Earnings Call Transcript - OMAB Q4 2025

Operator, Operator

Greetings. Welcome to OMA's Fourth Quarter 2025 Earnings Conference Call. Please note this conference is being recorded. I will now turn the conference over to Emmanuel Camacho, Investor Relations Officer. Thank you. You may begin.

Emmanuel Camacho, Investor Relations Officer

Thank you, Sherri. Hello, everyone. Thank you for standing by. And welcome to OMA's Fourth Quarter 2025 Earnings Conference Call. We are delighted to have you join us today as we discuss our company's performance and financial results for the past quarter. Joining us today are CEO, Ricardo Duenas; and CFO, Ruffo Perez Pliego. Please be reminded that certain statements made during the course of our discussion today may constitute forward-looking statements, which are based on current management expectations and are subject to a number of risks and uncertainties that could cause actual results to differ materially, including factors that may be beyond our control. And now I'll turn the call over to Ricardo Duenas for his opening remarks.

Ricardo Duenas, CEO

Thank you, Emmanuel. Good morning, everyone, and thank you for joining us today. This morning, I will briefly discuss the approval of our master development program, then Ruffo and I will review our annual and quarterly operational performance and financial results. And finally, we will be happy to answer your questions. During December, we received approval from the Federal Civil Aviation Agency for a master development program covering the '26-'30 period. The approved investment commitment amounts to approximately MXN 16 billion expressed in December 2024 pesos. This new 5-year program is focused on capacity expansion and quality enhancements at our largest airports in terms of passenger contribution while further strengthening the efficiency of our network. Investments are allocated across terminal expansions, airside infrastructure, equipment upgrades, pavement, rehabilitation, modernization works, environmental initiatives as well as safety and certification programs. Capacity and quality improvements, infrastructure optimization, airport equipment, and sustainability-related CapEx represent the main drivers of the program. In this context, our MDP prioritizes projects that enhance passenger experience, improve operational efficiency, and incorporate technology solutions that support long-term service quality and cost optimization. Sustainability and decarbonization are embedded in our investment strategy with initiatives aimed at improving energy efficiency and supporting our long-term emission reduction targets. Importantly, the total investment commitment of 2026-2030 is comparable in real terms to the investment considered in the 2021-2025 cycle. However, traffic levels today are materially higher than 5 years ago. This implies an improvement in capital efficiency per passenger and reflects the scalability of our existing infrastructure. In other words, this MDP reflects disciplined capital allocation, greater efficiency in the deployment of CapEx, and a focus on maximizing the use of current assets. The approval also provides long-term regulatory visibility and reinforces the structural growth outlook of our airports. Moving now to our full year 2025 results. This was a year marked by the continued recovery in operational capacity and a strong performance in our main airport of Monterrey. While the Pratt & Whitney engine inspection program continued to affect certain fleets during the year, capacity constraints eased compared to 2024. This allowed Mexican airlines to progressively restore frequencies and reintroduce routes that had been limited or suspended due to aircraft availability. As a result, seat capacity across our airports increased close to 11% during 2025, reflecting improved aircraft deployment and network adjustments. During 2025, we opened 35 new routes, of which 24 were domestic and 11 were international, further strengthening connectivity across our airports. Supported by higher seat availability and route expansion, total passenger traffic reached 28.8 million passengers in 2025, representing an 8.5% increase as compared to 2024, with domestic passenger traffic growing by 8% and international passenger traffic by 12%. The expansion reflects a continued diversification of Monterrey's international footprint. In addition to consolidating its position as a key gateway to the United States, Monterrey has progressively expanded its long-haul connectivity in recent years, including overseas service to Europe and Asia. The consolidation of long-haul routes such as Monterrey-Madrid, Monterrey-Tokyo, and Monterrey-Seoul reinforces our long-term vision of positioning Monterrey not only as a regional hub within Mexico but as an increasingly relevant international connecting point linking Northern Mexico with major global destinations. In 2026, we will continue strengthening overseas connectivity with additional operations to Madrid and the launch of the Monterrey-Paris route in April 2026, further expanding our presence across diversified international markets. Beyond traffic growth, 2025 was also a year of solid execution across our commercial and diversification businesses. On the commercial front, we recorded growth across three key revenue line items, driven primarily by the opening of new outlets and continued commercial mix optimization. Restaurant revenues grew by 22%. VIP lounges revenues increased by 30% and parking revenues increased by 13% as compared to 2025. From our diversification lines of business, our industrial park was one of the strongest contributions to growth with a 44% increase in revenues versus 2024, supported by higher leased square meters. OMA Carga revenues recorded strong results as well, with a 9% increase in revenues, mainly as a result of higher volumes and improved operational efficiencies. Regarding our financial performance, aeronautical and non-aeronautical revenues each grew approximately 12% year-over-year. As a result, our adjusted EBITDA for the year was MXN 10.2 billion, and we recorded an adjusted EBITDA margin of 74.5%. I will now move on to our fourth quarter 2025 performance. In the quarter, OMA's passenger traffic totaled 7.5 million, a 6% increase year-over-year. Seat capacity increased by 8% during the quarter. On the domestic front, passenger traffic grew by 6%, driven primarily by the Monterrey Airport, which saw an increase on routes to the metropolitan areas of Mexico City, mainly to Toluca and Mexico City airports, Bajio, Puerto Vallarta, Merida, and Guadalajara. These routes collectively added over 300,000 passengers during the quarter, representing 79% of the total domestic passenger growth. International passenger traffic increased by 4%, mainly driven by Monterrey with higher traffic on the routes to Bogotá, Toronto, Panama, and San Luis Potosi on the routes to Dallas-Fort Worth, Atlanta, and San Antonio. Together, these routes added more than 67,000 passengers during the quarter. In terms of growth by airline, Volaris, which accounted for 24% of our total passenger traffic in the quarter, recorded a 17% increase in passenger traffic compared to the fourth quarter of 2024, while Viva, which accounted for 51% of our total passenger traffic, recorded a 5% traffic increase during the quarter. Turning to our financial performance. Aeronautical revenues increased 6%. Commercial revenues grew by 8% compared to the fourth quarter of '24, and commercial revenue per passenger stood at MXN 62. Commercial revenue growth was mainly driven by parking, restaurants, VIP lounges, and retail, mainly as a result of higher penetration and the increase in passenger traffic. The occupancy rate for commercial space stood at 93% at the end of the quarter. On the diversification front, revenues increased 5% with OMA Carga contributing most of the growth, mainly due to higher revenues from our bonded warehouses in Chihuahua, given our successful strategy to further develop this warehouse in previous quarters. OMA's fourth quarter adjusted EBITDA increased by 6% to MXN 2.6 billion with a margin of 73.6%. On the capital expenditures front, total investments in the quarter, including MDP investments, major maintenance, and strategic investments were MXN 755 million. I would now like to turn the call over to Ruffo Perez Pliego, who will discuss our financial highlights for the quarter.

Ruffo Pérez del Castillo, CFO

Thank you, Ricardo, and good morning, everyone. I will briefly review our financial results for the quarter, and then we will open the call for your questions. Aeronautical revenues increased 5.6% relative to Q4 '24, mainly due to the increase in passenger traffic. It is worth noting that the peso appreciation against the dollar resulted in a 1.3% decline in international passenger charges despite a 4.2% increase in international passengers. Non-aero revenues increased 7.5%. Commercial revenues increased 8.4%. The line items with the highest growth were parking, restaurants, VIP lounges, and retail. Parking grew by 18.4%, mainly as a result of higher passenger traffic as well as higher penetration across our airports and increased tariffs. Restaurants and retail increased 11.3% and 7.0%, respectively, both driven by higher passenger traffic as well as previously opened or replaced outlets. VIP lounges grew by 17%, mainly due to the higher capture rate, primarily in Monterrey Airport as well as the increase in passenger traffic, partially offset by a stronger peso against the U.S. dollar. Diversification activities increased 4.8%. OMA Carga contributed most to the growth in the quarter, increasing by 14.2%, resulting from a higher level of operation and tons handled during the quarter. Total aeronautical and non-aeronautical revenues grew 6.1% to MXN 3.5 billion in the quarter. Construction revenues amounted to MXN 613 million during the fourth quarter. The cost of airport services and G&A expense increased 11.6% versus Q4 '24, primarily due to the following line items. Contracted services expenses rose 14.7%, mainly due to higher costs of security and cleaning services following contract renewals in prior quarters, reflecting inflationary pressures and tight labor market conditions. Minor maintenance increased 24.1%, primarily due to the timing effect of works performed. However, maintenance for the full year increased by 4.0%. Basic services increased by MXN 11 million, mainly due to higher utility costs, particularly electricity. This includes a one-time MXN 6 million impact related to the temporary use of an alternative power supply line at the Monterrey Airport, which carries a higher tariff than our power purchase agreement. This temporary situation was caused by construction works related to the subway line near the airport. And since the end of December, electricity supply has reverted to our regular PPA contract. Other costs and expenses increased by 9.9% due primarily to higher IT-related requirements and transportation services. Concession tax increased 8.0% to MXN 286 million, in line with revenue growth. Major maintenance provision was MXN 216 million compared to MXN 39 million in Q4 '24. It is important to highlight that this is a non-cash item. During the quarter, we reassessed our major maintenance requirements to reflect expenditures included in the recently approved 2026-2030 master development program. This reassessment resulted in an increase in the provision liability. Approximately 17% of the total investments under the 2026-2030 MDP correspond to major maintenance projects. For 2026, we expect the full year major maintenance provision cost to be approximately MXN 400 million. OMA's fourth quarter adjusted EBITDA grew 5.9% to MXN 2.6 billion and the adjusted EBITDA margin reached 73.6%. Our financing expense decreased by 12.7% to MXN 290 million, mainly driven by lower interest expense associated to the major maintenance provision as well as higher interest income resulting from a higher average cash position. Consolidated net income was MXN 1.2 billion in the quarter, an increase of 3.6% versus Q4 '24. Turning to our cash position. Cash generated from operating activities in the fourth quarter amounted to MXN 1.9 billion. Investing and financing activities used MXN 663 million and MXN 2.5 billion, respectively. As a result, our cash position at the end of the quarter was MXN 3.1 billion. At the end of December, total debt amounted to MXN 13.6 billion and leverage measured as net debt to adjusted EBITDA ratio stood at 1.0x. This concludes our prepared remarks. Sherri, please open the call to questions.

Operator, Operator

Our first question is from Juan Ponce with Bradesco.

Juan Ponce, Analyst

On the MXN 260 million major maintenance provision recognized this quarter, does this reflect higher maintenance intensity or just timing shifts? Any additional color on the change would be helpful.

Ruffo Pérez del Castillo, CFO

Sure. Juan, it does reflect the expected expenditures for the next five years, specifically from 2026 to 2030, as well as timing changes compared to what we had previously assumed.

Juan Ponce, Analyst

Okay. And just to clarify, the expectation is that the full year number is going to be around MXN 400 million, correct?

Ruffo Pérez del Castillo, CFO

That is correct, noncash. And the P&L impact is noncash, yes.

Operator, Operator

Our next question is from Jens Spiess with Morgan Stanley.

Jens Spiess, Analyst

Yes, I have a question about the passenger fleet. How do you plan to increase it throughout the year? Also, what are your expectations for reaching close to 100% of your maximum tariff?

Ricardo Duenas, CEO

Yes. Thank you, Jens. So the announced increase is 6.9% increase starting April 10. And we anticipate it will take a couple of years, 2 to 3 years to reach the 100% maximum tariff.

Jens Spiess, Analyst

Okay. So by the end of this year, what percentage do you expect to have completed of the maximum tariff of this year?

Ricardo Duenas, CEO

Something around the 93%.

Jens Spiess, Analyst

93%. Okay. Perfect. Okay. If I may, just a second question, like any update on the timing of the investments in Monterrey? Yes, it would be much appreciated.

Ruffo Pérez del Castillo, CFO

Investment in Monterrey.

Operator, Operator

Our next...

Ricardo Duenas, CEO

Yes. Our main projects are centered on Monterrey and Culiacan. In Monterrey, we expect to complete the new commercial area by mid-next year. For Culiacan, we plan to open the new commercial area by the end of this year.

Operator, Operator

Our next question is from Vanessa Quiroga with Eternal Capital Group.

Vanessa Quiroga, Analyst

I would like to ask if you can provide the following details. How much of the master development plan investments for the next 5 years is major maintenance? And is the accounting rule to provision 100% of that major maintenance during the 5-year period?

Ruffo Pérez del Castillo, CFO

Sure. The total investments related to major maintenance in the approved MDP represents approximately 17% of the total MDP for the next 5 years. And the accounting rule is to provision the present value of such expenditure from today until the day the project is expected to start its execution.

Operator, Operator

Our next question is from Abraham Fuentes with Santander.

Abraham Fuentes Salinas, Analyst

I wonder if you can give us more color about the excess of concession tax on aeronautical revenues that we had during this quarter. If this is something that could be recurrent going forward or not?

Ruffo Pérez del Castillo, CFO

So the excess pursuant to 2023 tariff-based regulation, that excess was incorporated as additional reference value that was used in the recent negotiation that occurred in December. So that excess is already being recovered through a maximum tariff starting January 1 of this year.

Operator, Operator

Our next question is from Gabriel Himelfarb with Scotiabank.

Gabriel Himelfarb Mustri, Analyst

I have two questions. First, regarding the MDP CapEx on Monterrey, what percentage increase in commercial revenues do you anticipate, and how much EBITDA do you expect for OMA? Second, what is your perspective on the Viva-Volaris consolidation in terms of routes and seat allocation?

Ricardo Duenas, CEO

In terms of the second part of your question, we're still assessing the potential impact. So it's still an analysis, the impact. And in terms of the first part, Ruffo?

Ruffo Pérez del Castillo, CFO

Yes. We anticipate an increase following the opening of the commercial areas of the expanded Terminal A, starting in the second half of next year, with a full impact seen by 2028. We expect about a 10% to 15% rise in spending per passenger in Monterrey in real terms on an annual basis once these new stores and outlets are operational.

Gabriel Himelfarb Mustri, Analyst

Okay. If I may, I have an additional question. What is your perspective on asset acquisitions, such as those involving VINCI and the MDP, or the potential for future acquisitions that could turn OMA into a consolidation vehicle?

Ricardo Duenas, CEO

We are constantly searching for opportunities to grow both locally and internationally. Currently, we do not have any specific transactions under consideration. However, if such opportunities arise in the future, they will be discussed internally between VINCI and our team. One area we are focusing on is expanding our hotel presence, with plans to evaluate a new hotel in Monterrey and another in Ciudad Juarez. Additionally, we are looking to expand our industrial park in Monterrey.

Operator, Operator

Our next question is from Alberto Valerio with UBS.

Alberto Valerio, Analyst

I have two questions. Could you provide more details on the revenue line as well as on the cost of revenues? Do you have an impact from foreign exchange on international traffic? Regarding costs, could you elaborate on maintenance? You mentioned it would be a significant portion of your next MDP. How can we forecast this for the future? Additionally, could you share more information on what might expand it?

Ruffo Pérez del Castillo, CFO

Yes. So the first part of your question was related to the FX impact, correct? Okay.

Alberto Valerio, Analyst

Perfect. Yes.

Ruffo Pérez del Castillo, CFO

So we have four items on the revenue line that are closely tied to foreign exchange, which include international passenger charges, VIP lounge, duty-free, and industrial park. We estimate that the impact of the peso's appreciation in the fourth quarter of 2025 compared to the fourth quarter of 2024, which saw an approximately 8% appreciation, will be between MXN 50 million to MXN 60 million. That is our estimate of the effect of this appreciation. Regarding the second part of your question, for 2026, we expect the total annual provisioning to be around MXN 400 million, and we are still evaluating what the impact will be for the subsequent years. This will depend on both construction costs and the long-term interest rates used to discount that provision.

Alberto Valerio, Analyst

And if I may, just one more about the violence that we have seen. I know that the region Jalisco is a little bit different from OMA airports region. But do you have any sort of impact on your airports or cancellation routes and so forth?

Ricardo Duenas, CEO

All our 13 airports are operating normally. On Sunday, during the event, there were a few cancellations from Guadalajara and Puerto Vallarta Airport. There were some cancellations yesterday, but today we are back to normal operations, and we do not expect this to significantly affect our numbers.

Operator, Operator

Our next question is from Anton Mortenkotter with GBM.

Ernst Mortenkotter, Analyst

I have a quick question. We've noticed that some of your competitors are exploring alternative financing options, like FIBRA. Are you considering any alternatives for funding your capital expenditures or any special vehicles you might be looking into?

Ruffo Pérez del Castillo, CFO

So right now, we are not necessarily considering any other type of structures different from what we have used in the past few years. We do have some refinancings of debt that is due this year, and we would expect to tap the CEBURES market as we have done so in the past 4 or 5 years.

Operator, Operator

Our next question is from Julia Arce with JPMorgan. I was just wondering if you guys are considering an alternative to funding your CapEx similar to those or any special vehicles that you may be looking at? Ruffo Pérez del Castillo, CFO, responded that right now, they are not necessarily considering any other type of structures different from what they have used in the past few years. They do have some refinancings of debt due this year, and they expect to tap the CEBURES market as they have done in the past 4 or 5 years.

Unknown Analyst, Analyst

So can you comment a bit on your traffic expectations for the year? So on previous call, you were mentioning a low to mid-single-digit growth rate for 2026. Is this still the case?

Ricardo Duenas, CEO

Yes. For the year, we're anticipating somewhere in the low to mid-single-digit growth in traffic.

Operator, Operator

Our next question is a follow-up from Vanessa Quiroga with Eternal Capital.

Vanessa Quiroga, Analyst

My question is regarding the increase in the tariffs. The 7% in real terms that you mentioned, what is the base for that? Is the base the average in peso terms achieved in 2025? Or do you assume any FX? What is the base that you're using?

Ruffo Pérez del Castillo, CFO

Sure. The MDP approved maximum tariff was a 6.9% real increase in all of the airports, and that reflects the 2025 maximum tariff. So 2026...

Vanessa Quiroga, Analyst

So that will increase a few...

Ruffo Pérez del Castillo, CFO

It's the 2026 maximum tariff as compared to the 2025 maximum tariff. That increase in real terms, excluding inflation, is 6.9%.

Vanessa Quiroga, Analyst

So the part that maybe I need clarification, you are in 2026, you are going to have that increase or that's targeting 3 years?

Ricardo Duenas, CEO

Yes. The increase that we're going to pass through this year is 6.9% starting on the 10th of April. That includes inflation as well. So it's a nominal 6.1% increase.

Operator, Operator

Our next question is from Enrique Cantú with GBM.

Enrique Cantú, Analyst

So as you implement tariff increases under the new MDP, how are you assessing demand elasticity, particularly in routes like Monterrey and tourist destinations? And could you share your outlook for further route additions and whether you see scope for continued expansion based on your ongoing discussions with carriers and route additions?

Ricardo Duenas, CEO

Sorry, could you repeat the question, Enrique? Sorry.

Enrique Cantú, Analyst

Yes, of course. So it's about demand elasticity. How are you assessing the demand elasticity, particularly in routes like Monterrey and tourist destinations as you implement your tariff increases under the new MDP?

Ricardo Duenas, CEO

We believe that the pass-through we are implementing this year will not significantly affect traffic elasticity.

Ruffo Pérez del Castillo, CFO

Yes. Just regarding new route openings, so far, 20 routes have been confirmed. 17 of them are domestic and 3 are international. And they start the vast majority of them in June of this year from airports such as Monterrey, San Luis Potosí primarily.

Operator, Operator

Our next question is from Andres Radin with TRG.

Andres Radin Borrajo, Analyst

I was curious about commercial revenues per passenger and revenue from diversification for 2026. What kind of growth should we be expecting in any particular lines? Do you see any for this year?

Ruffo Pérez del Castillo, CFO

Okay. So in terms of commercial revenue per pax, they ended 2025 around MXN 62 per pax. We expect similar amounts for the next few quarters in 2026. And regarding diversification revenues, we don't look at them on a per pax basis, but rather as a whole. We have, as you know, both 2 mature hotels, the NH in Mexico and the Hilton Garden in our Monterrey Airport. So we should expect inflationary increases in the results of those 2 units. And the driver of this year of diversification would be our OMA Carga unit which should have double-digit growth.

Operator, Operator

There are no further...

Ricardo Duenas, CEO

We would like to thank everyone for participating in today's call. We appreciate your insightful questions, engagement, and continued support. Ruffo, Emmanuel, and I remain available to answer your questions. Thank you once again, and have a great day.

Operator, Operator

Thank you. This does conclude today's conference. You may disconnect at this time, and thank you for your participation.