Good day, ladies and gentlemen, and welcome to ASUR's Fourth Quarter 2022 Results Conference Call. My name is Colin, and I'll be your conference operator. At this time, I'd like to welcome all participants. At this time, all participants are in listen-only mode, and we'll conduct a question-and-answer session towards the end of today's conference.

[Operator Instructions] As a reminder, today's call is being recorded. I would now like to turn the conference over to Mr. Adolfo Castro and Chief Executive Officer. Please go ahead..

Thank you, Colin, and good morning, everyone.

Before I begin discussing our results, let me remind you that certain statements made during this call may constitute forward-looking statements, which are based on current management's expectations and beliefs and are subject to several risks and uncertainties that could cause actual results to differ materially, including factors that may be beyond our company's control.

As usual, additional details about our quarterly results can be found in our press release, which was issued yesterday after market close and is available on our website in the Investor Relations section. Following my presentation, I will be available for Q&A. Now on to the results.

We closed the year with another strong quarter, reporting record high passenger traffic revenues and EBITDA. We are pleased to continue seeking an uptick in passenger flying.

Travel demand remained strong with a record of 17.6 million passengers taking the skis and passing through our airports, an 8% year-on-year increase and nearly 26% higher when we compare with fourth quarter 2019. For the full year, a total 66.3 million passengers travel through our airports. Our 3 geographies contributed to this solid performance.

Now, taking a look at performance by country of operations compared against fourth quarter 2019. Colombia again posted the strongest recovery, maintaining a steady 37% increase in traffic with domestic travel expanding in the low 30s and international travel in the high 60s.

On the cautious side, we do not expect this strong level to continue over the coming months as BAT in Colombia was raised to 19% from 5% effective this year and may have an impact on traffic trends. Traffic in Mexico rose 26% during the quarter, driven by growth across all airports.

International traffic increased in the high 20s, while growth in domestic ag is slightly increasing in the mid-20s. This overall robust performance was driven by travel demand above 2019 across all the regions, with the exception of Canada, which remains at 77% of 2019 levels.

Going forward, travel from Canada is likely to return to winter season levels during the first quarter of this year. While traffic from the United States and Europe is expected to continue posting a steady growth. In turn, domestic corporate travel is expected to continue lagging leisure travel.

As anticipated in our prior call, traffic at Merida Airport recovered this quarter beating 2019 levels, while we continue to expect Veracruz Minatitlan and Vermosa efforts to fully recover this year. Lastly, in Puerto Rico increased by a single digit. Domestic travel was up over 10%, partially offset by nearly 1% decline in international trade.

In sum, we forecast good traffic demand over the winter season with recoveries expected in certain remaining regions such as Canada in the first quarter, helping to compensate for any possible slowdown caused by inflationary global environment. Now, turning to a review of ASUR's income statement.

As a reminder, all references to revenues and costs exclude construction revenues. Starting with our top line results. Revenue were up 23% year-on-year to a record of MXN5.9 billion and up nearly 54% when we compare to pre-pandemic levels of fourth quarter 2019.

This strong performance was driven by both our optical and non-aeronautical revenues across our 3 geographies. Mexico accounted 74% of total revenues; Puerto Rico, 15% and Colombia 11%.

A Commercial revenues maintained a solid trend, up 50% against fourth quarter 2019 and in the mid-teens year-on-year, reflecting increases of 16% in Mexico, 14% in Colombia and 7% in Puerto Rico.

On a per passenger basis, commercial revenues contracted by a low single digit normalizing to nearly MXN112 or above the MXN92 posted in fourth quarter 2019. By region, commercial revenues per passenger were in the range of MXN137 to MXN147 [ph] in Mexico and Puerto Rico, up 25% and 39% from fourth quarter 2019 levels.

Of note, these figures include the effect of the strong Mexican peso. Our results in Colombia were impacted more by the currency depreciation declining 11% in Mexico peso terms. By contrast, commercial revenues per passenger increased 18% when measured in the local currency, driven by the opening of 28 commercial spaces over the past 12 months.

The share of domestic travel over the total traffic remains steady at 65% when compared with fourth quarter 2019. Moving down to the P&L. Total operating expenses increased in the mid-teens, but below the 20% revenue growth in the quarter.

Costs in Mexico were up slightly but below revenue growth, mainly driven by higher cost of energy, personnel costs and as well increasing dental assistant and concession fee in line with the higher EBITDA.

Puerto Rico costs declined by a mid-single digit as a reduction in the maintenance reserve and savings in water consumption more than offset higher cost of services. Cost in Colombia were up nearly 12%, reflecting the sustained pickup in business activity, higher cost of energy, concession fees and cost of services.

However, this was below the 20% year-on-year increase in revenues. When compared to prepandemic level for quarter 2019 levels, costs on the power control increased in the low 20s and significantly below the 60% increase in revenues, reflecting the efficiency measure implemented over the past few years.

As a reminder, costs under our control refers to total cost minus construction, depreciation and amortization, together with the technical and concession fees. We achieved another quarter of record high EBITDA reaching MXN4.4 billion, up 38% year-on-year and 82% from 2019 levels.

This also translated to higher margins with adjusted EBITDA margin reaching 75%, improving 6 percentage points year-on-year and over 11 percentage points when compared to prepandemic fourth quarter 2019 levels.

Again, this quarter's solid passenger traffic growth, along with increased commercial revenues and operating leverage more than offset higher concession fees. Importantly, we achieved high profitability across our 3 regions of operations.

EBITDA in Mexico increased by 30% year-on-year to MXN3.2 billion Colombia, we saw an EBITDA up to 85% to nearly MXN420 million. In Puerto Rico, EBITDA increased nearly 5% year-on-year on a comparable basis.

Note, this excludes the recognition of a nonrecurring other revenues of MXN30.4 million this quarter from a judgment rule in favor of Aerostar in connection with the right to charge a canola aviation fuel that was dispatched at the airport during 2013 to '21. By geography, adjusted EBITDA margin in Mexico was relatively stable at nearly 75%.

In turn, Colombia and Puerto Rico continued to deliver year-over-year margin improvements, both up 2 percentage points to 63% and over 53%, respectively.

-- compared to pre-pandemic levels for quarter 2019, the adjusted EBITDA margin increased nearly 0.5 points in Mexico and 19 percentage points in Colombia and was stable in Puerto Rico when excluding the onetime event this quarter.

In summary, we delivered another robust quarter with traffic and revenues at record highs, which together with operating leverage resulted in a 27% increase in net majority income to MXN2.6 billion in the quarter, up from MXN2 billion in fourth quarter '21 and MXN1.3 billion in fourth quarter 2019.

Looking at the balance sheet, we maintain a strong cash position and healthy debt profile. We ended the quarter with just over MXN13 billion in cash and cash equivalents. Net debt to last 12 months EBITDA and interest coverage stood at healthy levels of 0.1x and 12.6x.

Accounts receivables were up 35% when compared to prior year, reflecting the higher passenger traffic across our airports together with an increase in Puerto Rico in connection with the nonrecurring revenue recognition I mentioned earlier, which we expect to collect during the first half of 2023.

Lastly, we remain capital investments of nearly MXN1.5 billion during the quarter, the majority of which was allocated to Mexico, slightly over 14% to Puerto Rico and nearly MXN10 million were invested in Colombia. During the full year, capital expenses totaled MXN2.3 billion.

For 2023, we are planning a CapEx program of almost MXN1.2 billion with funds expanded mainly in Mexico and Puerto Rico. Before we move to the Q&A portion of the call, some brief closing remarks. We delivered extraordinary '22 results, including a record passenger traffic revenue and EBITDA.

These results underscore the higher consumer demand for travel and our ability to consistently deliver strong profitability while investing for the future. Our balance sheet remains strong with the same time, we remain mindful of maintaining our financial flexibility.

We look to 2023, many uncertainties remain in the macroeconomic weather from economic policies, consumer demand, inflation, supply chain, war and geopolitics.

And while Canadian traffic still lags our other markets, we're cautiously optimistic that we will see a pickup in the winter traffic and being able to recompare 2019 levels during the first quarter 2023. Our solid results throughout the year are a great testament of the quality of our team and consistent execution of our strategy.

As I mentioned earlier, we will continue to invest in the business to fuel and sustain growth with the underlying strength of the core business, and we are confident we have positioned ourselves for sustained profitable growth and strong cash flow generation and value creation for our shareholders.

Operator, please call the for open close the call for questions..

Thank you. [Operator Instructions] Your first question comes from Juan [ph] from Bradesco BBI..

The first one is on the MDP negotiation. I mean, on one hand, you have a higher traffic base with tariffs below the maximum rate. On the other, you have high inflation, pressure, OpEx, CapEx estimate.

So my question is, how do you see the higher level of bond yields and the broader inflationary environment impacting the negotiations of a potential adjustment in maximum tariffs -- and related to this, what are your thoughts on the new PAC estimate for the Tulum airport I've seen in the news, it's like $5.5 million right now.

I understand that you have included $3 million in the negotiation, but I just wanted to confirm whether it will be updated with the new estimates? Or how do you see this play out?.

Thank you for your question. Well, in the case of the MDP, what I can say is we have delivered our proposal to the government at the end of last year, and we will be reviewing that document during the entire year. In terms of rates, I believe we're going to be discussing those towards the end of the year, let's say, fourth quarter.

So today, we cannot say too much about it. In terms of the Tulum Airport, I have not said that we have included MXN3 million [ph].

Hello, can you hear me?.

Yes, I can hear you now..

What I was saying I did not say that I have included MXN3 million in the case of Tulum Airport, we have made our estimate of how much this airport will have and that will -- and how the effect is going to be in our airport of Cancun. But again, we will be discussing that towards the second half of this year. So that's what I can say today, Juan..

Understood. And just a follow-up on one of your comments. You said $1.2 billion in CapEx for 2023. Just wanted to confirm this..

Yes. That's around $700 million in Mexico and the rest in Puerto Rico..

Thank you so much..

You welcome..

Your next question comes from Alan Macias from Bank of America..

Just a follow-up question on CapEx. Important CapEx requirements that you see during your next development plan term? And if you can just give you any guideline in terms of CapEx levels for this period..

Alan, your line is not so well, but basically, in terms of CapEx for the next MDP, the most important expansion projects are, of course, in the case of Cancun Airport.

Maybe some expansion in the case of Wohaka Airport and no further expansion in the others, we will be able to disclose or to talk about these numbers once the government reviewed the document and approve it for the moment, I do not have any guidance to share with you..

Thank you..

Your next question comes from Philippe Nielsen from Citigroup..

So I have 2 questions on my side.

The first one would be if the company has any room for additional capacity in Colombia? And if you're seeing or there could be any airline using Colombia as a staging base for broader South America service -- and the second one would be if you could give us any sense regarding plans to build a new hotel infrastructure Southeast Mexico or Portola?.

Well -- in the case of Colombia, one of the main problems we have, and I have been saying this for a while, is that the airport in Ronegro is almost complete in terms of capacity. The comment has authorized at the end of the fourth quarter, additional works to expand more -- to expand the capacity of this building.

But of course, all of these works will last for a very few months, I would say, probably 2 years once those are completed. -- reality of Colombia is that it is important to say that they need a novel terminal building, and this is something that we have been talking and discussing with the government over the last couple of years.

We will let you know once we know more about this. In the case of flights from Colombia to the United States, the most important situation of Colombia today is that they have been expanding flights to Mexico and also there's one that is going to be to Puerto Rico, that's in progress. And some to the United States.

In the case of the United States, we're talking basically with more frequencies to the places where they are flying to take..

And regarding the new holder infrastructure in Mexico and Puerto Rico, do you have any color?.

You are talking about the CapEx program for this year?.

Yes.

If you have any plans regarding building new infrastructure for hotels in those regions?.

Well, in the case of the CapEx this year, we are basically completing the expansion in the case of Terminal 4 in Cancun, and we are basically refurbishing runways and taxiways in the case of Puerto Rico and the completion of the remodeling of Terminal....

Okay. That’s super clear..

Welcome..

Your next question comes from Javier Gayol from Santander Asset Management..

Can you hear me [ph]?.

Hello, Javier..

So first of all, congratulations and a quick one. My question is in terms of the cash. I mean -- I think you imminently will have by the end of 2023. Can you give us how are you looking at it? Where are you guys comfortable in terms of leverage there in terms of -- I know you privatize flexibility right now, and the markets are very volatile.

But just to understand how are you guys comfortable with the current cash position or well, the imminent cash position that you will have for the next year? Or should we expect more buybacks, dividends or maybe M&A? Just understand how you're looking at capital allocation for the cash that you -- most do have for 2023. .

Well, thanks for your question. Yes, you're right. We're closing the quarter with MXN13 billion in cash in hand. And apparently, that is too much.

Of course, we cannot forget what we have went through over the last couple of years, in the case of Co -- but it's true that this is too much, not just that, the CapEx program for this year, the MXN1.2 billion, of course, is very low when compared with other years.

And I'm almost ready to present my proposal -- my dividend proposal to the Board and then to the shareholders' assembly. So you will have to wait for that in the coming, I don't know, 30 years -- 30 days..

Super. Thank you..

You’re welcome..

Your next question comes from Adam Morton Carter from GBM [ph]..

Also congrats for your results. I just have a quick question. I understand, I mean, on a consolidated basis, the non-data revenue per pax decrease. I know that most of it comes from peso appreciation because actually in domain, increased a lot. But in some Mexican concessions, it did decrease.

So I just wanted to understand what kind of dynamics are you seeing there? Or if you could provide some color or what's the mixture from last revenues to pesos to -- so to better understand what's around that -- all right..

Well, as I have said during the initial remarks, the effect of the super peso has an impact on the commercial revenues. When you say non-rail remember that a portion of this is also regulated. So the best way to see there is total revenue, excluding construction managed commercial revenue that's regulated.

But you're right, it was a decrease, 24% depreciation of the Colombian peso in the case of the Mexican peso and around 5% in the case of the U.S. dollar had an impact on that number..

Your next question comes from Gabriel Himelfarb from Scotiabank..

Congrats on the results. Just a quick question, follow-up question about the MDP negotiation. Are you considering any tariff impact on -- based on the Tulum airport and also on -- are you considering an additional CapEx on Meritas terminal, which I believe is the capacity constraint..

Gabriel, well, in the case of media, let me start with your second question; in the case of many that we have expanded building. And today, May has much more capacity in comparison of what they had a year ago. So I don't see that many the airport is constrained.

In terms of the question about Tulum, yes, of course, that will have an implication on the tariff of Cancun because of the passenger traffic that they will take, but that's -- that's a normal procedure.

Remember that the maximum rate is calculated with the future passengers or the expected future passengers in all the airports, of course, if we are saying that Tulum will have some passengers that is considered into our calculation..

Sure. Okay. But just if there’s like a sort of rule of distance between airports, I believe it’s 110 kilometers far from another airport, it triggers the negotiation or the main negotiation or can be admitted it’s like more distance than the minimum part for competing assets? I don't know if I explained well..

Yes. Well, the [indiscernible] final location is 130 kilometers away from our airports. But some of the passengers that uses our efforts today should be using to numero -- and that is why this number has been included in our proposals..

Okay. Thank you very much..

Your next question comes from Pablo Monsivais from Barclays..

I have 2 quick questions. The first one is on the cost of services for Puerto Rico. I want to check why was the lower maintenance and what should we expect in the future? That's number one. And number two is a more broad question in terms of commercial revenues in Cancun and Puerto Rico.

I remember that early when you bid for the concession, the objective was to close the gap to Cancun.

How do you see commercial revenues in Puerto Rico reaching that go a few years after that? Do you think there's still room for upside? Or should we now expect a more steady state?.

In the case of cost of services of Puerto Rico, one of the important element that I mentioned here in the initial remarks was the maintenance reserve, and we decreased that because we made some savings on the works that have to be performed.

In the case of commercial revenues in the case of Cancun, we are experiencing at some times of the day, congestion at the terminal buildings that are not allowing us to provide the right service. And of course, we are not really taking the potential of commercial revenue.

So it's clear that today or this year until we expand the Teibildings, we're going to suffer or we're going to lose some opportunities there. Today, Puerto Rico has probably the same or slightly over commercial revenues per passenger in comparison with Cancun.

Going forward, of course, we will -- or we should expect a steady growth or not -- the low-hanging fruit is not there anymore. That's very clear. But of course, this is an endless story, and we need to take advantage of the passengers we have.

And at the end of the day, what we need to do is to convert flyers into buyers and keep taking these opportunities in both cases..

Your next question comes from Julia Orsi from JPMorgan..

I have 2 questions on our side. So the first one is, what should we expect from EBITDA margins going forward.

This quarter, EBITDA margins were pretty solid? And is this sustainable in the midterm? And the second question is what's your expectation on the FX upgrade your category one?.

Well, in the case of EBITDA margin going forward, you will have to make your own calculations in terms of revenues and costs. What I can say to you is that we have seen -- or we start feeling the inflation in the case of the 3 airports.

You have seen the numbers and those have increased more than inflation to catch up some pieces of what we have saved since 2019. If we see on real terms, our costs today in comparison of how it was in 2019 is lower than what it was in real terms. So we will see some effect.

Just to give you an idea, in the case of energy, during the quarter, the cost of energy here in Mexico increased 8%, 8% for the quarter is a very strong number. And that, of course, will have an impact through the rest of the year..

Your next question comes from Lucia Gomez from Compass Group..

Sorry, I got disconnected at the beginning.

So I don't know you've talked about this, but I just wanted to see if you could give me your outlook for specifically the Mexican traffic moving forward? Are we going to start seeing a slowdown on this higher traffic levels we've had? Or do you think it's going to keep up at current levels?.

Well, Mexico traffic has been very strong, particularly in the case of leisure. It is not the case in the case of corporate travel, as I mentioned, in Veracruz, Vermosa Minatitlan, -- what we expect is these airports to recover 2019 levels during this year. In the case of leisure, we expect this to continue. We are seeing a strong demand there.

Of course, that will depend on the tourism activities during the summer. So far, if we see the first month of the year, the numbers have been very strong. Of course, I would say, first quarter of this year, it's going to be strong because first quarter last year was affected by Omicron. So the important point during the year is going to be the summer.

But again, I can say to you that we expect steady growth on the leisure travel [ph]..

Your next question comes from Regis Cardoso from Credit Suisse..

One question from my side with a broader, longer-term perspective. Thinking of your assets in Mexico, where do you think we are in terms of either investing further? Or on the other hand, generating free cash flow to pay back the concession reference value.

As we approach the next MDP, right? Should we continue to invest further? Should we be thinking about -- does it make sense to allocate -- and if it is up capital, right? Does it make sense to allocate capital into assets that have a longer-term maturity, mixed-use buildings, industrial parking lots? I mean what would be the use of cash? Or do you think it will revert to higher shareholder distributions in the future?.

Well, in the case of Mexico, we're still 20 years away from 25 years away from the end of the concession. So we are, I would say, in the middle of the 50-year period. We -- normally, we invest or we propose our investments in accordance with the demand we expect.

That's what I was saying, the most important effect in terms of the proposal we have presented to the government is Cancun because we expect more traffic in the case of Cancun. In the other airports, basically, we do have the capacity for the future demand. So we do not perform major expansion works that with the exception of Waha.

So for the next MDP, if you want to say so, we're going to be, let's say, catching up in terms of that we have the capacity there with the exception of Kaiku [ph]..

Understood. And probably as we enter sort of the second half of the consumption period, I would assume at some point, free cash generation from those concessions will increase.

And in light of that 25-year remaining, does it make sense to invest in further mixed-use buildings? Or do you think majority of that free cash flow would eventually become shareholder distribution?.

Yes. I have to agree with you because if we see the results for the first 25 years, basically, most of the cash flow generation has been invested in the airports with the exception of the dividend payment mostly has been invested there. And this trend should reverse towards the end of the position..

Understood. Congratulations on the results..

Your next question comes from Francisco Suarez from Scotiabank..

Thanks for the call also congrats on the superb results. The -- and thank you for your initial remarks. Those were very helpful on your overall outlook.

Can you give us an indication what is also happening on go supply in the Revera Maya? Do you see further investments adding perhaps more to demand in addition to your remarks what you said on trends on air travel from the U.S.

and Canada?.

Yes. Thank you for your words. In the case of room supply several comments there. First is there has been a lot of Airbnb that have been constructed over the past couple of years. And to be honest, I do not have visibility as I had in the past because in the past, it was easy to see or to track hotel rooms.

In the case of Airbnb, we do not have a number of how many they are and how many rooms they have by unit. So you can see Airbnb's growth in what we call North of Cancun. That's one piece of the puzzle. The other piece is the case of Isla Murer [ph] that has been growing really fast over the last couple of years. So all of these not to our airport.

In the case of Cancun, I was saying for many years that there was no more space in the hotel zone of Cancun, and now there is a project there for another 2,500 rooms. So even that we say there's no space, there are some construction as we speak.

Finally, in the Revera, the most important region in terms of growth, of course, is close to, and that should be taken by the new airport there. .

Congrats, again..

That concludes the question-and-answer portion of today's conference call. I would now like to turn the conference back over to Mr. Castro for closing remarks..

Thank you, and thank you all of you again for participating in the first quarter -- in the fourth quarter results conference call. We wish you good day. Goodbye..

Ladies and gentlemen, this concludes ASUR's fourth quarter 2022 results conference call. We'd like to thank you for your participation. You may now disconnect..