Good morning, and welcome to the Corporación América Airports Third Quarter 2021 Earnings Conference Call. A slide presentation accompanies today's webcast and is available in the Investors section of Corporación América Airports' Investor Relations website.

At this time, I would now like to turn the call over to Patricio Iñaki Esnaola, Head of Investor Relations. Please go ahead..

Thank you. Good morning, everyone, and thank you for joining us today. Speaking during today's call will be Martin Eurnekian, our Chief Executive Officer; and Jorge Arruda, our Chief Financial Officer. Before we proceed, I would like to make the following Safe Harbor statement.

Today's call will contain forward-looking statements, and I refer you to the Forward-Looking Statements section of our earnings release and recent filings with the SEC. We assume no obligation to update or revise any forward-looking statements to reflect new or changed events or circumstances.

Note that for comparison purposes and for a better understanding of the underlying performance in our presentation today, we will be discussing results, excluding hyperinflation accounting in Argentina, which became effective in July 2018. Additional information in connection with the application of Rule IAS 29 can be found in our earnings report.

Now, let me turn the call over to our CEO, Martin Eurnekian..

Thank you, Iñaki. Hello everyone, and welcome to today's call.

I am pleased to report that the initiatives we have been focusing on since the start of this health crisis contributed again this quarter to deliver a significantly better business and financial performance despite challenging market conditions, while further enhancing the equity value of our business.

Traffic across our operations continued to recover during the quarter reaching 10.5 million passengers, up 90% on a sequential basis. Compared to pre-pandemic levels traffic reached 46% of the nearly 23 million reported in the third quarter of 2019.

This better performance was mainly driven by the sustained recovery of surge in Armenia, Brazil, Ecuador and Italy. By contract, Argentina and Uruguay remained heavily impacted by severe government travel restrictions to contain the spread of the COVID-19 virus during the quarter.

However, borders in these two countries were fully opened starting November 1st, on the back of the advanced rollout of the vaccination campaigns, and warmer weather as we approach the summer season in Latin America.

At the same time, cargo activity remained strong reaching 82% of pre-pandemic levels contributing to partially mitigate softer traffic volumes. Again this quarter, Uruguay and Italy outpaced 2019 cargo volume levels.

These positive trends flowed through our financial results, with revenues ex-IFRIC more than doubling year-on-year to nearly $170 million, and up 38% sequentially reaching 55% of the third quarter of 201 levels.

The successful cost reduction program implemented at the onset of the pandemic, together with our continued focus on strict expense controls and cash preservation also contributed to higher profitability.

Comparable adjusted EBITDA improved to $38 million, from the $7 million reported in the prior quarter and the $19 million loss reported in the third quarter of 2020. Importantly, we achieved positive adjusted EBITDA in all countries of operations with the exception of Peru. We have also achieved two important milestones on our strategy.

First, we’ve taken important steps to strengthen the company’s liquidity position and improve the debt profile. Between September and November in Argentina and Uruguay, we refinanced a combined $425 million in existing debt. We also obtained new funding for a total of $179 million in these two countries.

Second, we obtained a 20 year extension of our Carrasco International airport concession in Uruguay, which also includes the addition of six regional airports. This not only reinforces our leadership position in Uruguay, but also creates value and it strengthens our business. Jorge will go over these advances in more detail shortly.

Moving on to Slide 4, governments continue to gradually lower travel bans across most markets, while commercial operations were allowed across our airports. Total traffic for the quarter was still impacted by high restrictions for international travel in Argentina, Uruguay and Italy.

Beginning this month, Argentina and Uruguay opened their borders to international travel with certain requirements as reflected by the green boxes on this slide. By contrast, Italy increased travel restrictions for certain countries given a spike in COVID cases after the summer season.

Looking at performance and restrictions by country during the third quarter. Starting with Argentina, domestic traffic remained open throughout the quarter while borders remain closed to foreigners through October 31.

In addition, the daily quota for international arriving passengers by the government to contain the spread of the virus remained kept at 1,700 for almost the entire quarter causing passenger traffic to be 70% below the third quarter of 2019 levels, despite improving 38 times year-on-year with 78% of the population with at least one dose and 59% fully vaccinated and improved sanitized conditions since November 1st borders are opened to all fully vaccinated passengers who also present a negative PCR test.

While Uruguay posted a traffic increase of over four times year-on-year, this was still 75% below third quarter of 2019 levels impacted by the closure of borders to non-resident foreigners. Starting November, borders reopened to all foreigners presenting a full vaccination certificate and a negative COVID-test.

Passenger traffic in Italy was up over 85% year-on-year, reaching 50% of the third quarter of 2019 levels and posting a significant sequential improvement boosted by the summer season with domestic traffic reaching nearly 86% of pre-pandemic levels.

In Brazil, traffic more than doubled year-on-year has helped conditions improve reaching 74% of the passenger levels of the corresponding quarter in 2019. Domestic travel is not restricted, while international travel is now fully open only subject to presenting the negative COVID test prior to boarding.

Traffic in Armenia continued to post their strong performance, up nearly nine times year-on-year reaching over 34% of the third quarter of 2019 levels benefiting from the opening of the Russian borders to foreigners earlier in the year.

Lastly, Ecuador maintained the growth trend with passenger traffic improving 4.1 times year-on-year and reaching 67% of the third quarter of 2019 levels, supported mainly by travel to the U.S. and Panama, which is actually above 2019 traffic levels.

Domestic and international travel are not subject to any restrictions, although certain requirements apply for international passengers upon arrival. Taking a deeper look at passenger traffic trends on Slide 5.

The recovery that started last May from the wake of the advances in the vaccination rollout and lower travel restrictions continued throughout the quarter. Traffic in July, August and September improved to 40%, 47% and 52% of the traffic levels achieved in the respective months of 2019.

By country of operations, Armenia delivered their fastest recovery against pre-pandemic levels. Brazil and Ecuador posted and significant revamp while Italy benefited from the boost in demand during the summer season.

By contrast, Argentina and Uruguay will remain affected by the pronounced government restrictions in place through October showed this lowest recovery although posting a consistent pick up month-over-month. The recovery continued into October with passenger traffic reaching 58% of the corresponding month of 2019.

This momentum is anticipated to strengthen in our main LATAM markets as we enter the summer season on the lack of the recently relaxed travel lines, better sanitary conditions and pent-up demand. Now, turning to Slide 6, cargo operations continued the recovery trend across the board with volumes reaching 81% of third quarter of 2019 levels.

This good performance was driven by the majority of our countries of operations. Uruguay and Italy stand out this quarter with volumes exceeding the levels achieved in the third quarter of 2019 while Argentina and Ecuador reached 80% of pre-pandemic levels. I will now hand over the call to Jorge, who will review our financial results.

Please Jorge, go ahead. .

Last September, we issued $30.5 million link bond in the local market at an annual interest of 4% in a two year maturity.

In October, we issued a ten year note for an aggregate principal amount of US$209 million to repurchase and exchange $24.61 of the total or regional principal amount of the 2017 notes and 66.83% of the original principal amount of the 2020 notes with a 4-year grace period.

In November, we raised US$126 million of new money in two tranches, $64 million in additional 10-year notes and $62 million in new senior secured notes due 2028 with a 3-year grace period. We also refinanced $95 million in bank loan to extend the final maturity of these loans until November 2024 from February 2023 with a 15-months grace period.

In Uruguay, this month we completed an exchange offer of an aggregate principal amount of US$194 million in outstanding principal amount of the 2015 and 2020 notes due 2032 for new notes due 2034 with a grace period until May 2025. We also raised US$52.9 million of new money with the issuance of additional notes also due 2034.

As a result, we all of the foregoing, we reduced total debt service payments in our bond transaction by $75 million in Argentina and US$28 million in Uruguay in each case for the next three years.

Moving on to total indebtedness and liquidity on Slide 11, we ended the quarter with a total liquidity position of $297 million, while our total debt remains stable at $1.3 billion. Our net debt to last 12 months adjusted EBITDA ratio remains above historical level but improving sequentially reflecting the recovery in adjusted EBITDA.

Net debt has remained fairly stable over the past quarters. All our subsidiaries remain in compliance with the debt covenants and remember, that CAAP itself has no direct indebtedness.

Finally, we delivered four consecutive quarters of positive operating cash flow across most of our segments, which is a testament of the financial discipline we have been keeping since the beginning of the pandemic. I will now hand back the call to Martin, who will present our closing remarks on Slide number 12. .

Looking ahead, we expect passenger dynamics to continue improving as we head into the summer season in South America, supported by lower traffic restrictions, and pent-up demand. Airlines have also announced an increase in flights and destinations considering the expected higher tourism activity.

While we are closely monitoring the rise in COVID-19 cases in some European countries, we remain vigilant of new virus strains as the situation remains fluid and the recovery is still non-linear. Long-term, we expect to see sustained traffic growth as the desire to travel remains unchanged.

We have continued to successfully execute on our key objectives of the mitigation plan established at the onset of the pandemic. First, we have made great progress to-date when advancing on the economic re-equilibrium processes across many of our concessions to restore the equity value of our business.

Second, terminate the Natal airport concession to allow the collection of the indemnification payment. Third, through the various debt management exercises which will become credit, we have preserved liquidity and strengthened our balance sheet, which remains a key priority for us.

And finally, we continue to carefully manage costs to ensure we can benefit from an efficient cost structure as activity continues to improve. Beyond advancing on our COVID-19 mitigation plan, we are looking ahead and seeking to develop additional value creation opportunities.

In this respect, we have been introducing an agile operational model with various multi-disciplinary things. We recently created a data analytics team to gather and process data from our activities with a view to support our strategy, to maximize revenues and client service.

We also remain vigilant on new business opportunities to further strengthen our airport portfolio. I would like to take this opportunity to thank our teams for their continued commitment to the execution of our strategic initiatives, all their efforts and enthusiasm.

Finally, our team and I are fully committed to maintaining open and proactive communications with the investment community as we continue our journey of building shareholder value. We look forward to meeting many of you, as well as other shareholders, potential investors and analysts in the coming months.

With this, let me open the call for questions and answers. .

And the first question comes from Bruno Amorim with Goldman Sachs. Please go ahead. .

Thank you. Good morning everybody. So, I have two questions. The first one is on the Uruguay concession extension. Can you provide more color on what will be the traffic revenues, EBITDA or CapEx contributions for Corporación América from the new airports to be incorporated into the concession? And second, a more structural question.

Looking past the COVID crisis, of course we are going through a cyclical recovery as you mentioned, traffic should continue to recover.

What should we expect the company post this cyclical recovery? Should we expect a significant increase in dividend payments or rather a focus on investments in new concessions in the upcoming years? Thank you very much. .

Speakers, this is the operator, if you are speaking right now, your line may be muted on your end. We cannot hear you..

Thank you, Bruno, for your question. This is Martin. As far as I understood, your question was regarding our expected expensing for traffic revenues of the new airports.

The agreement we’ve made with the Uruguay, the government requires us to invest in these airports bringing them up to certification levels, to be able to bring in – to be able to be bringing in traffic and to work on the development of this traffic, which today it’s almost non-existent in terms of commercial traffic. It’s all general aviation.

So, we have a plan in place to start working at first in the investments. And then, on a traffic promotion plan, but this is a long-term plan and Montevideo Airport is the one that’s going to be supporting all of these with the additional extension of 20 years in the Montevideo Airport concession. I hope that answers your question. And regarding….

Is it possible to – sorry, I am sorry to interrupt you.

Is it possible to give an idea of how much you are going to invest in those airports?.

Yes. It’s on the press release. We are going – we plan to invest on our 4-year plan, $67 million, which their first part is in the next three years and the next much more investment in 2028 to be made. But that’s the amount of CapEx going into these six new airports. .

Thank you. .

And regarding your second question, we are still in a lookout mode to understand what the passenger dynamics are going to be in the next year and in the next few years regarding the pandemic. We are confident that we are seeing the end of the pandemic.

But we are still not reacting to it as if it’s over, because we still need to be confident enough to see consistent numbers growing and the feeling that the pandemic is behind us worldwide. But once we come back into normality, we are probably going to start looking for new opportunities in the market as we are today.

But as we always say, in an opportunistic manner we are going to look for new opportunities for growing our business. .

Thank you.

And what about the outlook for dividends once the COVID crisis is hopefully behind us?.

It’s probably too early to say. But we are probably going back to a pre-COVID idea of – policy for dividends. .

Thank you very much. .

We have a question from Roberta Versiani with Citibank. Please go ahead. .

Hi. Thanks for the call. Just a quick one. Could you give us more detail or when you expect the cost dynamic to normalize? How you expect it to be in the quarters, please? Thank you. .

Can you please repeat the question? We did not – the sound is not perfect that we can’t clearly hear it. .

Oh, sorry.

Do you hear me now? Can you hear me now?.

Yes. Go ahead please..

Okay. Okay. Sorry. Sorry for that. I just would like to understand what’s your view for the cost dynamic in the coming quarters. When would you expect them to normalize just whatever detail you could give me would be very helpful? Thank you. .

Sure, during the pandemic, we were really harder and really alert to reduce our costs to preserve our cash. And also those efforts are going to remain once traffic levels are about to normal. But of course, as traffic picks up, we are going to have higher OpEx due to do the required dynamics of the traffic in the airports.

But we definitely expect to come out of this pandemic with a better cost base than we enter it. .

That’s great. Thank you. .

We have no further questions. So, this concludes our question and answer session. And I will turn the conference back over to Martin for any closing remarks. .

I would like to thank everybody for joining us today. We really appreciate your interest in our company. We look forward to providing updates on our recent initiatives as they become available. In the mean time, the team remains available to answer any questions that you may have. Again, thank you everybody and have a nice day. .

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect..