Despegar.com, Corp. (NYSE:DESP), (“Despegar” or
the “Company”) a leading online travel company in Latin America,
today announced unaudited results for the three months- and fiscal
year ended December 31, 2018. Financial results are expressed in
U.S. dollars and are presented in accordance with U.S. generally
accepted accounting principles.
Fourth Quarter 2018 Key Financial and Operating
Highlights
- Transactions up 11% year-over-year
- Room Nights up 8% YoY
- Estimated Air Market share grew 130
basis points YoY
- Gross bookings reached $1.2 billion, a
year-over-year increase of 28% on an FX neutral basis (down 4% as
reported)
- Excluding Argentina, transactions, room
nights and gross bookings increased 18%, 33%, and 16% YoY,
respectively
- Revenues totaled $133 million, up 9% on
an FX neutral basis (down 13% as reported)
- Packages, Hotels and Other Travel
Products accounted for 62% of total revenue in 4Q18, up 567 basis
points from fourth quarter 2017
- Mobile transactions up 34%
year-over-year, accounting for 36% of total transactions in
4Q18
- Approximately 49 million cumulative
mobile application downloads as of December 31, 2018, up 27%
year-over-year
- Adjusted EBITDA decreased 58%
year-over-year. Excluding Argentina, Adjusted EBITDA rose by $8.7
million year-over-year
- Operating cash flow of ($5.4) million
in 4Q18, compared to $25.2 million in 4Q17
- Repurchased 605,458 shares in 4Q18 for
a total cost of $10.2 million at an average price per share of
$16.88
- Net Promoter Score (NPS) up 780 bps YoY
to 68%
Full Year 2018 Key Financial and Operating Highlights
- Transactions up 15%
- Room nights up 18%
- Estimated Air market share up 100 basis
points YoY
- Gross bookings reached $4.7 billion, up
29% year-over-year on an FX neutral basis (+6% as reported)
- Excluding Argentina, transactions, room
nights and gross bookings increased 18%, 32%, and 16% YoY,
respectively
- Revenues of $531 million, up 19% on an
FX neutral basis and flat as reported
- Adjusted EBITDA decreased 29%
year-over-year. Excluding Argentina, Adjusted EBITDA rose by $14.7
million year-over-year.
- Operating cash flow of ($17.6) million,
compared to $61.2 million in 2017
- Repurchased a total of 1.5 million
shares during 2018 for a total cost of $26.0 million
- Opened sales call centers in its seven
key markets during the year accounting for 1.5% of total gross
bookings
- Successfully launched Tour Operator
activities in 4Q18
Operating and Financial Metrics Highlights
(In millions, except as
noted)
4Q18
Pro Forma4Q17
Adj. 4Q17
% Chg 2018FY
Pro Forma2017FY
% Chg Operating metrics
Number of transactions 2.7 2.4 – 2.4 11% 10.4
9.1 15% Gross bookings $1,207.2 $1,258.4 – $1,258.4 (4%) $4,715.3
$4,454.5 6% Mix of mobile transactions 36%
30% – 30%
+645 bps 34% 28% +532 bps
Financial
metrics
Revenues $127.8 $151.6
$7.6 $144.0 (16%) $525.9 $529.4 (1%) Air 50.3 66.1 0.3 65.8 (24%)
$214.8 241.6 (11%) Packages, Hotels & Other Travel Products
77.6 85.5 7.3 78.2 (9%) $311.1 287.9 8% Net income 3.0 18.8 6.5
12.4 (84%) 19.2 46.2 (59%) Adjusted EBITDA 13.5 32.7 7.6 25.1 (59%)
67.3 94.9 (29%) Adjusted EBITDA (Excl. one-time items)
13.5 31.9
24.3 (58%) 68.1 92.1
(26%)
Note: For comparison purposes, the Company
has presented Pro-forma 4Q17 figures which include the adjustments
required under the new revenue recognition standards adopted since
the start of 2018. The YoY % change calculated against the adjusted
figures.
Message from CEO
Commenting on the Company’s results, Damián Scokin, CEO stated:
“We are pleased that our fourth quarter results show the successful
execution of our strategy to gain market share and further improve
our customer service. At that same time though these actions are
impacting short term profitability. Although the Latin American
markets, particularly Argentina, contracted during the quarter, our
gross bookings, on a FX neutral basis, increased 28% and we
continued to gain market share. Reflecting the actions taken and
the resiliency of our business model, mobile transactions were up
34%, and Packages, Hotels and Other Products accounted for 62% of
total revenue, an increase of more than 500 basis points from the
same period in the prior year. Additionally, for the full year, we
gained market share in air, grew our room nights by 18% and saw an
increase in NPS. Strong execution of our strategic plan from
pricing to new initiatives, is helping us address continued costs
and foreign exchange pressures.
“We are also seeing the benefits of our investment in
brand-building and our continuous customer improvement initiatives,
including the opening of call center across our seven key markets
and more recently our tour operation activities. We strategically
invested in the most promising opportunities and functionalities
which is attracting customers to our broad travel related options.
In a dynamic and highly challenging operating environment in 2018,
we grew our business while strategically invested for the
future.
“We are fortunate to participate in a large, over $100 billion
industry, with attractive long-term growth prospects. More and more
people in Latin America are going online to plan their trips. We
have built an omni-channel infrastructure that has the right
products and services to ensure our consumers have a great travel
booking experience no matter what platform they chose. Delivering
superior value and customer service will continue to underpin
everything we do. We are focused on further market share gains and
driving long term profitable growth. We are taking a balanced and
disciplined approach to further investing in the business. Looking
ahead, we are very excited by the future we see for Despegar and
believe we are on the right path to maximize our growth potential.
We have a healthy balance sheet that gives us flexibility to make
the necessary investments to drive long-term shareholder value. In
summary, we believe we are well positioned for long-term
marketplace success and confident Despegar’s sustained industry
leadership and ability to gain market share will continue,”
concluded Mr. Scokin.
Overview of Fourth Quarter 2018
Results
Operating Metrics
Key Operating Metrics
(In
millions, except as noted)
4Q18 4Q17
% Chg
FX Neutral% Chg
$ % of total
$ % of total
Gross Bookings $1,207.2
$1,258.4
(4%) 28% Average selling
price (ASP) (in $) $451 $520 (13%) 15%
Number of Transactions by
Segment & Total Air 1.6 58% 1.4 57% 12% Packages, Hotels
& Other Travel Products 1.1
42% 1.0 43% 8%
Total Number of Transactions
2.7 100%
2.4 100% 11%
Despegar continued to invest in driving share gains across its
key markets during 4Q18, which generated a 130 bps increase in air
market share during the quarter, led by Argentina and Brazil (as
per management estimates based on GDS and OAG data).
Transactions rose 11% to 2.7 million from 2.4 million in 4Q17
and FX neutral gross bookings increased 28% year-over-year in 4Q18
and 29% in 2018. During the quarter, industry gross bookings
declined and significant currency depreciation was noted across the
Company’s key markets, particularly Argentina. As a result, as
reported gross bookings decreased 4% year-on-year, to $1,207.2
million in 4Q18, from $1,258.4 million in the year-ago quarter.
However, this performance was significantly better than the low
teens contraction experienced by the travel industry in Latin
America in the fourth quarter.
The Latin American travel market is large with significant
opportunity for Despegar as customers migrate online. As the
leading OTA in Latin America, the Company is in a unique position
to leverage its strong competitive position and low-cost operating
structure to further increase market share.
The Company’s business is organized into two segments: (1) Air,
which consists of the sale of airline tickets, and (2) Packages,
Hotels and Other Travel Products, which consists of travel packages
(the bundling of two or more products together which can include
airline tickets and hotel rooms), as well as stand-alone sales of
accommodations (including hotels and vacation rentals), car
rentals, bus tickets, cruise tickets, travel insurance and
destination services.
In 4Q18, Despegar successfully launched its proprietary
activities (Tour Operations and allotments or “cupos”) offering
customers the ability to purchase a full travel experience
consisting of a charter flight, transportation, hotel and if the
customer chooses, activities. This new seasonal service is
currently offered in Argentina with trips to the south of Brazil. A
total of 110 trips have taken place to-date, with a load factor of
99%.
The share of higher-margin Packages, Hotels and Other Travel
Products transactions in 4Q18 remained relatively unchanged
year-on-year at 42% of total transactions. This metric is impacted
by a contracting market in Argentina, which still accounts for the
highest share of Packages, Hotels and Other Travel Products.
Following continued investments in Customer Service, NPS
continues to improve, up 780 bps YoY to 68% in 4Q18, as enhancing
customer satisfaction remains a key priority.
The average selling price (“ASP”) reached $451 per transaction
in 4Q18, a 15% year-over-year increase on an FX neutral basis, but
13% down as reported. This was mainly the result of year-on-year
quarterly average currency devaluation of 51% in Argentina, one of
Despegar’s key markets, which more than offset the successful
continued mix-shift to higher ASP packages. This also reflects
continued mix-shift from international to domestic travel across
key markets.
Despegar continues to make solid progress in driving mobile
transaction growth. During 4Q18 the number of transactions via
mobile rose 34% year-over-year with 36% of all transactions
completed on the mobile platform, up from 30% in 4Q17.
Geographic Breakdown
During 4Q18, Brazil, Despegar’s largest market,
accounting for 41% of total transactions reported a year-over-year
increase of 12.4% in transactions. On an FX neutral basis, gross
bookings rose 31.8% year-over-year and ASPs increased 17.3%.
However, as reported gross bookings increased 12.5% year-over-year
and ASPs were flat at $457 as continued mix-shift from domestic to
international travel and mix-shift to higher ASP packages more than
offset the impact from the 15% currency depreciation in the
period.
Argentina continued to experience challenging macro
conditions with GDP for 2018 estimated to have contracted 2.5%
year-over-year, inflation up 41% and the currency depreciating 51%
against the U.S. dollar. The Company’s ability to adjust quickly to
changing market dynamics, coupled with its leading market position,
drove market share increase, despite reporting an 11.7% decline in
transactions reflecting the overall market contraction. On an FX
neutral basis, gross bookings increased year-over-year by 26.0% and
ASPs rose 42.7%, in line with inflation. On a reported basis, gross
bookings and ASPs in Argentina declined year-over-year by 40.4% and
32.5%, respectively.
Across the Rest of Latin America, Despegar reported
increases of 28.8% in transactions and 20.5% in gross bookings,
while ASPs declined 6.4% year-over-year. On an FX neutral basis,
gross bookings rose 26.6%, while ASPs decreased 1.7% to $450.
Geographical Breakdown of Select Operating and Financial
Metrics - Growth Analysis (In %, except as noted)
4Q18 vs.
4Q17 - As Reported
Argentina
Brazil
Rest of Latin America
Total
% Chg. % Chg. % Chg. % Chg.
Transactions ('000) (11.7%) 12.4% 28.8% 11.5% Gross Bookings
(40.4%) 12.5% 20.5% (4.1%) ASP ($) (32.5%) 0.1% (6.4%) (14.0%)
Revenues (12.8%) Gross Profit
(26.7%)
4Q18
vs. 4Q17 - FX Neutral Basis
Argentina
Brazil
Rest of Latin America
Total
% Chg. % Chg. % Chg. % Chg.
Transactions ('000) (11.7%) 12.4% 28.8% 11.5% Gross Bookings 26.0%
31.8% 26.6% 28.2% ASP ($) 42.7% 17.3% (1.7%) 15.0% Revenues 8.7%
Gross Profit
(12.4%)
Revenue
Total FX neutral revenue in 4Q18 increased 9% year-on-year as
the Company continued to gain market share. However, as reported
revenue decreased 13% to $132.5 million in 4Q18, from pro forma
$151.6 million in the year-ago period, driven mainly by the 13%
year-on-year decline in ASP mainly reflecting the FX translation
impact from currency depreciation and lower purchasing power
resulting from challenging macro conditions in Argentina, and to a
lesser extent by a continued mix-shift from international to
domestic travel across some key markets.
Revenue margin declined 65 basis points year-on-year, to 11% in
4Q18, due to reductions earlier in the year in customer fees and
discounts in package transactions to drive further share gains,
along with the mix-shift from international to lower margin
domestic destinations and a reduction in air supplier volume
bonuses as a result of lower demand. This was partially offset by
lower cancellations in the quarter.
The year-on-year decline in revenue was mainly the result of
lower revenues from Air and to a lesser extent from Packages,
Hotels & Other Travel Products segments.
- Air segment revenue was $50.3
million in 4Q18, decreasing 24% year-over-year from pro forma $66.1
million in the year-ago quarter. Transactions rose 12% year-on-year
resulting in market share gains despite slower overall market
growth. Higher volumes were more than offset by a 32% decline in
average revenue per transaction reflecting the Company’s strategy
of lowering air customer fees in several markets earlier in 2018 to
support share gains and drive additional cross-selling
opportunities. A reduction in supplier volume bonuses as a result
of lower than anticipated demand and a mix-shift from international
to domestic travel resulting from local currency depreciation in
Argentina also contributed to the decline in Air revenues.
- Packages, Hotels & Other Travel
Products segment revenue declined 4% in the fourth quarter of
2018 to $82.3 million, from pro forma $85.5 million in 4Q17.
Transactions rose by 8% but were more than offset by an 11%
decrease in revenue per transaction principally reflecting the
weaker macro environment and price discounts, along with mix-shift
from international to domestic travel given currency depreciation.
The Packages, Hotels and Other Travel Products segment accounted
for 62% of total revenue in 4Q18, up from 56% in the same period of
the prior year
Revenue
Breakdown1
4Q18 Pro Forma 4Q17 Adj.
4Q17
% Chg2
$ % of total
$ % of total $ $
% of total
Revenue by business
segment (in $Ms) Air 50.3
38%
66.1 44% 0.3 65.8 46%
(24%)
Packages, Hotels & Other Travel Products
82.3
62%
85.5 56% 7.3
78.2 54%
(4%)
Total revenue
$132.5
100% $151.6
100% $7.6 $144.0
100%
(13%)
Revenue per transaction (in $) Air 32.3 47.7 0.2 47.5 (32%)
Packages, Hotels & Other Travel Products
73.5
82.7
7.1 75.7
(11%)
Total revenue per transaction
$49.5
$62.7
$2.8 $59.5
(21%)
Total
revenue margin
11.0%
11.6%
11.4%
(65) bps
1. Net of sales tax
2. For comparison purposes, the Company
has presented Pro-forma 4Q17 figures which include the adjustments
required under the new revenue recognition standards adopted since
the start of 2018. The YoY % change calculated against the adjusted
figures.
Cost of Revenue and Gross Profit
Cost of revenue, which mainly consists of credit card
processing fees, bank fees related to customer financing
installment plans offered and fulfillment center expenses, was
$49.7 million in 4Q18 compared to $38.4 million in 4Q17, an
increase of 29%. As a percentage of revenue, cost of revenue rose
by 1,219 basis points to 37.5% from 25.3% in the fourth quarter of
2017.
The year-on-year increase in cost of revenue was primarily
driven by higher installment plan costs as Despegar increased the
availability and duration of installments in the fourth quarter in
Argentina, after a contraction in the prior quarter. Additionally,
credit card merchant fee expense increased reflecting a higher mix
of transactions where the Company was the credit card merchant of
record rather than airline suppliers which allowed Despegar to
offer more attractive customer financing options.
To a lesser extent, higher fulfillment costs also contributed to
the increase in cost of revenue, while a continued reduction in
fraud partially offset such increases. These customer-oriented
initiatives allowed the Company to deliver a 780 basis points
year-on-year increase in after trip NPS.
Gross Profit reached $82.8 million in 4Q18, declining 27%
year-on-year. On an FX neutral basis, gross profit declined 12% to
$99 million, reflecting lower revenue margins resulting from the
Company’s initiatives to accelerate market share growth, along with
investments in support of improving customer satisfaction
levels.
Cost of Revenue and Gross Profit (In millions,
except as noted)
4Q18
Pro Forma4Q17
Adj. 4Q17
% Chg1 Revenue $132.5 $151.6 $7.6 $144.0 (13%)
Cost of Revenue $49.7 $38.4 $38.4 29% % of revenues
37.5% 25.3%
26.7% +1,219 bps
Gross Profit
82.8 113.2
7.6 105.6 (27%)
Gross Profit Margin 62.5% 74.7%
73.3% (1,219) bps
1. For comparison purposes, the Company
has presented Pro-forma 4Q17 figures which include the adjustments
required under the new revenue recognition standards adopted since
the start of 2018. The YoY % change calculated against the adjusted
figures.
Operating Expenses
Total operating expenses in 4Q18 decreased 10%
year-over-year to $76.9 million, mainly benefitting from regional
currency depreciation, principally in Argentina which accounts for
approximately half of total operating expenses. This more than
offset more difficult comps from a one-time tax recovery gains in
4Q17. As a percentage of revenues, however, total operating
expenses increased by 161 bps to 58.0%. Excluding the one-time item
in 4Q17, total operating costs decreased 11% year-on-year in 4Q18
but rose 108 basis points as a percentage of revenues to 58.0%.
- Selling and marketing (S&M)
expenses declined 7% year-over-year to $42.9 million, from
$46.4 million in 4Q17. On a per transaction basis, Despegar
achieved savings of 16.3%, with S&M declining to $16.0 million
from $19.2 in 4Q17. Measured as a percentage of revenues, however,
these expenses increased to 32.4% in 4Q18 from 30.6% in 4Q17,
mainly reflecting lower ASPs resulting from local currency
devaluation in Argentina and the continued mix-shift from
international to domestic travel across key markets. This more than
offset the benefit from regional currency depreciation on costs,
the lower level of marketing investments and improving
efficiencies.
- General and administrative (G&A)
expenses declined 11% year-over-year to $17.6 million, from
$19.8 million in the fourth quarter of 2017, benefitting from
currency depreciation, mainly in Argentina. As a percentage of
revenues, G&A increased 21 basis points to 13.3% in 4Q18 from
13.1% in the prior year quarter reflecting the 7.8% year-over-year
increase in headcount, personnel expenses, a $2.0 million increase
in stock-based compensation, and $363 thousands of the Venezuela
impairment. Excluding a one-time time tax recovery gain of $0.8
million in 4Q17, comparable G&A declined 14.7% year-over-year,
but increased 32 basis points as % of revenues on a lower revenue
base.
- Technology and product development
expenses declined 15% year-over-year to $16.4 million in 4Q18,
from $19.3 million in 4Q17 reflecting lower USD expenses from
currency depreciation in Argentina where the majority of headcount
is based, partially offset the 17.7% year-over-year increase in
headcount as the Company continues to introduce new services and
functionalities to its platform. As a percentage of revenue,
technology and product expenses declined by 41 basis points
year-over-year to 12.4% despite continued investments in technology
and product development platform.
Operating Expenses (In millions, except as noted)
4Q18
Pro Forma4Q17
4Q17 % Chg1
Selling and marketing $42.9 $46.4 $46.4 (7%) % of revenues 32.4%
30.6% 32.2% +181 bps General and administrative2 $17.6 $19.8 $19.8
(11%) % of revenues 13.3% 13.1% 13.8% +21 bps Technology and
product development $16.4 $19.3 $19.3 (15%) % of revenues
12.4% 12.8% 13.4%
(41) bps
Total operating expenses
$76.9 $85.5
$85.5 (10%) Total operating expenses as
a % of revenues 58.0% 56.4%
59.4% +161 bps
Total operating
expenses (Excl. one-time items)
$76.9 $86.3 $86.3
(11%) Total operating expenses (Excl. one time
items) as a % of revenues 58.0%
56.9% 59.9% +108 bps
1. For comparison purposes, the Company
has presented Pro-forma 4Q17 figures which include the adjustments
required under the new revenue recognition standards adopted since
the start of 2018. The YoY % change calculated against the adjusted
figures.
2. Includes $363 thousands impairment loss
for fixed assets in Venezuela in 4Q 2018.
Financial Income/Expenses
In the fourth quarter of 2018, the Company reported a net
financial expense of $0.0 million compared to $6.2 million in 4Q17.
The decrease was primarily due to foreign exchange gain from
currency revaluation in Argentina and Brazil and higher interest
income from invested cash balances. Savings were partially offset
by higher credit card receivable factoring expenses in Brazil as a
result of the increase in the Company’s own merchant gross bookings
in 4Q18. Net financial expense for 4Q18 also includes a $1.0
million FX gain resulting from the adoption of the U.S. dollar as
the functional currency of the Company’s Argentine subsidiary
starting July 1, 2018 following the guidance of ASC 830 as
Argentina is recognized as a hyperinflationary economy.
Income Taxes
The Company reported an income tax expense of $2.9 million in
4Q18, compared to $2.6 million pro-forma in 4Q17. The effective tax
rate in 4Q18 was 48,6%, compared to pro-forma 12.2% 4Q17. The
higher rate in 4Q18 is primarily driven by the decrease in
non-taxable income during 2018. The lower effective tax rate in
4Q17 was mainly due to the recognition of deferred tax assets and
by a reversal of a tax contingency due to the expiration of the
statutory limitations.
Adjusted EBITDA & Margin
Adjusted EBITDA declined by 58%, or $19.2 million, to $13.9
million in 4Q18 from pro forma $32.7 million in the prior
year-quarter. Excluding Argentine operations, Adjusted EBITDA,
increased by $8.7 million in the quarter, which highlights the
resilience of the Company’s business model and diversification
value.
Adjusted EBITDA margin contracted to 10.5% from 21.6% in the
prior year quarter, primarily resulting from the mix-shift from
international to domestic travel driven by currency devaluation
across the region, lower year-on-year customer fees in air and
price discounts in packages introduced earlier in the year to
support top line growth and lower supplier bonuses resulting from
softer volumes. Higher installment expense to drive top line growth
also impacted Adjusted EBITDA margin. This was partially offset by
lower operating expenses.
Excluding one-time tax recoveries of $0.8 million in the fourth
quarter of 2017, comparable Adjusted EBITDA would have decreased
56%.
Adjusted EBITDA Reconciliation & Adjusted EBITDA
Margin (In millions, except as noted)
4Q18
Pro Forma4Q17
Adj. 4Q17
% Chg1 Net income/ (loss) $3.0
$18.8 $6.5 $12.4
(84%)
Add (deduct):
Financial expense,
net 0.0 6.2 6.2 (100%) Income tax expense 2.9 2.6 1.1 1.5 9%
Depreciation expense 1.7 1.0 - 1.0
62%
Amortization of intangible assets 3.2 2.7 - 2.7 15% Share-based
compensation expense 3.1 1.2
- 1.2 155%
Adjusted
EBITDA $13.9 $32.7 $7.6 $25.1
(58%)
Adjusted EBITDA Margin 10.5%
21.6%
17.4%
(1,109) bps
One-time items - 0.8 0.8 (100%) Adjusted EBITDA (Excl. one-time
items) 13.9 31.9 24.3
(56%)
Adjusted EBITDA Mg. (Excl. one-time items)
10.5% 21.0%
16.9%
(1,056) bps
1. For comparison purposes, the Company
has presented Pro-forma 4Q17 figures which include the adjustments
required under the new revenue recognition standards adopted since
the start of 2018. The YoY % change calculated against the adjusted
figures.
Balance Sheet and Cash Flow
Unrestricted cash and cash equivalents at December 31, 2018 was
$352.2 million, compared to $410.8 million at December 31, 2017,
reflecting lower cash flow generated during the twelve-months ended
December 31, 2018. Additionally, during the quarter, the Company
repurchased $10.2 million shares under a previously announced share
buyback program totaling $26 million in the year.
Despegar reported a use of cash flow from operating activities
of $5.4 million in 4Q18 compared to cash generation of $25.2
million in 4Q17. This usage of cash resulted mainly from an
increase in inventories and cash advances to travel suppliers,
lower net income and slower growth in the Company’s supplier and
related party payables resulting from lower year-over-year sales.
For the twelve months ended December 31, 2018 the Company reported
a net use of cash from operating activities of $17.6 million versus
cash flow generation from operating activities of $61.2 million for
the twelve months ended December 31, 2017.
During 4Q18, the Company’s capital expenditures were $8.9
million compared to $6.3 million during the comparable quarter in
2017. Funds were primarily used for technology hardware and office
expansion.
Argentina Considered Hyperinflationary Market
As of July 1, 2018, as a result of a three-year cumulative
inflation rate greater than 100% and following the guidance of ASC
830 the U.S. dollar became the functional currency of the Company’s
Argentine subsidiary. This change in functional currency is being
recognized prospectively in the financial statements. As a result,
starting 3Q18 the impact of any change in currency exchange rate on
the Company’s balance sheet accounts is reported in the Net
financial income/(expense) line of the income statement instead of
Other comprehensive income.
4Q18 Earnings Conference Call
When: 8:00 a.m. Eastern time, March 7, 2019
Who:
Mr. Damián Scokin, Chief Executive
Officer
Mr. Alberto López-Gaffney, Chief Financial Officer Mr. Javier Kelly
Grinner, Investor Relations
Dial-in:
1-866-270-1533 (U.S. domestic);
1-412-317-0797 (international)
Webcast:
CLICK HERE
Definitions and concepts
Average Selling Price (ASP): reflects gross bookings
divided by the total number of transactions.
Gross Bookings: Gross bookings is an operating measure
that represents the aggregate purchase price of all travel products
booked by the Company’s customers through its platform during a
given period. 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, it monitors gross bookings
as an important indicator of its ability to generate revenue.
Foreign Exchange (“FX”) Neutral: calculated by using the
average monthly exchange rate of each month of 2017 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
effect such as local currency inflation effects.
Number of Transactions: The number of transactions for a
period is an operating measure that represents the total number of
customer orders completed on our platform in such 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 its business from period to period but, 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.
Revenue: The Company reports its revenue on a net basis,
deducting cancellations and amounts that it collects as sales
taxes. Despegar derives 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. To a lesser extent, Despegar also derives revenue from
the sale of third-party advertisements on its websites and from
certain suppliers when their brands appears in the Company
advertisements in mass media.
Revenue Margin: calculated as revenue divided by gross
bookings.
Seasonality: Despegar’s financial results experience
fluctuations due to seasonal variations in demand for travel
services. Bookings for vacation and leisure travel are generally
higher during the fourth quarter, although to date and prior to the
revenue recognition change beginning in the first quarter of 2018,
the Company has recognized more revenue associated with those
bookings in the fourth quarter of each year. Latin American
travelers, particularly leisure travelers, who are Despegar’s
primary customers, tend to travel most frequently at the end of the
fourth quarter and during the first quarter of each year.
About Despegar.comDespegar is the leading online travel
company in Latin America. With over two decades of business
experience and operating in 20 countries in the region, Despegar
accompanies Latin American travelers from the moment they dream of
taking a trip until they share their memories of that trip. Thanks
to the strong commitment to technological development and customer
service, Despegar offers a tailor-made experience to more than 18
million customers.
Despegar’s websites and leading mobile apps, offer products from
over 300 airlines, more than 520,000 accommodation options, as well
as approximately 1,100 car rental agencies and approximately 240
destination services suppliers with more than 8,700 activities
throughout Latin America. The Company owns and operates two
well-recognized brands, Despegar, its global brand, and Decolar,
its Brazilian brand. Despegar is traded on the New York Stock
Exchange (NYSE:DESP). For more information, please
visit www.despegar.com.
Forward-Looking StatementsThis press release includes
forward-looking statements. We base these forward-looking
statements on our current beliefs, expectations and projections
about future events and financial 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.
-- Financial Tables Follow --
Unaudited Consolidated Statements of
Operations for the three and twelve - month periods ended December
31, 2018
(in thousands U.S. dollars, except as
noted)
4Q18
Pro Forma4Q17
Adj. 4Q17
% Chg2 Revenue $132,515 $151,589
$7,578 $144,011 (13%) Cost of revenue
49,703 38,383
38,383 29%
Gross profit
82,812 113,206
7,578 105,628
(27%) Operating expenses Selling and marketing 42,925
46,356 46,356 (7%) General and administrative 17,599 19,821 19,821
(11%) Technology and product development
16,376 19,349
19,349 (15%)
Total operating expenses
76,900 85,526
85,526
(10%)
Operating income 5,912
27,680 7,578
20,102 (79%) Net financial income
(expense) (18) (6,232)
(6,232) (100%)
Net
income before income taxes 5,894
21,448 7,578
13,870 (73%) Income tax expense
2,864 2,617 1,105
1,512 9%
Net income
3,030 18,831
6,473 12,358 (84%)
Basic EPS (in $) 0.04 0.27 0.18 (84%) Diluted EPS (in $) 0.04 0.27
0.18 (84%) Basic shares weighted average1 69,187 69,098 69,098
Diluted shares weighted average1 71,287
69,189 69,189
As a % of Revenues Cost of revenue 37.5% 25.3%
26.7% +1,219 bps Gross profit 62.5% 74.7% 73.3% (1,219) bps
Operating expenses Selling and marketing 32.4% 30.6% 32.2% +181 bps
General and administrative 13.3% 13.1% 13.8% +21 bps Technology and
product development 12.4% 12.8% 13.4% (41) bps Total operating
expenses 58.0% 56.4% 59.4% +161 bps Operating income 4.5% 18.3%
14.0% (1,380) bps Net income before income taxes 4.4% 14.1% 9.6%
(970) bps Net income 2.3% 12.4%
8.6% (1,014) bps
1. In thousands
2. For comparison purposes, the Company
has presented Pro-forma 4Q17 figures which include the adjustments
required under the new revenue recognition standards adopted since
the start of 2018. The YoY % change calculated against the adjusted
figures.
Key Financial & Operating Trended
Metrics
(in thousands U.S. dollars, except as noted)
Pro Forma 1Q17
2Q17 3Q17
4Q17 1Q18 2Q18
3Q18 4Q18 FINANCIAL RESULTS
Revenue $124,999
$123,462 $131,468 $144,011
$148,593 $128,259 $121,247 $132,515
Revenue Recognition Adjustment ($3,321) ($59) $1,310 $7,578 Cost of
revenue 31,140 35,087
37,869 38,383 43,646 42,088
36,673 49,703
Gross profit
90,538 88,316
94,909 113,206
104,947 86,171
84,574 82,812 Operating expenses
Selling and marketing 35,546 43,289 41,097 46,356 46,410 43,450
41,572 42,925 General and administrative 18,869 18,618 15,318
19,821 15,888 16,986 17,130 17,599 Technology and product
development 15,408 17,644
18,907 19,349 19,225 18,732
16,821 16,376
Total operating
expenses 69,823
79,551 75,322
85,526 81,523 79,168
75,523 76,900
Operating income
20,715 8,765
19,587 27,680 23,424
7,003 9,051
5,912 Net financial income (expense)
(6,156) (1,611) (2,880)
(6,232) (2,831) (5,292) (11,026)
(18)
Net income before income taxes
14,559 7,154
16,707 21,448 20,593
1,711 (1,975)
5,894 Adj. Net Income tax expense 2,418 4,254 4,373 2,617
4,235 471 (501) 2,864 Income tax expense 2,486 3,806 4,190 1,512
4,235 471 (501) 2,864 Adjustment $68
($448) ($183) ($1,105)
Net income /(loss) 12,141
2,900 12,334
18,831 16,358 1,240
(1,474) 3,030
KEY METRICS
Operational
Gross bookings $1,019,102 $1,061,026
$1,116,022 $1,258,398 $1,231,497
$1,184,355 $1,092,287 $1,207,186 - YoY growth
54% 40% 32% 26% 21% 12% (2%) (4%)
Number of transactions
2,129 2,210 2,298 2,419 2,514
2,607 2,596 2,676 - YoY growth 30% 30% 25% 19%
18% 18% 13% 11% Air 1,246 1,324 1,328 1,386 1,362 1,513 1,512 1,557
- YoY growth 34% 31% 22% 13% 9% 14% 14% 12% Packages, Hotels &
Other Travel Products 883 886 970 1,033 1,152 1,094 1,085 1,119 -
YoY growth 25% 27% 29% 28% 30% 23% 12% 8%
Revenue per
transaction $57.2 $55.8 $57.8 $62.7
$59.1 $49.2 $46.7 $47.8 - YoY growth 3%
(12%) (18%) (20%) Air $45.6 $45.2 $44.3 $47.7 $44.7 $35.1 $33.4
$32.3 - YoY growth (2%) (22%) (25%) (32%) Packages, Hotels &
Other Travel Products $73.5 $71.7 $76.2 $82.7 $76.2 $68.6 $65.2
$69.3 - YoY growth 4% (4%) (14%) (16%)
ASPs $479
$480 $486 $520 $490 $454
$421 $451 - YoY growth 18%
8% 6% 6% 2%
(5%) (13%) (13%)
Net income/ (loss)
$12,141 $2,900 $12,334
$18,831 $16,358 $1,240 ($1,474)
$3,030
Add (deduct): Financial expense, net 6,156
1,611 2,880 6,232 2,831 5,292 11,026 18 Income tax expense 2,418
4,254 4,373 2,617 4,235 471 (501) 2,864 Depreciation expense 1,343
1,362 1,337 1,033 859 1,475 1,338 1,676 Amortization of intangible
assets 1,517 2,039 2,454 2,741 2,018 2,228 2,738 3,156 Share-based
compensation expense 1,176 930
959 1,224 983 1,266
1,393 3,124
Adjusted EBITDA
$24,751 $13,096
$24,337 $32,678
$27,284 $11,972
$14,520 $13,868
Unaudited Consolidated Balance Sheets
as of December 31, 2018
(in thousands U.S. dollars, except as noted)
As of December
31, 2018 As of December 31, 2017 ASSETS
Current assets Cash and cash
equivalents $346,480 $371,013 Restricted cash and cash equivalents
$5,709 $29,764 Accounts receivable, net of allowances $225,019
$198,273 Related party receivable 8,653 5,253 Other current assets
and prepaid expenses 68,471 29,405 Total
current assets 654,332 633,708
Non-current
assets Other Assets 12,751 4,658 Restricted cash and cash
equivalents – 10,000 Property and equipment net 19,716 16,171
Intangible assets, net 37,512 35,424 Goodwill
36,207 38,733 Total non-current assets 106,186
104,986
TOTAL ASSETS 760,518
738,694 LIABILITIES AND SHAREHOLDERS’ DEFICIT
Current liabilities Accounts payable
and accrued expenses 42,353 45,609 Travel suppliers payable 185,450
174,817 Related party payable 83,904 84,364 Loans and other
financial liabilities 31,162 8,220 Deferred Revenue 4,800 30,113
Other liabilities 33,270 39,751 Contingent liabilities
4,794 4,732 Total current liabilities
385,733 387,606
Non-current liabilities Other
liabilities 243 1,015 Contingent liabilities 1,968 7,115 Related
party liability 125,000 125,000 Total
non-current liabilities 127,211 133,130
TOTAL LIABILITIES 512,944
520,736 SHAREHOLDERS’ EQUITY (DEFICIT) Common stock
255,254 253,535 Additional paid-in capital 321,627 316,444 Other
reserves (728) (728) Accumulated other comprehensive income 3,051
16,323 Accumulated losses (305,600) (367,616) Treasury Stock
(26,030) – Total Shareholders' Equity Attributable /
(Deficit) to Despegar.com Corp 247,574 217,958
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
760,518 738,694
Unaudited Statements of Cash Flows for
the three and twelve-month period ended December 31, 2018 and
2017
(in thousands U.S. dollars, except as
noted)
3 months ended December 31,
Twelve months ended December
31,
2018 2017
2018 2017 Cash flows from
operating activities
Net income
$3,030 $12,358
$19,154 $42,366 Adjustments to
reconcile net income to net cash flow from operating activities
Unrealized foreign currency translation losses (2,565)
– (1,088) 457 Depreciation expense 1,313 1,033
4,985 5,075 Amortization of intangible assets 3,156 2,741 10,140
8,751 Impairment of long-lived assets 363 – 363 – Stock based
compensation expense 3,124 1,224 6,766 4,289 Interest and penalties
(103) (675) 494 (65) Income taxes 1,589 (369) 2,876 5,507 Allowance
for doubtful accounts 749 130 1,062 818 Provision / (recovery) for
contingencies 1,079 (97)
2,021 (603) Changes in assets and liabilities,
net of non-cash transactions (Increase) / Decrease in accounts
receivable, net of allowances (36,805) (45,783) (51,277) (85,383)
(Increase) / Decrease in related party receivables (2,137) (671)
(3,406) (3,013) (Increase) / Decrease in other assets and prepaid
expenses (15,914) (3,599) (61,302) (10,090) Increase / (Decrease)
in accounts payable and accrued expenses (4,062) 7,878 4,277 22,363
Increase / (Decrease) in travel suppliers payable 42,253 50,005
42,789 78,835 Increase / (Decrease) in other liabilities (4,783)
(9,086) 3,309 (12,323) Increase / (Decrease) in contingencies (181)
(2,062) (5,567) (12,183) Increase / (Decrease) in related party
liabilities (530) 4,621 4,203 13,964 Increase / (Decrease) in
deferred revenue 4,989 7,584 2,581 2,461
Net cash flows provided
by / (used in) operating activities
(5,435) 25,232
(17,620) 61,226 Cash flows from
investing activities Payments for short-term investments – – – –
Acquisition of property and equipment (4,692) (2,392) (13,085)
(8,746) Increase of intangible assets including internal-use
software and website development (4,247) (3,942) (13,494) (12,929)
(Increase) / Decrease in restricted cash and cash equivalents – – –
–
Net cash (used in) /provided by investing activities
(8,939) (6,334)
(26,579) (21,675) Cash
flows from financing activities
Increase / (Decrease) in loans and
other financial liabilities 621 (374) 24,637 585 Capital
contributions – (776) 136 253,529 Treasury Stock
(10,234) (26,030)
Net cash (used in) / provided by financing
activities (9,613)
(1,150) (1,257)
254,114 Effect of exchange rate changes on cash, cash
equivalents and restricted cash (518) (3,009) (13,132) (2,053)
Net increase / (decrease) in cash, cash equivalents and
restricted cash (24,505)
14,739 (58,588)
291,612 Cash, cash equivalents and restricted cash as of
beginning of the period 376,694 396,038 410,777 119,165 Cash, cash
equivalents and restricted cash as of end of the period
352,189 410,777 352,189
410,777
Use of Non-GAAP Financial Measures
This announcement includes certain references to Adjusted EBITDA
and non-GAAP financial measures. The Company defines:
Adjusted EBITDA is defined as net
income/(loss) exclusive of financial income/(expense), income tax,
depreciation, amortization and share-based compensation
expense.
Free cash flow is defined as cash
flow from operating activities less capital expenditures including
capitalized software.
Adjusted EBITDA and Free cash flow are not measures 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. Adjusted EBITDA margin refers to Adjusted EBITDA
as defined above divided by revenue.
To supplement our consolidated financial statements presented in
accordance with U.S. GAAP, we use 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.
Reconciliation of this non-GAAP financial measure to the most
comparable U.S. GAAP financial measures can be found in the tables
included in this quarterly report.
The Company believes that reconciliation of 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 provide 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 2017 and applying them
to the corresponding months in 2018, so as to calculate what our
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 local currency inflation or devaluations.
The following table sets forth the FX neutral measures related
to our reported results of the operations for the three-month
period ended December 31, 2018:
Geographical Breakdown of Select Operating and Financial
Metrics (In millions, except as noted)
4Q18 vs. 4Q17 - As
Reported Argentina
Brazil Rest of Latin America
Total 4Q18 4Q17
% Chg. 4Q18 4Q17
% Chg. 4Q18 4Q17
% Chg. 4Q18 4Q17
% Chg. Transactions ('000) 558 632
(11.7%) 1,085 966 12.4%
1,033 802 28.8% 2,676
2,400 11.5% Gross Bookings 269 451 (40.4%) 496 441
12.5% 443 367 20.5% 1,207 1,258 (4.1%) ASP ($) 481 713 (32.5%) 457
456 0.1% 429 458 (6.4%) 451 524 (14.0%) Revenues 133 152 (12.8%)
Gross Profit
83 113
(26.7%)
4Q18 vs. 4Q17 - FX Neutral Basis
Argentina Brazil Rest of Latin America
Total 4Q18 4Q17
% Chg. 4Q18 4Q17
% Chg. 4Q18 4Q17
% Chg. 4Q18 4Q17
% Chg. Transactions ('000) 558 632 (11.7%) 1,085 966 12.4%
1,033 802 28.8% 2,676 2,400 11.5% Gross Bookings 568 451 26.0% 581
441 31.8% 465 367 26.6% 1,614 1,258 28.2% ASP ($) 1,017 713 42.7%
535 456 17.3% 450 458 (1.7%) 603 524 15.0% Revenues 179 152 8.7%
Gross Profit
99 113
(12.4%)
2018 vs. 2017 - As Reported Argentina
Brazil Rest of Latin America Total 2018
2017 % Chg. 2018
2017 % Chg. 2018
2017 % Chg. 2018
2017 % Chg. Transactions
('000) 2,378 2,253 5.5% 4,230 3,698 14.4% 3,786 3,102 22.0% 10,394
9,056 14.8% Gross Bookings 1,250 1,462 (14.5%) 1,790 1,628 10.0%
1,675 1,365 22.8% 4,715 4,454 5.9% ASP ($) 525 648 (19.0%) 423 440
(3.8%) 443 440 0.6% 454 492 (7.8%) Revenues 531 529 0.4% Gross
Profit
359 387
(7.2%)
2018 vs. 2017 - FX Neutral Basis
Argentina Brazil
Rest of Latin America Total
2018 2017
% change 2018
2017 %
change 2018
2017 % change
2018 2017
% change Transactions ('000)
2,378 2,253 5.5% 4,230 3,698 14.4% 3,786 3,102 22.0% 10,394 9,056
14.8% Gross Bookings 2,013 1,462 37.7% 2,044 1,628 25.6% 1,688
1,365 23.7% 5,745 4,454 29.0% ASP ($) 846 648 30.6% 483 440 9.8%
446 440 1.4% 553 492 12.4% Revenues 645 529 19.2% Gross Profit
230 142 7.2%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190307005184/en/
Investor RelationsJavier Kelly GrinnerInvestor
RelationsPhone: (+5411) 5173
3501E-mail: investorelations@despegar.com
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