Corporación América Airports (CAAP) Q2 2025 Earnings Call Transcript

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DATE

Thursday, August 21, 2025, at 10 a.m. ET

CALL PARTICIPANTS

• Chief Executive Officer — Martin Eurnekian
• Chief Financial Officer — Jorge Arruda

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TAKEAWAYS

• Passenger Traffic-- Passenger traffic increased 13.7% year over year to nearly 21 million in Q2 2025, with double-digit growth in Argentina and Brazil, and strong single-digit growth in Italy, Uruguay, and Armenia; Ecuador remained roughly flat.
• Revenue-- Revenue grew 18.9% year over year ex-IFRIC 12 in Q2 2025, outpacing passenger growth, driven by increases in Argentina, Armenia, Italy, and Uruguay; Brazil achieved double-digit revenue growth excluding a prior period litigation gain.
• Revenue Per Passenger-- Revenue per passenger rose 4.5% year over year to $21, with healthy contributions from cargo, parking, VIP lounges, and duty-free.
• Adjusted EBITDA ex-IFRIC 12-- Adjusted EBITDA ex-IFRIC 12 reached $169 million in Q2 2025, up 23% year over year, with margin expanding 1.4 percentage points year over year to 38.6%.
• Commercial Revenue-- Commercial revenue up 22% year over year, exceeding year-over-year traffic growth, supported by gains in cargo, parking, duty-free, and other passenger-related services.
• Argentina’s Performance-- Argentina delivered 17% overall traffic growth year over year and more than 20% revenue growth year over year; both domestic and international traffic set new records.
• Italy Traffic-- Traffic increased 9% in Italy, setting a second-quarter record, driven by domestic growth at Pisa and international gains at Florence and Pisa Airports.
• Brazil International Traffic-- International traffic surged over 41% in Brazil, with US-bound routes reaching record levels.
• Cargo Revenues-- Cargo revenues grew 30% year over year, led by Argentina, Brazil, and Uruguay, benefiting from new business models, tariff increases, and higher pharma imports.
• Liquidity-- The company ended Q2 2025 with $595 million total liquidity, up 13% versus year-end 2024.
• Net Debt-- Net debt decreased to $643 million from $718 million in December 2024; The net leverage ratio improved to a record low of one time.
• Dividend Action-- The Argentine subsidiary AA2000 approved a $150 million dividend distribution in Q2 2025, with $127.5 million to be received by Corporación América Airports S.A.
• Florence Master Plan-- Environmental approval was secured in April for the Florence Airport project in Tuscany.
• Argentina’s Cost Trend-- Indicating efficiency gains despite inflationary pressures.
• Ongoing M&A-- Management confirmed active review of Motiva’s former CCR airport assets and pursuit of new concessions in Latin America, Iraq, Angola, and other markets.

SUMMARY

Corporación América Airports S.A. (NYSE:CAAP) reported record-setting operational results, with double-digit revenue and traffic growth in Argentina, Brazil, and Uruguay, and strong single-digit traffic growth in Italy and Armenia. Adjusted EBITDA and margin expansion reflected rising commercial and cargo revenues, supported by disciplined cost management and improved per-passenger yields. The group increased its liquidity and reduced net debt, positioning itself for continued portfolio investment and capital return. The company made notable strategic progress with project approvals in Florence, dividend actions in Argentina, and momentum on new M&A opportunities.

• Management said, "The conversations include the rebalancing of the economic equilibrium, investment requirements in the system, among other aspects. There is a new Secretary of Transport since mid-May. We are very engaged with all the authorities. We believe that we are making good progress, and we will keep the market updated as we make concrete steps into this process." Management described ongoing engagement with authorities following the arrival of a new Secretary of Transport.
• The CFO stated that all subsidiaries except Ecuador generated positive operating cash flow year to date as of Q2 2025, with Ecuador's outflow attributed to its regular annual concession fee payment.
• The CEO highlighted that the newly expanded duty-free arrivals area at Ezeiza Airport in Argentina opened in May, and that construction of a shopping mall at Brasília Airport remains on track for an April 2026 opening.
• Management expressed the expectation that positive traffic momentum will continue in Argentina, Italy, and Romania during the upcoming summer seasons.

INDUSTRY GLOSSARY

• IFRIC 12: International Financial Reporting Interpretations Committee standard defining accounting for service concession arrangements, often relevant for infrastructure operators in sectors such as airports.
• Concession: A long-term operating agreement granting a private entity the right to run airport infrastructure, usually involving capital commitments and regulatory oversight.
• AA2000: Aeropuertos Argentina 2000, the Argentine subsidiary operating the country’s main airports under a government concession.

Full Conference Call Transcript

Martin Eurnekian: Thank you, Patricio. Good day, everyone, and thank you for joining us today. I am pleased to report an excellent quarter for Corporación América Airports S.A. Customer traffic was up almost 14% from last year, with strong growth in the great majority of our markets. Argentina had a standout performance, hitting a new second-quarter historical record with double-digit increases in both international and domestic travel. We also saw solid gains in Brazil, Italy, Uruguay, and Armenia, while Ecuador remained largely flat. Italy, Uruguay, and Armenia also hit new second-quarter historical records.

On the top line, revenues grew nearly 19%, outpacing passenger growth and demonstrating a strong execution of our management team in increasing revenues per passenger, as well as the quality of our portfolio. Revenue per passenger edged up to $21, given by steady contributions from cargo, parking, VIP lounges, and duty-free. This led to a 23% year-over-year increase in adjusted EBITDA, supported by notable contributions from Argentina, Uruguay, and Armenia, with the margin up 1.4 percentage points to 38.6%. We closed the quarter with a very strong financial position that gives us flexibility to keep moving on our growth plans.

We also wanted to highlight that we obtained environmental approval from the region of Tuscany for the Florence Airport master plan in April. Lastly, our Argentine subsidiary AA2000 has recently approved a $150 million dividend distribution. Moving on to Slide four, we saw a very strong traffic performance across operations, except Ecuador, where traffic was flat. Total passenger traffic increased 13.7% year over year to nearly 21 million passengers, accelerating from the 7% growth or 9% ex-Natal reported in the first quarter. Domestic traffic rose just under 15%, driven primarily by a recovery in demand in Argentina and Brazil, to a lesser extent in Italy.

International traffic increased 12% with positive contributions from all markets except Ecuador, and particularly strong results in Argentina and Italy, which together accounted for more than 80% of the year-over-year increase in the quarter. Brazil, Uruguay, and Armenia also posted strong growth in international traffic. Let's look at performance by country. In Argentina, our largest market, overall traffic growth accelerated to 17% from nearly 13% in the first quarter. Domestic traffic was up 16%, supported by sustained demand recovery and multiple route resumptions. On the international front, traffic increased close to 19%, reflecting new and expanded services from carriers such as JetSmart, Gol, Sky, Azul, LATAM, Avianca, and Air Europa.

This strong performance continued into July, with domestic and international passenger traffic increasing by 10% and 13%, respectively. Italy delivered a 9% increase in traffic, reaching a second-quarter record, driven by both domestic and international travel. International traffic, representing 81% of the total, was up 9%, supported by strong growth at Florence and Pisa Airports. Domestic volumes grew 11%, led by nearly 20% growth at Pisa, mainly reflecting Ryanair's frequency increases. This solid performance continued into July, with domestic and international passenger traffic increasing by 8% and 6%, respectively. Brazil recorded a 15% year-over-year increase in traffic, with domestic traffic up nearly 14% and transit passengers up 15%.

International traffic, a smaller share of the mix, grew over 41%, with routes to the US reaching record highs. In July, overall traffic increased by 6% against July 2024. In Uruguay, traffic was up nearly 9%, marking also a second-quarter record. The performance in the quarter benefited from the strong activity during the Easter holiday. Azul announced the introduction of a new route between Montevideo and Campinas, which began operating last month. In July, overall traffic in Uruguay declined 6% year over year, mainly impacted by the removal of the Montevideo-Buenos Aires route by JetSmart, as well as several days of adverse weather conditions that led to flight cancellations.

In Armenia, traffic was up 8%, fueled by the arrival of several new carriers, including China Southern, El Cairo, Salam Air, and Sky Express, and the announcement of a lease airbase launching eight European routes. These developments are strengthening connectivity and supporting our role in positioning Armenia as a regional hub. Traffic in July rose by 7% against the same period last year. Lastly, traffic in Ecuador was broadly flat, with a 0.5% decline in total passengers. Domestic traffic rose slightly, while international volumes declined, impacted by reduced US operations, high airfare levels, and a still challenging security environment in the country continue to affect travel. In July, traffic remained robust compared to July 2024.

In sum, this was a record second quarter for Argentina, Italy, Uruguay, and Armenia, highlighting the strength and resilience of our network and their ability to capture growth across diverse geographies. Turning now to cargo on Slide five, we delivered another strong quarter, with cargo revenues up 30% year over year, led by Argentina, Brazil, and Uruguay. The increase reflected not only higher margins in key markets but also improved pricing dynamics and new revenue streams. In Argentina, cargo revenues were boosted by the new cargo business model implemented in mid-March, which is delivering as planned.

Uruguay also saw a solid lift from tariff increases in the courier segment, while Brazil benefited from increased higher pharma imported volumes as well as higher average ticket on domestic cargo. Armenia maintained its positive trend, contributing meaningfully to overall volumes. Looking ahead, we will continue to build on this momentum, enhancing our current capabilities and leveraging growth opportunities across our airports while maintaining a competitive and efficient cost structure. I will now turn the call over to Jorge, who will review our financial results. Please go ahead.

Jorge Arruda: Thank you, Martin, and good day, everyone. Let's start with our top line on Slide six. Total revenues ex-IFRIC 12 increased 18.9% year over year, outpacing passenger traffic growth of 13.7%. This strong performance was driven by double-digit growth in Argentina, Armenia, Italy, and Uruguay. Excluding the one-time litigation benefit recorded in 2024, Brazil also delivered double-digit revenue growth, further supporting our solid results. Our revenue per passenger was up 4.5% to $21 from $20.1 last year. Aeronautical revenues were up 15.1%, mainly supported by the strong performance we saw in Argentina, coupled with positive contributions from all countries except Ecuador.

In Argentina, revenues were up more than 20%, supported by an 18.5% year-on-year increase in international traffic and, to a lesser extent, higher domestic passenger fees following a tariff adjustment implemented in November. Strong momentum continued in Argentina, Uruguay, and Italy, each delivering double-digit growth, while Brazil posted a 9.5% increase in line with passenger traffic trends. In contrast, Ecuador reported a 2.2% revenue decline, reflecting a modest drop in traffic during the quarter. Commercial revenues were up 22% year on year, well above the 13.7% increase in traffic, driven by higher cargo revenues and solid performance across parking facilities, VIP lounges, duty-free stores, and other passenger-related services. Fuel-related revenues, primarily in Armenia, also contributed to the increase.

Growth was particularly strong in Argentina and Armenia, up 27% and 26%, respectively, with additional double-digit gains in Italy and Uruguay further highlighting the strength of our commercial portfolio. Turning to Slide seven, total costs and expenses excluding IFRIC 12 were up 16.8% year over year, in line with higher activity but below revenue growth of nearly 19%. Cost of services rose by 15.4%, primarily reflecting higher concession fees and maintenance tied to increased activity in Argentina, as well as higher fuel costs in Armenia consistent with the growth in fuel revenues. SG&A expenses increased 22%, largely due to higher salaries in Argentina driven primarily by inflation outpacing currency devaluation and tough comparisons with the second quarter of 2024.

We note, however, that total costs and expenses in Argentina, excluding IFRIC 12, declined 5.5% in the second quarter compared to the prior quarter, confirming the improved trend we signaled in our first-quarter earnings call. Moving on to profitability on Slide eight, adjusted EBITDA ex-IFRIC 12 reached $169 million, up 23% year over year, mainly driven by a 34% increase in Argentina and positive contributions from all countries except Ecuador. Uruguay delivered another consecutive quarter of strong growth, with adjusted EBITDA up 27%, supported by steady traffic gains and robust commercial performance, particularly in cargo and other passenger-related revenues such as duty-free and VIP lounges.

Armenia delivered double-digit growth, underpinned by traffic growth and robust fuel revenues, contributing to the positive momentum across our key markets. Adjusted EBITDA at Brazil Airport was up 16%, excluding the one-time benefit of $1.7 million from the resolution of a litigation process, which was recorded in the second quarter of 2024. In Italy, adjusted EBITDA increased 2%, or 14% when excluding other construction service-related costs at Toscana Aeroporti Consorzio, a subsidiary of Toscana Aeroporti. Adjusted EBITDA in Ecuador declined 3%, reflecting weaker passenger traffic during the period. Adjusted EBITDA margin ex-IFRIC 12 expanded 1.4 percentage points year over year to 38.6%, mainly driven by margin improvements in Argentina and Uruguay.

Notably, in Argentina, we achieved a 3.2 percentage point margin expansion, supported by strong traffic growth and robust commercial revenues despite continued pressure on Argentine peso costs, from inflation running ahead of currency depreciation and tough year-over-year comparisons. Turning to Slide nine, on the back of our strong cash flow generation, we closed the quarter with a total liquidity position of $595 million, up 13% from the $526 million recorded at year-end 2024. Notably, all of our operating subsidiaries reported positive year-to-date cash flow from operating activities except for Ecuador, due to the one-time annual concession fee payment, which is due and paid every January.

Cash used in financing activities reflected debt repayments in Argentina and Ecuador, as well as dividends paid to non-controlling interest in subsidiaries. As Martin noted at the beginning of the call, driven by strong cash generation, our Argentine subsidiary has recently approved a dividend distribution of $150 million, of which $127.5 million will be paid to Corporación América Airports S.A. We are very pleased with the performance of our operations in Argentina, which enables us to meet our CapEx commitments, pay our debt service, and distribute excess cash to strengthen our consolidated cash position.

Moving on to the debt and maturity profile on Slide 10, total debt at quarter-end was $1.1 billion, while our net debt decreased to $643 million from $718 million in December 2024. Our net leverage ratio improved to a record low of one time, driven by lower net debt and stronger adjusted EBITDA levels. To wrap up, we delivered strong operating and financial results, ending the quarter with a solid balance sheet and healthy debt position. We remain focused on pursuing both organic and inorganic growth opportunities to enhance our airport portfolio and create value. I will now hand the call back to Martin, who will provide closing remarks and discuss our view for the remainder of the year.

Martin Eurnekian: To close, let's turn to Slide 12. This was a very strong second quarter, with broad-based passenger growth across our network that underscores the resilience and quality of our diversified portfolio. We continue to perform well, driving revenue growth and EBITDA margin expansion, while keeping a solid financial position. On the commercial front, we remain focused on enhancing non-aeronautical revenues. In Argentina, we inaugurated the new duty-free arrivals area at the Ezeiza Airport in May, expanding it from 700 to 1,100 square meters to improve the passenger experience and capture additional commercial opportunities.

In Brazil, construction of the shopping mall at Brasilia Airport is progressing, with opening planned for April 2026, alongside other initiatives to grow food and beverage, retail, and service offerings across the portfolio. Strategically, we are moving forward across our concessions. In Argentina, we are progressing with the AA2000 concession process. In Italy, we secured environmental approval from the region of Tuscany for the Florence Airport master plan in April. In Armenia, we continue to make progress on the CapEx program approvals to expand Yerevan Airport. On the new business front, we are awaiting official resolution from the government of Montenegro and actively pursuing opportunities in Latin America, Iraq, Angola, and other M&A initiatives, among others.

Looking ahead, we expect positive traffic momentum to continue in Argentina, with strong summer seasons anticipated in both Italy and Romania. In sum, our second-quarter performance underscores the strength of our geographic diversification, the quality of our portfolio, the effectiveness of our strategy, and the dedication of our teams across markets. Operator, please open the lines for questions.

Operator: Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. If you wish to cancel your request, please press the star followed by the two. Please lift the handset if you are using a speakerphone. Once again, that is star one if you wish to ask a question. Your first question is from Guillermo Mendez from JPMorgan. Your line is now open.

Guillermo Mendez: Yes. Thank you. Good morning, Martin, Jorge. Thanks for taking my questions. The first one is in Argentina. If you can provide some details on what are the next steps for the rebalancing discussion. I know you do not have a lot of visibility on timing, but if you can share what we should expect on the next milestones, that would be useful. And the second one is on Motiva's former CCR airport sales. If you are still interested in this asset, is it something that you probably would bid alone, or are you considering doing so with a partner, probably dividing the Brazilian assets from the non-Brazilian assets? Thank you.

Martin Eurnekian: Thank you for your question. Let me start with the second one. We are looking at the asset. As you may know, it is a typical M&A process subject to NDA confidentiality, etcetera. But what we can say at this point in time is that we are looking at the asset. It is an interesting opportunity for Corporación América Airports S.A., and we will keep the market updated as we make progress in the process. Regarding Argentina, your first question, conversations with the technical teams are ongoing. They have never been interrupted. The conversations include the rebalancing of the economic equilibrium, investment requirements in the system, among other aspects. There is a new Secretary of Transport since mid-May.

We are very engaged with all the authorities. We believe that we are making good progress, and we will keep the market updated as we make concrete steps into this process.

Guillermo Mendez: Got it. Thank you, Jorge.

Operator: Thank you. Once again, please press star one if you wish to ask a question.

Guillermo Mendez: It is paid actually by all the end of the virtual. So we have in our...

Operator: There are no further questions at this time. I will now hand the call back over to Martin Eurnekian for the closing remarks. Please proceed.

Martin Eurnekian: I would like to thank everyone for your participation and interest in our call and remind you that our team remains available for any questions that you might have in the future. Thank you very much, and please have a very good rest of your day. Goodbye.

Operator: Thank you, ladies and gentlemen. The conference has now ended. Thank you all for joining. You may all disconnect your lines.

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