Revenues up 23% YoY, with Total Adjusted
EBITDA Increasing 183% YoY to $30.0 million
Despegar.com, Corp. (NYSE: DESP) (“Despegar” or the
“Company”), Latin America’s leading online travel company, today
announced unaudited financial results for the three-months ended
June 30, 2023 (“second quarter 2023” or “2Q23”). Financial results
are expressed in U.S. dollars and are presented in accordance with
U.S. generally accepted accounting principles (“U.S. GAAP”).
Financial results are preliminary and subject to year-end audit and
adjustments. All comparisons in this announcement are
year-over-year (“YoY”), unless otherwise noted.
2Q23 Financial and Operating Highlights (for definitions,
see page 15)
- Gross Bookings for 2Q of $1.3 billion, up 16% YoY as travel
demand continues to recover in Latin America
- Travel Packages as a percentage of Gross Bookings reached 33%,
up 577 basis points (bps) YoY
- Average Selling Prices (ASPs) increased 15% YoY to $585, while
Transactions were flat YoY, reflecting sustained focus on expanding
higher-margin package transactions
- Revenues increased 23% YoY to $165.5 million, reaching a record
quarterly level, with a 12.9% Take Rate, as Packages, Hotels and
Other Travel Products Revenue reached $102.0 million (+27%
YoY)
- Cost of Revenue as a percentage of Gross Bookings rose to 4.7%
from 4.1% in 2Q22, in part due to one-time impacts during the
quarter
- Total Adjusted EBITDA increased 183% YoY to $30.0 million, and
excluding one-time items Adjusted EBITDA increased 71% YoY to $20.2
million
- Net Income of $28.0 million, the first positive quarter since
2019
- Operating cash flow was positive $28.9 million, compared to
positive $5.7 million in 2Q22
- Cash position of $243.9 million, including restricted cash, at
June 30, 2023
- Loyalty Program members increased 194% YoY to 16.9 million
- Net Promoter Score (NPS) increased 4.0 percentage points YoY to
67.4%
Message from the CEO
Commenting on Despegar’s performance, Damian Scokin, CEO,
said:
“Our momentum accelerated and we achieved a remarkably strong
performance in the second quarter, with revenues reaching a
new all-time high of $165.5 million despite operating in our
seasonally weakest quarter.
There were three driving forces behind this growth. First, a
significant improvement in revenue mix, as we continue to
successfully increase sales of vacation Packages, further expanding
our margins. Second, a sustained rise in average sales prices,
reflecting the value and quality that we consistently deliver to
our customers. And third, our steadfast focus on profitable growth,
resulting in a robust 12.9% Take Rate.
From a geographic standpoint, we are particularly pleased with
the continued expansion of Despegar’s key Brazilian business, with
transactions up 39% YoY. Additionally, demand for international
traffic continued recovering across our footprint and contributed
to a 16% YoY increase in Gross Bookings.
Excluding one-time benefits in the quarter, comparable Adjusted
EBITDA increased 71% YoY to $20.2 million, with reported Adjusted
EBITDA of $30.0 million. Our top line momentum and sustained
profitability are keeping us firmly on track to achieve our revenue
and Adjusted EBITDA guidance for the year. In addition, we are
particularly pleased with our return to positive Net Income, which
reached a solid $28 million in the quarter, or $5 million excluding
one-time items.
Profitability at Koin, our Buy Now, Pay Later business, improved
to an EBITDA loss of only $0.6 million from the $4.5 million loss
in 2Q22. Thanks to our disciplined focus on cost control, margin
expansion and asset quality, Koin remains on target to not only
reach EBITDA breakeven in the second half of this year but become
EBITDA accretive.
Regarding our key growth initiatives, we continue to make
significant progress toward the milestones presented at our
Investor Day a little over year ago. The share of high-margin
Travel Packages in Gross Bookings expanded 577 bps YoY to 33%.
While the expansion of our B2B service, HotelDo, together with our
white-label solutions, also remain on track with the combined share
of these two business lines expanding 567 bps to 15% of Gross
Bookings. In addition, our Mobile Apps continue to be an important
tool to drive customer engagement, with Mobile App transactions
increasing 334 bps YoY and reaching 37.8% of total Transactions.
Our unwavering client focus coupled with our ambition to provide
excellent B2B solutions underscore our commitment to provide the
best travel options to both customers and travel partners.
Continuously strengthening our technology advantage, we’re
increasingly employing artificial intelligence (“AI”) and large
language models to enhance the customer experience as well as our
operational effectiveness. We are preparing to introduce a Beta
version of our innovative AI trip planner in the third quarter of
this year. Building on our robust machine learning models, this new
tool will not only offer bespoke travel and accommodation
recommendations, but also go further by creating a conversational
experience to enhance our customers’ trip planning. Additionally,
our developer team is using AI for code writing and aiding our
after-sales team when addressing customer requests.
Finally, we are leveraging our technology platform and
experience operating highly profitable brick-and-mortar travel
agencies in the Andean Region and Mexico, as we embark on expanding
Despegar’s offline business. In an initial deployment, we will be
opening 10 mostly asset-light stores in Brazil and 5 in Argentina
by year end. These new stores will enable us to reach more of Latin
America’s still large cash-based economy, while providing a
personalized experience that more than half of the region’s travel
consumers prefer today.
Our outstanding financial performance, noteworthy achievements
across business segments, and substantial progress with each of our
strategic growth initiatives are all enabling us to effectively and
efficiently deliver higher value to our customers and travel
partners alike. And as the most recent quarter makes clear, we
continue driving earnings power by growing in more profitable
product segments and by scaling our market-leading travel platform
to further penetrate and consolidate Latin America’s fast-growing
and fragmented travel market.”
2023 Financial Guidance
The Company reaffirms its 2023 annual guidance, which is as
follows:
- Revenue: $640 million to $700 million
- Adjusted EBITDA: $80 million to $100 million
The above guidance assumes that the Latin American travel market
will continue to recover and reach 2019 demand levels by year-end
2023. This guidance is in line with the 2024 financial targets
presented at the Company’s June 2022 Investor Day. See our Investor
Relations website at www.investor.despegar.com.
Disclaimer: The 2023 financial guidance reflects
management’s current assumptions regarding numerous evolving
factors that are difficult to accurately predict, including those
discussed in the Risk Factors set forth in the Company’s Annual
Report on Form 20-F filed with the United States Securities and
Exchange Commission (the “SEC”).
Reconciliations of forward-looking non-GAAP measures,
specifically the 2023 Adjusted EBITDA guidance, to the relevant
forward-looking GAAP measures are not being provided, as the
Company does not currently have sufficient data to accurately
estimate the variables and individual adjustments for such guidance
and reconciliations. Due to this uncertainty, the Company cannot
reconcile projected Adjusted EBITDA to projected net income without
unreasonable effort.
The 2023 financial guidance constitutes forward-looking
statements. For more information, see the “Forward-Looking
Statements” section in this release.
Operating and Financial Metrics Highlights
The following table presents key operating metrics of Despegar’s
travel and financial services businesses as well as key financial
metrics on a consolidated basis, post-intersegment eliminations
between these businesses.
(in millions, except as noted)
2Q23
2Q22
Δ %
Operating metrics
Number of transactions
2.204
2.193
0
%
Gross bookings
$
1,287.0
$
1,113.4
16
%
TPV Financial Services (1)
$
16.7
$
22.5
(26
)%
Financial metrics
Total Revenue
$
165.5
$
134.4
23
%
Total Adjusted EBITDA
$
30.0
$
10.6
183
%
Net income (loss)
$
28.0
$
(13.2
)
n.m.
Net income (loss) attributable to
Despegar.com, Corp
$
28.0
$
(13.2
)
n.m.
Less: Class A and Class B preferred shares
dividends
$
(4.3
)
$
(4.2
)
2
%
Less: Class A preferred shares
accretion
$
(3.3
)
$
(2.9
)
13
%
Less: undistributed income allocated to
participating securities
$
(1.3
)
$
—
n.m.
Income (loss) attributable to common
stockholders (2)
$
19.2
$
(20.3
)
n.m.
Average Shares Outstanding - Basic (3)
77,109
77,434
n.m.
Effect of Dilutive Participating
Securities - Stock Option Plan (3)
3
0
n.m.
Average Shares Outstanding - Diluted
(3)
77,112
77,434
n.m.
EPS Basic (2)
$
0.25
$
(0.26
)
n.m.
EPS Diluted (2)
$
0.25
$
(0.26
)
n.m.
Note that Despegar´s 2Q22 earnings press release indicated that
weighted common average shares outstanding totaled 82,362 thousand
(basic and diluted) at June 30, 2022 when the amount should have
been 77,434 thousand as presented in the table above. More
information is available in our 2022 Annual Report on Form 20-F
filed on April 27, 2023 with the SEC
(1)
Presented on a pre intersegment elimination basis. Intersegment TPV
amounted to $14.9 million in 2Q23 and $ 15.9 million in 2Q22.
(2)
Round numbers. For 2Q23, basic earnings (loss) per share is
computed using the two-class method, which is an earnings
allocation formula that determines earnings (loss) per share for
common stock and any participating securities according to dividend
and participating rights in undistributed earnings (losses). The
Company's Class B Preferred Shares contain rights to dividends or
dividend equivalents and are deemed to be participating securities.
Other instruments granted by the Company (such as restricted stock
awards and stock options to employees, as well as Class A Preferred
Shares) do not contain non-forfeitable rights to dividends and are
not deemed to be participating securities. In periods of net loss,
no amounts are allocated to participating securities as they do not
have an obligation to absorb such loss. Under the two-class method,
net income for the period, after subtracting dividends on and
accretion of preferred stock, is allocated between common
stockholders and the holders of the participating securities based
on the weighted-average number of common shares outstanding during
the period and the weighted-average number of participating
securities outstanding during the period, respectively. The
allocated, undistributed income for the period is then divided by
the weighted-average number of common shares outstanding during the
period to arrive at basic earnings per common share for the period.
Pursuant to U.S. GAAP, the Company has elected not to separately
present basic or diluted earnings per share attributable to
preferred stock. Diluted earnings (loss) per share is computed in a
manner consistent with that of basic earnings per share, while
considering other potentially dilutive securities
(3)
In thousands n.m.: Not Meaningful
Key Operating Metrics
(in millions, except as noted)
2Q23
2Q22
% Chg
FX Neutral % Chg
$
% of total
$
% of total
Gross Bookings
$
1,287.0
$
1,113.4
16
%
29
%
TPV Financial Services (1)
$
16.7
$
22.5
(26
)%
(25
)%
Average selling price (ASP) (in $)
$
585
$
511
15
%
28
%
Number of Transactions by Segment &
Total
Air
1.0
47
%
1.1
51
%
(8
)%
Packages, Hotels and Other Travel
Products
1.2
52
%
1.0
47
%
12
%
Financial Services
0.0
0
%
0.0
1
%
(77
)%
Total Number of Transactions
2.2
100
%
2.2
100
%
0
%
(1)
Presented on a pre intersegment elimination basis. Intersegment TPV
amounted to $14.9 million in 2Q23 and $ 15.9 million in 2Q22
Transactions were flat YoY at 2.2 million, as the Company
continues to focus on expanding Package Transactions, which
increased 270 bps YoY as a percentage of total Transactions. In
Brazil and Chile, non-air Transactions increased 58% and 22% YoY
respectively, as the Company continues to effectively capitalize on
the demand recovery in those markets. Accordingly, the consolidated
share of higher-margin Packages, Hotels and Other Travel Products
Transactions increased to 52% from 47% in the previous year.
Conversely, Air Transactions declined 8% YoY, mostly due to a
decrease in lower margin domestic Transactions in Mexico and
Colombia as Despegar maintained its focus on profitable growth.
ASPs in 2Q23 increased 15% YoY (+28% FX neutral) to $585 per
transaction. The increase in ASPs was mostly driven by a
combination of the aforementioned improvements in product mix
reflecting sustained growth in higher average ticket Package sales,
as well as higher lodging fares.
Gross Bookings increased 16% YoY (+29% FX neutral), reaching
$1.3 billion for the quarter. Specifically, international Gross
Bookings grew 14% YoY while domestic gross bookings increased 16%
over the same period.
Geographic Breakdown
(in millions, except as noted)
2Q23 vs. 2Q22 - As Reported
Brazil
Mexico
Rest of Latin America
Total
2Q23
2Q22
Δ %
2Q23
2Q22
Δ %
2Q23
2Q22
Δ %
2Q23
2Q22
Δ %
Transactions ('000)
989
709
39
%
399
459
-13
%
816
1,025
-20
%
2,204
2,193
0
%
Gross Bookings
508
356
42
%
268
247
9
%
511
510
0
%
1,287
1,113
16
%
TPV Financial Services (1)
17
22
-26
%
—
—
—
%
—
—
—
%
17
22
-26
%
ASP ($)
515
512
1
%
673
537
25
%
627
498
26
%
585
511
15
%
Revenues
166
134
23
%
Gross Profit
106
89
18
%
2Q23 vs. 2Q22 - FX Neutral
Brazil
Mexico
Rest of Latin America
Total
2Q23
2Q22
Δ %
2Q23
2Q22
Δ %
2Q23
2Q22
Δ %
2Q23
2Q22
Δ %
Transactions ('000)
989
709
39
%
399
459
-13
%
816
1,025
-20
%
2,204
2,193
0
%
Gross Bookings
510
356
43
%
236
247
-4
%
690
510
35
%
1,437
1,113
29
%
TPV Financial Services (1)
17
22
-25
%
—
—
—
%
—
—
—
%
17
22
-25
%
ASP ($)
518
512
1
%
593
537
10
%
846
498
70
%
653
511
28
%
Revenues
187
134
39
%
Gross Profit
119
89
33
%
(1)
Presented on a pre intersegment elimination basis. Intersegment TPV
amounted to $14.9 million in 2Q23 and $ 15.8 million in 2Q22
Brazil, Despegar’s largest market, accounted for 45% of
total Transactions in 2Q23, increasing 39% YoY. Growth was driven
by increases in both domestic and international traffic.
Importantly, Packages and Hotel Transactions increased 79% and 53%
YoY respectively, as the Company’s growth investments in Brazil
continue to pay off. ASPs were flat YoY on an as reported basis and
grew 1% on an FX neutral basis, as increases in international ASPs
were offset by declining domestic ASPs. As a result of the above
factors, Gross Bookings in Brazil grew 42% YoY.
Mexico represented 18% of 2Q23 Transactions. During the
quarter, ASPs increased 25% (+10% FX neutral) with both domestic
and international ASPs increasing equally YoY. Transactions
declined 13% YoY, mainly due to a decrease in domestic air
Transactions as the Company maintained its focus on more profitable
travel products. The 25% YoY growth in ASPs was largely driven by
an improving revenue mix as the prices of Packages, Hotels and
Other Travel Products increased. Accordingly, Gross Bookings
increased 9% YoY.
Across the rest of Latin America, Despegar’s Transactions
decreased 20% YoY, primarily due to a decline in air Transactions
in Colombia. ASPs grew 26% (+70% FX neutral) during the same
period, mainly due to an improving revenue mix and a recovery in
international demand in Chile and Argentina. The combination of
these factors resulted in flat Gross Bookings when compared to
2Q22.
Revenue Breakdown
We organize our business into three segments: (1) Packages,
Hotels and Other Travel Products, which consists of facilitation
services for the sale of travel packages (which can include airline
tickets and hotel rooms, among other products); (2) Air, which
consists of facilitation services for the sale of airline tickets
on a stand-alone basis; and (3) Financial Services, which primarily
consists of loan origination to our travel business’ customers and
to customers of other merchants in various industries. Our
“Financial Services” segment also consists of processing, fraud
identification, credit scoring and IT services provided to our
travel business, and to third-party merchants.
The following table reconciles the intersegment revenues of the
Company’s three business segments for the quarters ended June 30,
2023 and 2022:
2Q23
2Q22
Δ %
$
% of total
$
% of total
Revenue by business segment (in $Ms)
Travel Business
Air Segment
$
60.7
37
%
$
53.4
40
%
14
%
Packages, Hotels and Other Travel Products
Segment
$
102.0
62
%
$
80.1
60
%
27
%
Total Travel Business
$
162.7
98
%
$
133.5
99
%
22
%
Financial Business
Financial Services Segment
$
9.4
6
%
$
3.2
2
%
195
%
Total Financial Business
$
9.4
6
%
$
3.2
2
%
195
%
Intersegment Eliminations
$
(6.7
)
-4
%
$
(2.3
)
-2
%
191
%
Total Revenue
$
165.5
100
%
$
134.4
100
%
23
%
Total Revenue margin
12.9
%
12.1
%
+79 bps
On a YoY basis, Total Revenue increased 23% to a record high of
$165.5 million. The increase in revenue was mainly driven by an
ongoing product shift toward higher ticket Packages, Hotels and
Other Travel Products, which also drove margin expansion in line
with the Company’s growth strategy, particularly in Brazil,
Argentina and Chile. Given Despegar’s continuous focus on
profitable growth, sales of Packages, Hotels and Other Travel
Products increased 27% to $102.0 million, or 62% of Total Revenue
(versus 60% in 2Q22). In addition, Revenue margin increased 79
basis points to 12.9%.
Cost of Revenue and Gross Profit
The following table shows Cost of Revenue and Gross Profit on a
consolidated basis, post-intersegment eliminations between
Despegar’s travel and financial services businesses.
(in millions, except as noted)
2Q23
2Q22
Δ %
Revenue
$
165.5
$
134.4
23
%
Revenue Margin
12.9
%
12.1
%
79
%
Cost of Revenue (1)
$
60.0
$
45.1
33
%
Cost of Revenue as a % of GB
4.7
%
4.1
%
+61 bps
Gross Profit
$
105.5
$
89.3
18
%
Gross Profit as a % of GB
8.2
%
8.0
%
+18 bps
(1)
Cost of Revenues was impacted by two one-time events due to: i) a
$2.5 million increase in customer claims provision as ASPs of
customer claims increased; and ii) a $2 million expense increase
due to changes in VAT recoverability in Mexico
Cost of Revenue consists mainly of credit card processing fees,
bank fees related to customer financing installment plans, and
fulfillment center expenses as well as credit loss expenses.
On a YoY basis, Cost of Revenue increased 33% YoY to $60.0
million and 61 bps as a percentage of Gross Bookings. The increase
was mainly due to: i) the cost of installments rising $6.8 million
due to the Argentine government´s “Previaje” domestic travel
incentive program; ii) a $3.1 million rise in credit card
processing fees in line with the overall demand recovery across the
region; iii) a one-time $2.5 million expense on customer claims, as
the Company took a conservative approach to projecting claim
provisions, given the overall increase in ASPs; and iv) a $2.0
million one-time expense related to Mexican VAT recoverability.
Excluding these one-time effects, Cost of Revenues would have been
$55.5 million, or 4.3% of Gross Bookings.
As reported Gross Profit increased 18% to $105.5 million from
$89.3 million in 2Q22. As a percentage of Gross Bookings, Gross
Profit increased to 8.2% from 8.0% over the same period. On an FX
neutral basis, Gross Profit increased 33% to $119 million.
Operating Expenses
The following table shows operating expenses on a consolidated
basis, post-intersegment eliminations between Despegar’s travel and
financial services businesses.
(in millions, except as noted)
2Q23
2Q22
Δ %
Selling and marketing
$
51.7
$
42.2
22
%
S&M as a % of GB
4.0
%
3.8
%
+23 bps
General and administrative
$
8.4
$
27.0
-69
%
G&A as a % of GB
0.7
%
2.4
%
(178) bps
Technology and product development
$
26.4
$
21.4
24
%
T&PD as a % of GB
2.1
%
1.9
%
+13 bps
Total operating expenses
$
86.5
$
90.7
-5
%
Operating Expenses as a % of GB
6.7
%
8.1
%
(142) bps
On a YoY basis, Operating Expenses decreased 5% to $86.5
million, mainly due to a 69% decrease in General and Administrative
expenses, mostly reflecting a reversal in Mexican tax provisions,
as explained below under General and Administrative expenses, in
addition to improved operating efficiencies. Excluding one-time
impacts, operating expenses as a percentage of Gross Bookings would
have decreased 18 bps.
Selling and Marketing (“S&M”) expenses increased 22%
YoY to $51.7 million and rose 23 bps as a percentage of Gross
Bookings. The increase was principally driven by YoY increases of:
i) $3.7 million in third party commissions, as the Company expanded
its B2B and white label solutions business; ii) $2.7 million in
Direct Marketing costs, mostly in Brazil; and iii) $2.6 million in
personnel costs due to the expansion of the Company's higher-margin
Offline Sales channels.
General and Administrative (“G&A”) expenses decreased
69% YoY to $8.4 million, and 178 bps as a percentage of Gross
Bookings to 0.7%. The decline in G&A expenses was mainly due to
the aforementioned one-time $14.3 million reversal of tax
provisions, following a favorable resolution with the Mexican tax
authorities regarding tax payables that Despegar had acquired when
merging with Best Day in 2020. Excluding this extraordinary
benefit, G&A expenses would have decreased 16% to $22.7
million, or 1.8% of Gross Bookings, mainly due to declines in
stock-based compensation, office rental expenses and outsourced
services. This trend was partially offset by FX variations and
local currency inflation in Argentina, particularly in connection
with wages.
Technology and Product Development (“T&PD”) expenses
increased 24% YoY to $26.4 million, and rose 13 bps as a percentage
of Gross Bookings. Approximately two-thirds of this increase was
related to expanding the Company’s developer team with the
onboarding of Viajanet personnel, a key resource to further extend
Despegar’s competitive advantage in the region. The remainder of
the increase was due to FX variations and local currency inflation
related to IT personnel expenses.
Financial result, net
Despegar reported net financial expenses of $3.9 million in
2Q23, compared to $10.5 million in 2Q22. The YoY decrease was
primarily due to FX appreciation in Brazil as well as working
capital efficiencies in Argentina.
Income Taxes
The Company reported an income tax benefit of $13.3 million in
2Q23, compared to an income tax expense of $1.3 million in 2Q22.
The effective tax rate in 2Q23 was 89.8%, compared to 10.6% in
2Q22.
The variation in the effective tax rate was mainly driven by:
i) the impact of the aforementioned tax settlement and closing tax
audits in Mexico in 2Q23; and ii) an increase in Valuation
Allowance in Mexico, the US and Brazil.
Adjusted EBITDA Reconciliation
(in millions, except as noted)
2Q23
2Q22
Δ %
Net gain (loss)
$
28.0
$
(13.2
)
n.m.
Add (deduct):
Financial result, net
$
3.9
$
10.5
(63
)%
Income tax (benefit) / expense
$
(13.3
)
$
1.3
n.m.
Depreciation expense
$
3.1
$
1.7
82
%
Amortization of intangible assets
$
7.3
$
6.9
5
%
Share-based compensation expense
$
0.9
$
3.3
(73
)%
Total Adjusted EBITDA
$
30.0
$
10.6
183
%
One Time Charges
Total Adjusted EBITDA
$
30.0
$
10.6
183
%
Extraordinary Cancellations due to
COVID-19
$
—
$
0.5
n.m.
One Time Charges*
$
9.8
$
(1.7
)
n.m.
Adjusted EBITDA (Excluding One Time
Charges)
$
20.2
$
11.8
71
%
(*) One-time charges include: i) higher
Cost of Revenue due to a) a $2.5 million increase in customer
claims provision as ASPs of customer claims increased, and b) a $2
million expense due to changes in VAT recoverability in Mexico; and
ii) a $14.3 million decrease in General and Administrative expenses
due to the reversal of Mexican tax provisions.
Total Adjusted EBITDA increased 183% YoY to $30.0 million from
$10.6 million reported in 2Q22. Excluding the one-time impacts
described above, Adjusted EBITDA would have increased 71% YoY to
$20.2 million.
Balance Sheet and Cash Flows
The majority of Despegar’s excess cash balance is held in U.S.
dollars in the United States and the United Kingdom. Foreign
currency exposure is minimized by managing natural hedges, netting
the Company’s current assets and current liabilities in similarly
denominated foreign currencies, and by managing short term loans
and investments for hedging purposes.
Cash and cash equivalents, including restricted cash, at June
30, 2023, was $244 million. During the quarter, cash and cash
equivalents increased $16 million, in line with working capital
increases as the industry continued to recover. The increase in
working capital was partially offset by tax payment to the Mexican
tax authority. Aggregate Net Operational Short-term Obligations
were $248.9 million, increasing 15% on a sequential basis due to
the increase in supplier payables.
Despegar’s generation of cash from operating activities improved
from $5.7 million in the same quarter during the previous year to
$28.9 million during 2Q23, mainly due to changes in working capital
related to the increase in Packages, Hotels and Other Travel
Products Gross Bookings that resulted in higher Outstanding Days
Payables.
Financial Services Segment Analysis
Koin, Despegar’s financial services segment, provides: (i)
point-of-sale installment loans, (ii) Buy Now, Pay Later (“BNPL”)
services, which enable the Company’s customers as well as customers
of third-party merchants to make online purchases and pay off
interest bearing debt in installments, and (iii) fraud prevention
services.
During 2Q23, Koin maintained its conservative loan origination
approach due to persistently challenging market and credit
conditions in Brazil. Consequently, Total Payment Volume (TPV)
declined 26% YoY to $17 million in the quarter, while Total
Adjusted EBITDA improved to negative $0.6 million from negative
$4.5 million in 2Q22. Given a to our disciplined focus on cost
control, margin expansion and asset quality, Koin remains on target
to reach EBITDA breakeven in the second half of this year.
Key Events During the Quarter
Despegar published its 2022 ESG report
On June 30, 2023, Despegar published its 2022 ESG report, which
is available on the Company's website at:
https://investor.despegar.com/
Devaluation of the Argentine Peso
In light of the ongoing devaluation of the Argentine Peso, the
Company is providing an overview of its currency exposure as of
June 30, 2023.
1. P&L exposure: Throughout the
first half 2023, approximately 14.1% of total Gross Bookings were
generated in Argentina, 45% of which were attributable to domestic
Gross Bookings while 9.9% of the Company’s operating costs were
denominated in Argentine Pesos. However, given that the
peso-denominated amounts of revenues and costs are of similar
magnitudes, effects of the official exchange rate devaluation on
EBITDA have been, for the most part, naturally hedged.
2. Current Balance Sheet exposure:
Despegar maintains a proactive approach to managing its current
balance sheet exposure to Argentine Peso depreciation. The Company
for example, employs a combination of strategies to hedge its
working capital exposure, primarily relying on cash management
measures and investments in Argentina’s money market, which can
yield interest income consistent with local inflation. We therefore
do not expect any significant impact from Argentine Peso
devaluation on our working capital.
3. Non-current Balance Sheet
exposure: Despegar deliberately refrains from hedging its
non-current balance sheet exposure to fluctuations in the Argentine
Peso exchange rate, as it does not have an impact on the Company’s
cash balance.
2Q23 Earnings Conference Call
When:
10:00 a.m. Eastern time, August 17,
2023
Who:
Mr. Damián Scokin, Chief Executive
Officer
Mr. Luca Pfeifer, Investor Relations
Dial-in:
1 888 330 2413 (U.S. domestic); 1 240 789
2721 (International)
Pre-Register: You may pre-register at any time: click
here. To access Despegar’s financial results call via telephone,
callers need to press # to be connected to an operator.
Webcast: CLICK HERE
Definitions and concepts
Aggregate Net Operational Short-term Obligations:
consists of travel accounts payable plus related party payables and
accounts payable and accrued expenses, minus trade accounts
receivable net and loan receivables of credit expected loss and
related party receivables.
Average Selling Price (“ASP”): reflects Gross Bookings
divided by the total number of Transactions.
Foreign Exchange (“FX”) Neutral: calculated by using the
average monthly exchange rate of each month of the quarter and
applying it to the corresponding months in the current year, so as
to calculate what the results would have been had exchange rates
remained constant. These calculations do not include any other
macroeconomic effects such as local currency inflation effects.
Net Promoter Score (“NPS”): a customer loyalty and
satisfaction metric that measures the willingness of customers to
recommend a company, product, or service to others.
Gross Bookings (“GB”): Gross Bookings is an operating
measure that represents the aggregate purchase price of all travel
products booked by the Company’s travel customers through its
platform during a given period related to our travel business. In
its quarterly earnings releases, Despegar presents Gross Bookings
net of withholding taxes on international trips in Argentina which
have been in effect since 2020. The Company generates substantially
all of its revenue from commissions and other incentive payments
paid by its suppliers and service fees paid by its customers for
transactions through its platform, and, as a result, the Company
monitors Gross Bookings as an important indicator of its ability to
generate revenue. In this presentation the Company has also recast
previously reported segment financial information for the quarters
ended June 30, 2022 to reflect its new reportable segments. The
segment change has no impact on the Company’s historical
consolidated financial results.
Seasonality: Despegar’s financial results experience
fluctuations due to seasonal variations in demand for travel
services. Despegar’s most significant market, Brazil, and much of
South America where Despegar operates, are located in the southern
hemisphere where summer travel season runs from December 1 to
February 28 and winter runs from June 1 to August 31. Despegar’s
most significant market in the Northern hemisphere is Mexico where
summer travel season runs from June 1 to August 31 and winter runs
from December 1 to February 28. Accordingly, traditional leisure
travel bookings in the Southern hemisphere are generally the
highest in the third and fourth quarters of the year as travelers
plan and book their summer holiday travel. The number of bookings
typically decreases in the first quarter of the year. In the
Northern hemisphere, bookings are generally the highest in the
first three quarters as travelers plan and book their spring,
summer and winter holiday travel. The seasonal revenue impact is
exacerbated with respect to income by the nature of variable cost
of revenue and direct S&M costs, which are typically timed with
booking volumes, and the more stable nature of fixed costs.
Packages: refers to custom packages formed through the
combination of two or more travel products, which may include
airline tickets, hotels, car rentals, or a combination of these. By
bundling these items together and securing them in a single
transaction, we can present customers with a unified package at a
single, quoted price. This approach not only enables us to provide
travelers with more affordable options compared to purchasing
individual products separately but also facilitates the
cross-selling of multiple products within a single transaction.
Total Adjusted EBITDA: is calculated as net income/(loss)
exclusive of financial result, net, income tax, depreciation and
amortization, impairment charges, stock-based compensation expense,
restructuring charges and acquisition transaction costs.
Total Revenue: The Company reports its revenue on a net
basis for the majority of its transactions, deducting cancellations
and amounts collected as sales taxes. The Company presents its
revenue on a gross basis for some transactions when it
pre-purchases flight seats. These transactions have been limited to
date. Despegar derives substantially all of its revenue from
commissions and incentive fees paid by its travel suppliers and
service fees paid by the travelers for transactions through its
platform. To a lesser extent, Despegar also derives revenue from
advertising, its installment loans and Buy Now, Pay Later offered
through the company’s fintech platform Koin and other sources (i.e.
destination services, loyalty and interest revenue). For more
additional information regarding Despegar’s revenue recognition
policy, please refer to “Summary of significant accounting
policies” note of Despegar’s Financial Statements.
Total Revenue Margin (also “Take Rate”): calculated as
revenue divided by the sum of Gross Bookings and Total Payment
Volume.
Total Payment Volume (“TPV”): is an operating measure
that represents the US dollar loan volume processed by "Buy Now,
Pay Later" financing solution during a specific period of time.
Reporting Business Segments: The Company operates a
Travel Business and a Financial Services Business which are
structured as follows:
Our travel business is comprised of two reportable segments:
“Air” and “Packages, Hotels and Other Travel Products. Our “Air”
segment primarily consists of facilitation services for the sale of
airline tickets on a stand-alone basis and excludes airline tickets
that are packaged with other non-airline flight products. Our
“Packages, Hotels and Other Travel Products” segment primarily
consists of facilitation services for the sale of travel packages
(which can include airline tickets and hotel rooms), as well as
stand-alone sales of hotel rooms (including vacation rentals), car
rentals, bus tickets, cruise tickets, travel insurance and
destination services. Both segments also include the sale of
advertisements and incentives earned from suppliers.
Our financial services business is comprised of one reportable
segment: “Financial Services”. Our “Financial Services” segment
primarily consists of loan origination to our travel business’
customers and to customers of other merchants in various
industries. Our “Financial Services” segment also consists of
processing, fraud identification, credit scoring and IT services to
our travel business, and to third-party merchants.
Transactions: We define the number of transactions as the
total number of travel customer orders completed on our platform or
the financing merchant customers (excluding Decolar) of the “Buy
Now, Pay Later” solution during a given period. The number of
transactions is an important metric because it is an indicator of
the level of engagement with the Company’s customers and the scale
of our business from period to period. However, unlike Gross
Bookings, the number of transactions is independent of the average
selling price of each transaction, which can be influenced by
fluctuations in currency exchange rates among other factors.
About Despegar.com
Despegar is the leading online travel company in Latin America.
For over two decades, it has revolutionized the tourism industry in
the region through technology. With its continuous commitment to
the development of the sector, Despegar today is comprised of a
consolidated group that includes Despegar, Decolar, Best Day,
Viajes Falabella, Viajanet Stays and Koin, and has become one of
the largest travel companies in Latin America.
Despegar operates in 20 countries in the region, accompanying
Latin Americans from the moment they dream of traveling until they
share their memories. With the purpose of improving people's lives
and transforming the shopping experience, Despegar has developed
alternative payment and financing methods, democratizing the access
to consumption and bringing Latin Americans closer to their next
travel experience. Despegar’s common shares are traded on the New
York Stock Exchange (NYSE: DESP). For more information, visit
Despegar’s Investor Relations website
https://investor.despegar.com/ .
About This Press Release
This press release does not contain sufficient information to
constitute a complete set of interim financial statements in
accordance with U.S. GAAP. The financial information is this
earnings release has not been audited.
Forward-Looking Statements
This press release includes forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. We base these forward-looking statements on our current
beliefs, expectations and projections about future events and
trends affecting our business and our market. Many important
factors could cause our actual results to differ substantially from
those anticipated in our forward-looking statements.
Forward-looking statements are not guarantees of future
performance. Forward-looking statements speak only as of the date
they are made, and we undertake no obligation to update publicly or
to revise any forward-looking statements. New risks and
uncertainties emerge from time to time, and it is not possible for
us to predict all risks and uncertainties that could have an impact
on the forward-looking statements contained in this press release.
The words “believe,” “may,” “should,” “aim,” “estimate,”
“continue,” “anticipate,” “intend,” “will,” “expect” and similar
words are intended to identify forward-looking statements.
Forward-looking statements include information concerning our
possible or assumed future results of operations, business
strategies, capital expenditures, financing plans, competitive
position, industry environment, potential growth opportunities, the
effects of future regulation and the effects of competition.
Considering these limitations, you should not make any investment
decision in reliance on forward-looking statements contained in
this press release.
-- Financial Tables Follow --
Unaudited Consolidated Statements of Operations for the
three-month periods ended June 30, 2023 and 2022 (in thousands of
U.S. dollars, except as noted)
2Q23
2Q22
Δ %
Total Revenue
$
165,524
$
134,421
23
%
Cost of revenue
$
60,000
$
45,149
33
%
Gross profit
$
105,524
$
89,272
18
%
Operating expenses
Selling and marketing
$
51,695
$
42,214
22
%
General and administrative
$
8,396
$
27,037
(69
)%
Technology and product development
$
26,448
$
21,407
24
%
Total operating expenses
$
86,539
$
90,658
(5
)%
(Loss) / Gain from equity investments
$
(285
)
$
16
n.m.
Operating income / (loss)
$
18,700
$
(1,370
)
n.m.
Financial result, net
$
(3,948
)
$
(10,529
)
n.m.
Net income / (loss) before income
taxes
$
14,752
$
(11,899
)
n.m.
Income tax (benefit) / expenses
$
(13,251
)
$
1,266
n.m.
Net income / (loss)
$
28,003
$
(13,165
)
n.m.
Net income / (loss) attributable to
Despegar.com, Corp
$
28,003
$
(13,165
)
n.m.
Key Financial & Operating Trended Metrics (in thousands
of U.S. dollars, except as noted)
3Q21
4Q21
1Q22
2Q22
3Q22
4Q22
1Q23
2Q23
FINANCIAL RESULTS
Revenue
$
83,368
$
124,556
$
112,414
$
134,421
$
145,596
$
145,542
$
158,707
$
165,524
Cost of revenue
$
37,953
$
53,765
$
42,558
$
45,149
$
50,305
$
44,897
$
51,027
$
60,000
Gross profit
$
45,415
$
70,791
$
69,856
$
89,272
$
95,291
$
100,645
$
107,680
$
105,524
Operating expenses
Selling and marketing
$
26,138
$
34,582
$
30,517
$
42,214
$
46,174
$
46,245
$
51,892
$
51,695
General and administrative
$
22,162
$
18,689
$
23,523
$
27,037
$
24,873
$
26,092
$
22,672
$
8,396
Technology and product development
$
19,432
$
19,508
$
20,735
$
21,407
$
22,834
$
25,015
$
25,971
$
26,448
Total operating expenses
$
67,732
$
72,779
$
74,775
$
90,658
$
93,881
$
97,352
$
100,535
$
86,539
Gain / (loss) from equity investments
$
(29
)
$
343
$
117
$
16
$
(105
)
$
(192
)
$
113
$
(285
)
Operating (loss) / income
$
(22,346
)
$
(1,645
)
$
(4,802
)
$
(1,370
)
$
1,305
$
3,101
$
7,258
$
18,700
Financial result, net
$
(3,254
)
$
(3,809
)
$
(7,023
)
$
(10,529
)
$
(15,359
)
$
(12,543
)
$
(12,595
)
$
(3,948
)
Net (loss) / income before income
taxes
$
(25,600
)
$
(5,454
)
$
(11,825
)
$
(11,899
)
$
(14,054
)
$
(9,442
)
$
(5,337
)
$
14,752
Income tax (benefit) / expenses
$
(1,654
)
$
7,545
$
19,093
$
1,266
$
(4,767
)
$
5,717
$
(4,640
)
$
(13,251
)
Net (loss) / income
$
(23,946
)
$
(12,999
)
$
(30,918
)
$
(13,165
)
$
(9,287
)
$
(15,159
)
$
(697
)
$
28,003
Net income attributable to non-controlling
interest
$
273
$
526
—
—
—
—
—
—
Net income / (loss) attributable to
Despegar.com, Corp
$
(23,673
)
$
(12,473
)
$
(30,918
)
$
(13,165
)
$
(9,287
)
$
(15,159
)
$
(697
)
$
28,003
Adjusted EBITDA
$
(10,346
)
$
9,002
$
6,787
$
10,594
$
12,015
$
12,525
$
17,272
$
29,957
Net (loss) /income
$
(23,946
)
$
(12,999
)
$
(30,918
)
$
(13,165
)
$
(9,287
)
$
(15,159
)
$
(697
)
$
28,003
Add (deduct):
Financial expense, net
$
3,254
$
3,809
$
7,023
$
10,529
$
15,359
$
12,543
$
12,595
$
3,948
Income tax (benefit) / expense
$
(1,654
)
$
7,545
$
19,093
$
1,266
$
(4,767
)
$
5,717
$
(4,640
)
$
(13,251
)
Depreciation expense
$
2,451
$
1,497
$
1,672
$
1,699
$
2,144
$
1,504
$
1,716
$
3,091
Amortization of intangible assets
$
6,457
$
6,909
$
6,584
$
6,937
$
6,871
$
8,593
$
6,813
$
7,257
Share-based compensation expense
$
3,092
$
2,241
$
3,333
$
3,328
$
1,305
$
(673
)
$
1,485
$
910
Acquisition transaction costs
—
—
—
—
$
390
—
—
—
Adjusted EBITDA
$
(10,346
)
$
9,002
$
6,787
$
10,594
$
12,015
$
12,525
$
17,272
$
29,957
Note: The Company reclassified Financial
Bad Debt from General and Administrative expenses to Cost of
Revenue for the periods under analysis
Unaudited Consolidated Balance Sheet as of June 30, 2023 and
March 31, 2023 (in thousands of U.S. dollars, except as
noted)
As of June 30, 2023
As of March 31, 2023
ASSETS
Current assets
Cash and cash equivalents
$
218,535
$
205,143
Restricted cash and cash equivalents
$
24,434
$
22,015
Accounts receivable, net of allowances
$
211,787
$
170,672
Loan receivables, net
$
16,911
$
18,057
Related party receivable
$
12,092
$
9,277
Other current assets and prepaid
expenses
$
47,346
$
40,993
Total current assets
$
531,105
$
466,157
Non-current assets
Other assets and prepaid expenses
$
81,752
$
76,798
Loan receivables, net
$
974
$
857
Restricted cash
$
965
$
864
Lease right-of-use assets
$
18,912
$
19,820
Property and equipment net
$
14,848
$
15,959
Intangible assets net
$
97,461
$
94,083
Goodwill
$
154,125
$
147,216
Total non-current assets
$
369,037
$
355,597
TOTAL ASSETS
$
900,142
$
821,754
LIABILITIES AND SHAREHOLDERS’ DEFICIT
Current liabilities
Accounts payable and accrued expenses
$
54,715
$
60,087
Travel suppliers payable
$
375,143
$
314,714
Related party payable
$
59,791
$
42,226
Short-term debt
$
27,984
$
21,392
Deferred Revenue
$
29,057
$
26,001
Other liabilities
$
92,235
$
110,763
Contingent liabilities
$
12,020
$
9,488
Lease Liabilities
$
5,075
$
5,506
Total current liabilities
$
656,020
$
590,177
Non-current liabilities
Other liabilities
$
15,991
$
17,786
Contingent liabilities
$
15,300
$
30,786
Long term debt
$
2,734
$
3,433
Lease liabilities
$
14,811
$
15,252
Related party liability
$
125,000
$
125,000
Total non-current liabilities
$
173,836
$
192,257
TOTAL LIABILITIES
$
829,856
$
782,434
Series A non-convertible preferred
shares
$
127,594
$
120,582
Series B convertible preferred shares
$
46,700
$
46,700
Mezzanine Equity
$
174,294
$
167,282
SHAREHOLDERS’ DEFICIT
Common stock
$
288,240
$
287,844
Additional paid-in capital
$
310,218
$
317,526
Other reserves
$
(728
)
$
(728
)
Accumulated other comprehensive loss
$
(7,458
)
$
(10,318
)
Accumulated losses
$
(616,013
)
$
(644,019
)
Treasury Stock
$
(78,267
)
$
(78,267
)
Total Shareholders' Deficit Attributable
to Despegar.com Corp
$
(104,008
)
$
(127,962
)
TOTAL LIABILITIES, MEZZANINE EQUITY AND
SHAREHOLDERS’ DEFICIT
$
900,142
$
821,754
Unaudited Statements of Cash Flows for the three-month
periods ended June 30, 2023 and 2022 (in thousands of U.S. dollars,
except as noted)
3 months ended June 30,
2023
2022
Cash flows from operating activities
Net income / (loss)
$
28,003
$
(13,165
)
Adjustments to reconcile net income /
(loss) to net cash flows from operating activities:
Unrealized foreign currency translation
losses
$
6,325
$
(2,701
)
Depreciation expense
$
3,091
$
1,699
Amortization expenses
$
7,257
$
6,937
Earnout
$
323
$
(862
)
Indemnity
$
(323
)
$
862
Loss / (Gain) from equity investments
$
285
$
(16
)
Stock based compensation expense
$
910
$
3,328
Amortization of lease right-of-use
assets
$
2,036
$
1,282
Interest and penalties
$
793
$
438
Income tax benefit
$
(16,178
)
$
(1,544
)
Allowance for credit expected losses
$
3,505
$
2,134
Provision for contingencies
$
(7,393
)
$
2,838
Changes in assets and liabilities net of
non-cash transactions:
Increase in trade accounts receivable, net
of credit expected loss
$
(34,200
)
$
(41,618
)
Decrease in Loans receivables
$
4,058
$
5,543
(Increase) / decrease in related party
receivables
$
(2,705
)
$
5,494
(Increase) / decrease in other assets and
prepaid expenses
$
(5,883
)
$
22,306
(Decrease) / increase in accounts payable
and accrued expenses
$
(7,140
)
$
13,293
Increase in travel suppliers payable
$
36,670
$
6,642
Decrease in other liabilities
$
(4,175
)
$
(10,783
)
Decrease in contingent liabilities
$
(6,940
)
$
(3,790
)
Increase in related party liabilities
$
20,723
$
9,422
Decrease in lease liability
$
(3,540
)
$
(4,069
)
Increase in deferred revenue
$
3,371
$
2,018
Net cash flows provided by operating
activities
$
28,873
$
5,688
Cash flows from investing activities:
Origination of loans receivable, net of
allowance
$
(8,402
)
$
(6,885
)
Collection on Loan Receivables
$
2,685
$
2,464
Payment for other assets
$
—
$
(173
)
Payment for acquired businesses, net of
cash acquired
$
—
$
(428
)
Acquisition of property and equipment
$
(1,529
)
$
(949
)
Capital expenditures, including
internal-use software and website development
$
(9,414
)
$
(4,044
)
Net cash flows used in investing
activities
$
(16,660
)
$
(10,015
)
Cash flows from financing activities:
Net decrease of short term debt
$
(5,624
)
$
(35
)
Increase in short-term debt
$
12,384
$
6,169
Payment of short-term debt
$
(9,123
)
$
(5,470
)
Payment of long-term debt
$
(813
)
$
(1,500
)
Payment of dividends to stockholders
$
(646
)
$
(231
)
Proceeds from debenture issuance by
securitization program
$
3,477
$
5,407
Payments of debenture issuance by
securitization program
$
(1,268
)
$
—
Payments for acquired non-controlling
interest
$
—
$
(1,200
)
Purchase of treasury stock
$
—
$
(5,412
)
Net cash flows used in financing
activities
$
(1,613
)
$
(2,272
)
Effect of exchange rate changes on cash
and cash equivalents and restricted cash
$
5,312
$
(4,401
)
Net increase / (decrease) in cash and
cash equivalents and restricted cash
$
15,912
$
(11,000
)
Cash and cash equivalents as of
beginning of the year and restricted cash
$
228,022
$
285,764
Cash and cash equivalents as of end of
the period and restricted cash
$
243,934
$
274,764
Use of Non-GAAP Financial Measures
This earnings release includes certain references to Total
Adjusted EBITDA, a non-GAAP financial measure. For the year ended
December 31, 2020, Despegar changed the calculation of Total
Adjusted EBITDA reported to the chief operating decision maker to
exclude restructuring charges and acquisition costs. The Company
defines:
Total Adjusted EBITDA as net
income/(loss) exclusive of financial result, net, income tax,
depreciation and amortization, impairment charges, stock-based
compensation expense, restructuring charges and acquisition
transaction costs.
Adjusted EBITDA is not a measure recognized under U.S. GAAP.
Accordingly, readers are cautioned not to place undue reliance on
this information and should note that these measures as calculated
by the Company, differ materially from similarly titled measures
reported by other companies, including its competitors.
To supplement its consolidated financial statements presented in
accordance with U.S. GAAP, the Company presents foreign exchange
(“FX”) neutral measures.
This non-GAAP measure should not be considered in isolation or
as a substitute for measures of performance prepared in accordance
with U.S. GAAP and may be different from non-GAAP measures used by
other companies. In addition, this non-GAAP measure is not based on
any comprehensive set of accounting rules or principles. Non-GAAP
measures have limitations in that they do not reflect all of the
amounts associated with our results of operations as determined in
accordance with U.S. GAAP. This non-GAAP financial measure should
only be used to evaluate our results of operations in conjunction
with the most comparable U.S. GAAP financial measures.
On page 4 of this earnings release the company shows FX neutral
measures to the most directly comparable GAAP measure. The Company
believes that comparing FX neutral measures to the most directly
comparable GAAP measure provides investors an overall understanding
of our current financial performance and its prospects for the
future. Specifically, we believe this non-GAAP measure provides
useful information to both management and investors by excluding
the foreign currency exchange rate impact that may not be
indicative of our core operating results and business outlook.
The FX neutral measures were calculated by using the average
monthly exchange rates for each month during 2022 and applying them
to the corresponding months in 2023, so as to calculate what
results would have been had exchange rates remained stable from one
year to the next. The table below excludes intercompany allocation
FX effects. Finally, this measure does not include any other
macroeconomic effect such as local currency inflation effects, the
impact on impairment calculations or any price adjustment to
compensate for local currency inflation or devaluations.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230817398180/en/
IR Contact Luca Pfeifer Investor Relations Phone:
(+57)3153824802 E-mail: luca.pfeifer@despegar.com
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