted an extensive commercial effort, which resulted in a solid growth in new clients and existing ones. Especially during this third quarter, we started operation with 90 new clients that required 130 additional units. Moreover, during September, we operated more than 6,000 units in this segment. This was possible mainly by outsourcing fleet of third parties with spare capacity. All this drove a growth of 15.7% in kilometer volume in this service. So as you can see, we are gaining clients despite the pandemic situation. Shifting to our cargo business, it remains stable during this quarter. We had an increase in our cross-border business related to auto industry and obtained a license for fuel transportation, a service that we have developed organically and was kicked off during this third quarter. In terms of expansion, we gain a five-year contract that will require 49 new cargo trucks for 2021. We also will be adding refrigerated trailers to our fleet to face the growth of this service. Finally, we achieved a 2.3% fuel saving as a result of synergies in new technologies. On the social and environment front, Traction joined a breast cancer prevention and support program together with a computer recycling campaign to assist child cancer groups. We also obtained the Clean Transportation Certification for the sixth year in a row and renewed several quality assurances programs.