Despegar.com Announces 3Q18 Year-Over-Year Growth of 13% in Transactions

BUENOS AIRES, Argentina--()--Despegar.com, Corp. (NYSE: DESP), (“Despegar” or the “Company”), a leading online travel company in Latin America, today announced unaudited results for the three- and nine-month periods ended September 30, 2018. Financial results are expressed in U.S. dollars and are presented in accordance with U.S. generally accepted accounting principles.

Third Quarter 2018 Key Highlights

  • Transactions up 13% year-over-year
  • Gross bookings down 2% year-over-year (+27% on an FX neutral basis)
  • Revenue declined 9% year-over-year
  • Packages, Hotels and Other Travel Products accounted for 58% of total revenue in 3Q18, up 269 basis points from third quarter 2017
  • Mobile transactions up 36% year-over-year, accounting for 35% of total transactions in 3Q18
  • Over 46 million cumulative mobile application downloads as of September 30, 2018, up 30% year-over-year
  • Adjusted EBITDA decreased 40% year-over-year, and was down 31% year-over-year excluding one-time tax recovery gains in 3Q17 and a one-time severance payment in 3Q18
  • Operating cash flow of ($26.7) million in 3Q18, compared to $10.7 million in 3Q17
  • Repurchased 939 thousand shares in 3Q18 for $15.7 million, with a total of $25 million in share repurchases year-to-date

Message from CEO

Commenting on the Company’s results, Damian Scokin, CEO stated: “This was a challenging quarter as we faced increasingly unfavorable macro conditions in Latin America, particularly in Argentina and Brazil, that impacted the travel industry which saw gross bookings decline in the low double-digit range. Given the full quarter impact of macroeconomic conditions, we expect further industry deterioration in the fourth quarter.

The current market environment, coupled with our strong balance sheet, has provided us with a unique opportunity to further strengthen our leading market position. Earlier this year, we adjusted our go-to-market strategy and customer service processes, , launching several initiatives that are allowing us to continue to gain market share across all of our key markets, despite lower reliance on payment installments. These measures will better position us to capture future growth as the economies recover. Importantly, on an FX-neutral basis consolidated gross bookings increased 27% year-on-year. Our decision to accelerate market share growth and customer service initiatives together with the significant currency volatility across our key markets, are impacting our financial results in the near term.

Reflecting our confidence in the Company’s future growth opportunities, we opportunistically took advantage of stock market volatility and repurchased over $25 million of our shares outstanding year-to-date. We have been operating in the region for over two decades and have faced similar challenges. Each time, we have emerged stronger, cementing our position as the leading OTA in the region.”

Operating and Financial Metrics Highlights
(In millions, except as noted)
    Pro Forma             Pro Forma  
    3Q18   3Q17  

  Adj.  

  3Q17   % Chg 9M18   9M17   % Chg
Operating metrics
Number of transactions   2.6   2.3     2.3   13% 7.7   6.6   16%
Gross bookings   $1,092.3   $1,116.0     $1,116.0   (2%) $3,508.1   $3,196.2   10%
Mix of mobile transactions   35%   29%     29%   +594 bps 33%   28%   +495 bps
Financial metrics                              
Revenues   $121.2   $132.8   $1.3   $131.5   (9%) $398.1   $377.9   5%
Air   50.5   58.9   0.3   58.5   (14%) $164.5   175.5   (6%)
Packages, Hotels & Other Travel Products   70.8   73.9   1.0   72.9   (4%) $233.5   202.4   15%
Net income   (1.5)   12.3   1.1   11.2   (112%) 16.1   27.4   (41%)
Adjusted EBITDA   14.5   24.3   1.3   23.0   (40%) 53.8   62.2   (14%)
Adjusted EBITDA (Excl. one-time items)   15.3   22.3       21.0   (31%) 54.6   60.2   (9%)
Note: For comparison purposes, the Company has presented Pro-forma 3Q17 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.
 

Overview of Third Quarter 2018 Results

Operating Metrics

Transactions rose 13% to 2.6 million in 3Q18 from 2.3 million in the year-ago period, as Despegar continued to gain share across its key markets. As a result, gross bookings decreased just 2%, significantly less than the industry’s, to $1,092.3 million in 3Q18, from $1,116.0 million in the third quarter of 2017. Importantly, on an FX neutral basis, gross bookings increased 27% year-over-year, in 3Q18. Across the key markets in which it operates, particularly Argentina, Despegar faced declining industry gross bookings and significant currency depreciation. Nevertheless, in the $100 billion Latin American travel market, the Company remains focused on leveraging its strong competitive position and low-cost operating structure, while improving customer satisfaction levels, to accelerate market share gains.

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.

The share of higher-margin Packages, Hotels and Other Travel Products transactions in 3Q18 remained relatively unchanged year-on-year at 42% of total transactions. Reflecting the macro environment in the country, Argentina accounted for a lower share in overall transactions, although still accounting for the highest share of Packages, Hotels and Other Travel Products.

The average selling price (“ASP”) was $421 per transaction in 3Q18, a 13% year-over-year decline (+12% YoY FX neutral), mainly as a result of local quarterly average currency devaluation in our two largest markets, specifically, 46% year-on-year in Argentina and 20% year-on-year in Brazil, and to a lesser extent by a continued mix-shift from international to domestic travel across key markets. In particular, the extent of the currency devaluation more than offset the successful continued mix-shift to higher ASP packages.

Brazil remains the largest market by transactions for Despegar, accounting for 40% of total transactions and increasing 11% year-over-year in 3Q18. Transactions grew 4% year-over-year in Argentina and 20% year-over-year in Mexico in the third quarter of 2018.

Mobile is an important initiative for Despegar and during the quarter the number of transactions via mobile rose 36% year-over-year with 35% of all transactions completed on the mobile platform, compared with up from 29% in 3Q17.

Key Operating Metrics
(In millions, except as noted)              
3Q18 3Q17

  % Chg  

FX Neutral

    $   % of total     $   % of total    

% Chg

Gross Bookings   $1,092.3         $1,116.0       (2%)   27%
Average selling price (ASP) (in $)   $421         $486       (13%)   12%
Number of Transactions by Segment & Total                          
Air   1.5   58%     1.3   58%   14%    
Packages, Hotels & Other Travel Products   1.1   42%     1.0   42%   12%    
Total Number of Transactions   2.6   100%     2.3   100%   13%    
 

Revenue

Total revenue in 3Q18 decreased 9% to $121.2 million, from pro forma $132.8 million in the year-ago quarter, mainly impacted by the 13% year-on-year decline in ASP resulting from local currency devaluation in Argentina and Brazil, our two largest markets, and to a lesser extent by a continued mix-shift from international to domestic travel across key markets.

Revenue margin experienced a 53 basis points year-on-year decline, to 11.1% in 3Q18, following the prior quarter implementation of customer fee reductions and discounts in package transactions, along with international to domestic mix-shift.

The year-on-year decline in revenue was mainly the result of lower revenues from Air and to a lesser degree from Packages, Hotels & Other Travel Products segments.

  • Air segment revenue was $50.5 million in 3Q18, declining 14% year-over-year from pro forma $58.9 million in 3Q17. Transactions were up 14% year-on-year resulting in market share gains despite slower overall market growth. Higher volumes were more than offset by a 25% decline in average revenue per transaction resulting from the Company’s strategy of lowering air customer fees in several markets to drive market share gains and provide additional cross-selling opportunities, along with a mix-shift from international to lower-margin domestic travel driven by local currency depreciation, particularly in Argentina and Brazil.
  • Packages, Hotels & Other Travel Products segment revenue decreased 4% in 3Q18 to $70.8 million, from pro forma $73.9 million in the year-ago quarter. Transactions increased by 12% but were more than offset by a 14% decline in revenue per transaction resulting mainly from the slower macro environment and price discounts, along with mix-shift from international to domestic travel given currency depreciation, particularly in Argentina and Brazil. The Packages, Hotels and Other Travel Products segment accounted for 58% of total revenue in the third quarter of 2018, up from 56% in 3Q17.
Revenue Breakdown1                      
 
3Q18 Pro Forma 3Q17

   Adj.   

3Q17 % Chg2
    $   % of total     $   % of total     $     $   % of total  
Revenue by business segment (in $Ms)                                      
Air   50.5   42%     58.9   44%     0.3     58.5   45%   (14%)
Packages, Hotels & Other Travel Products   70.8   58%     73.9   56%     1.0     72.9   55%   (4%)
Total revenue   $121.2   100%     $132.8   100%     $1.3     $131.5   100%   (9%)
Revenue per transaction (in $)                                      
Air   33.4         44.3         0.2     44.1       (25%)
Packages, Hotels & Other Travel Products   65.2         76.2         1.0     75.2       (14%)
Total revenue per transaction   $46.7         $57.8         $0.5     $57.2       (19%)
                                       
Total revenue margin   11.1%         11.6%               11.8%       (53) bps
1. Net of sales tax
2. For comparison purposes, the Company has presented Pro-forma 3Q17 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, declined 3% to $36.7 million in 3Q18 from $37.9 million in 3Q17. As a percentage of revenue, cost of revenue increased by 173 basis points to 30.2% from 28.5% in the comparable period a year ago.

The absolute year-on-year decline cost of revenue was primarily driven by lower installment plan costs as the Company reduced the availability and duration of installments in the quarter in Argentina, following the sharp rise in interest rates in the country. This was partially offset by incremental costs to operate the fulfillment center reflecting the Company’s increased focus on customer service. These customer-oriented initiatives allowed the Company to deliver a 720 basis points year-on-year increase in after trip NPS.

As a result, Gross Profit decreased 11% year-on-year to $84.6 million in 3Q18, reflecting lower revenue margins given the Company’s initiatives to accelerate market share growth and investments in support of improving customer satisfaction levels.

Cost of Revenue and Gross Profit          
(In millions, except as noted)
   

  3Q18  

 

Pro Forma
3Q17

 

   Adj.   

 

  3Q17  

  % Chg1
Revenue   $121.2   $132.8   $1.3   $131.5   (9%)
Cost of Revenue   $36.7   $37.9       $37.9   (3%)
% of revenues   30.2%   28.5%       28.8%   +173 bps
Gross Profit   84.6   94.9   1.3   93.6   (11%)
Gross Profit Margin   69.8%   71.5%       71.2%   (173) bps
1. For comparison purposes, the Company has presented Pro-forma 3Q17 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 3Q18 at $75.5 million, were basically flat when compared to the year-ago quarter despite the benefit from regional currency depreciation reflecting more difficult comps from one-time items in both quarters and higher stock-based compensation in 3Q18. As a percentage of revenues, total operating expenses increased to 62.3%, from 56.7% in the comparable period. Excluding one-time expenses, total operating costs decreased 3% year-on-year and total operating expenses as a percentage of revenue increased 339 basis points to 61.6% in 3Q18 from 58.2% in the same quarter of the prior year.

  • Selling and marketing expenses rose 1% year-over-year to $41.6 million, from $41.1 million in 3Q17. As a percentage of revenue, selling and marketing expenses in 3Q18 increased to 34.3% from 31.0% in 3Q17, mainly reflecting lower revenue per transaction which more than offset the benefit from regional currency depreciation, lower marketing investments and higher efficiencies.
  • General and administrative (G&A) expenses increased 12% year-over-year to $17.1 million, from $15.3 million in the third quarter of 2017, mainly reflecting more difficult comps from a $2.0 million one-time tax recovery gain in the year-ago quarter and a one-time severance expense of $0.8 million in 3Q18. As a percentage of revenues, G&A increased 259 basis points to 14.1% in 3Q18 from 11.5% in the prior year quarter reflecting higher personnel expenses, including a $0.4 million increase in stock-based compensation. Excluding the one-time items described above, comparable G&A declined 6% year-over-year, and as % of revenues, comparable G&A declined 43 basis points year-over-year.
  • Technology and product development expenses declined 11% year-over-year to $16.8 million in 3Q18, compared to $18.9 million in the year-ago quarter reflecting lower expenses from currency depreciation in Argentina where the majority of headcount is based, partially offset by higher headcount. As a percentage of revenue, technology and product expenses decreased by 37 basis points year-over-year to 13.9%.

Operating Expenses        
(In millions, except as noted)
   

  3Q18  

 

Pro Forma
3Q17

 

  3Q17  

  % Chg1
Selling and marketing   $41.6   $41.1   $41.1   1%
% of revenues   34.3%   31.0%   31.3%   +334 bps
General and administrative   $17.1   $15.3   $15.3   12%
% of revenues   14.1%   11.5%   11.7%   +259 bps
Technology and product development   $16.8   $18.9   $18.9   (11%)
% of revenues   13.9%   14.2%   14.4%   (37) bps
Total operating expenses   $75.5   $75.3   $75.3   0.27%
Total operating expenses as a % of revenues   62.3%   56.7%   57.3%   +556 bps
Total operating expenses (Excl. one-time items)   $74.7   $77.3   $77.3   (3%)
Total operating expenses (Excl. one time items) as a % of revenues   61.6%   58.2%   58.8%   +339 bps
1. For comparison purposes, the Company has presented Pro-forma 3Q17 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.
 

Financial Income/Expenses

In 3Q18, the Company reported a net financial expense of $11.0 million compared to $2.9 million in the comparable prior-year quarter. The increase was primarily due to FX impact of the currency devaluation in Argentina, Brazil and Chile. This also includes a $2.6 million FX loss 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. FX losses were partially offset by higher interest income from invested cash balances.

Income Taxes

The Company reported an income tax gain of $0,5 million in 3Q18, compared to an expense of $4.4 million in 3Q17. The effective tax rate in 3Q18 was 25%, compared to 27% in 3Q17. The decrease in effective tax rate was mainly due to the recovery of deferred tax allowances in certain subsidiaries.

Adjusted EBITDA & Margin

Adjusted EBITDA declined 40% to $14.5 million in 3Q18 from pro forma $24.3 million in the comparable year-ago period. Adjusted EBITDA margin contracted to 12.0% from 18.3% in the prior year quarter, primarily resulting from the mix shift from international to domestic travel driven by currency devaluation across the region, along with lower year-on-year customer fees in air and price discounts in packages to support top line growth. Higher fulfillment costs and credit card processing fees also impacted Adjusted EBITDA margin.

Excluding one-time tax recoveries of $2.0 million in the third quarter of 2017 and a one-time severance charge of $0.8 million in 3Q18, Adjusted EBITDA would have decreased 31%.

Adjusted EBITDA Reconciliation & Adjusted EBITDA Margin
(In millions, except as noted)          
   

  3Q18  

 

Pro Forma
3Q17

 

   Adj.   

 

  3Q17  

  % Chg1
Net income/ (loss) ($1.5) $12.3 $1.1 $11.2 (112%)
Add (deduct):                    
Financial expense, net   11.0   2.9       2.9   283%
Income tax expense   (0.5)   4.4   0.2   4.2   (111%)
Depreciation expense   1.3   1.3   -   1.3   0%
Amortization of intangible assets   2.7   2.5   -   2.5   12%
Share-based compensation expense   1.4   1.0   -   1.0   45%
Adjusted EBITDA $14.5 $24.3 $1.3 $23.0 (40%)
Adjusted EBITDA Margin   12.0%   18.3%       17.5%   (635) bps
One-time items   (0.8)   2.0       2.0   (140%)
Adjusted EBITDA (Excl. one-time items)   15.3   22.3       21.0   (31%)
Adjusted EBITDA Mg. (Excl. one-time items)   12.6%   16.8%       16.0%   (419) bps
1. For comparison purposes, the Company has presented Pro-forma 3Q17 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 September 30, 2018 was $357.4 million, compared to $371.0 million at December 31, 2017, reflecting lower cash flow generated during the nine-months ended September 30, 2018. Additionally, during the quarter, the Company repurchased $15.7 million shares under a previously announced share buyback program.

Despegar generated negative cash flow from operating activities of $26.7 million in 3Q18 compared to $10.7 million in the comparable prior year quarter. This reduction was mainly due to a decrease in supplier and related party payables resulting from lower year-over-year sales, as well as higher cash advances to travel suppliers resulting from new commercial agreements.

During 3Q18, the Company’s capital expenditures were $3.7 million compared to $5.1 million during the same 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.

 

3Q18 Earnings Conference Call

When:   8:00 a.m. Eastern time, November 8, 2018
 
Who: Mr. Damián Scokin, Chief Executive Officer
Mr. Alberto López-Gaffney, Chief Financial Officer
Mr. Javier Kelly, Investor Relations
 
Dial-in: 1-866-270-1533 (U.S. domestic); 1-412-317-0797 (international)
 
Webcast:

CLICK HERE

 

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.

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 Gross Bookings 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 third quarter of 2018, the Company has recognized more revenue associated with those bookings in the third 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 third quarter of each year.

About Despegar.com

Despegar is the leading online travel company in Latin America. Operating across 20 countries, Despegar provides a broad suite of travel products, including airline tickets, travel packages, hotel bookings and other travel products to over 17 million customers. With a mission “to make travel possible”, the Company’s one-stop marketplace enables millions of users to find, compare, plan and easily purchase travel services and products. Through Despegar’s websites and leading mobile apps, it offers 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 Statements

This 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 nine-month periods ended September 30, 2018 (in thousands U.S. dollars, except as noted)

                 
    3Q18  

Pro Forma
3Q17

  Adj.   3Q17   % Chg2 9M18  

Pro Forma
9M17

  % Chg
Revenue   $121,247   $132,778   $1,310   $131,468   (9%) $398,099   $377,860   5%
Cost of revenue   36,673   37,869       37,869   (3%) 122,407   104,096   18%
Gross profit   84,574   94,909   1,310   93,599   (11%) 275,692   273,764   1%
Operating expenses
Selling and marketing   41,572   41,097       41,097   1% 131,432   119,932   10%
General and administrative   17,130   15,318       15,318   12% 50,004   52,805   (5%)
Technology and product development   16,821   18,907       18,907   (11%) 54,778   51,959   5%
Total operating expenses 75,523 75,322 75,322 0% 236,214 224,696 5%
                               
Operating income   9,051   19,587   1,310   18,277   (54%) 39,478   49,068   (20%)
Net financial income (expense)   (11,026)   (2,880)       (2,880)   283% (19,149) (10,647) 80%
Net income before income taxes   (1,975)   16,707   1,310   15,397   (112%) 20,329   38,421   (47%)
Income tax expense   (501)   4,373   183   4,190   (111%) 4,205   11,045   (62%)
Net income   (1,474)   12,334   1,127   11,207   (112%) 16,124   27,376   (41%)
 
Basic EPS (in $)   (0.02)   0.21       0.19   (110%) 0.23   0.46   (50%)
Diluted EPS (in $)   (0.02)   0.21       0.19   (110%) 0.23   0.46   (50%)
 
Basic shares weighted average1   69,193   59,694       59,694     69,165   58,910    
Diluted shares weighted average1   69,193   59,785       59,785     69,165   59,001    
As a % of Revenues                              
Cost of revenue   30.2%   28.5%       28.8%   +173 bps 30.7%   27.5%   +320 bps
Gross profit   69.8%   71.5%       71.2%   (173) bps 69.3%   72.5%   (320) bps
Operating expenses                              
Selling and marketing   34.3%   31.0%       31.3%   +334 bps 33.0%   31.7%   +128 bps
General and administrative   14.1%   11.5%       11.7%   +259 bps 12.6%   14.0%   (141) bps
Technology and product development   13.9%   14.2%       14.4%   (37) bps 13.8%   13.8%   +1 bps
Total operating expenses   62.3%   56.7%       57.3%   +556 bps 59.3%   59.5%   (13) bps
Operating income   7.5%   14.8%       13.9%   (729) bps 9.9%   13.0%   (307) bps
Net income before income taxes   -1.6%   12.6%       11.7%   (1,421) bps 5.1%   10.2%   (506) bps
Net income   -1.2%   9.3%       8.5%   (1,051) bps 4.1%   7.2%   (319) bps
1. In thousands
2. For comparison purposes, the Company has presented Pro-forma 3Q17 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
FINANCIAL RESULTS                          
Revenue   $124,999   $123,462   $131,468   $144,011 $148,593   $128,259   $121,247
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
Gross profit 90,538   88,316   94,909   113,206 104,947 86,171 84,574
Operating expenses
Selling and marketing   35,546   43,289   41,097   46,356 46,410   43,450   41,572
General and administrative   18,869   18,618   15,318   19,821 15,888   16,986   17,130
Technology and product development   15,408   17,644   18,907   19,349 19,225   18,732   16,821
Total operating expenses   69,823   79,551   75,322   85,526 81,523   79,168   75,523
                           
Operating income   20,715   8,765   19,587   27,680 23,424   7,003   9,051
Net financial income (expense)   (6,156)   (1,611)   (2,880)   (6,232) (2,831)   (5,292)   (11,026)
Net income before income taxes   14,559   7,154   16,707   21,448 20,593   1,711   (1,975)
Adj. Net Income tax expense   2,418   4,254   4,373   2,617 4,235   471   (501)
Income tax expense   2,486   3,806   4,190   1,512 4,235   471   (501)
Adjustment   $68   ($448)   ($183)   ($1,105)          
Net income /(loss)   12,141   2,900   12,334   18,831 16,358   1,240   (1,474)
 
                           
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
- YoY growth   54%   40%   32%   26% 21%   12%   (2%)
Number of transactions   2,129   2,210   2,298   2,419 2,514   2,607   2,596
- YoY growth   30%   30%   25%   19% 18%   18%   13%
Air   1,246   1,324   1,328   1,386 1,362   1,513   1,512
- YoY growth   34%   31%   22%   13% 9%   14%   14%
Packages, Hotels & Other Travel Products   883   886   970   1,033 1,152   1,094   1,085
- YoY growth   25%   27%   29%   28% 30%   23%   12%
Revenue per transaction   $57.2   $55.8   $57.8   $62.7 $59.1   $49.2   $46.7
- YoY growth                 3%   (12%)   (18%)
Air   $45.6   $45.2   $44.3   $47.7 $44.7   $35.1   $33.4
- YoY growth                 (2%)   (22%)   (25%)
Packages, Hotels & Other Travel Products   $73.5   $71.7   $76.2   $82.7 $76.2   $68.6   $65.2
- YoY growth                 4%   (4%)   (14%)
ASPs   $479   $480   $486   $520 $490   $454   $421
- YoY growth   18%   8%   6%   6% 2%   (5%)   (13%)
 
                           
Net income/ (loss)   $12,141   $2,900   $12,334   $18,831 $16,358   $1,240   ($1,474)
Add (deduct):                          
Financial expense, net   6,156   1,611   2,880   6,232 2,831   5,292   11,026
Income tax expense   2,418   4,254   4,373   2,617 4,235   471   (501)
Depreciation expense   1,343   1,362   1,337   1,033 859   1,475   1,338
Amortization of intangible assets   1,517   2,039   2,454   2,741 2,018   2,228   2,738
Share-based compensation expense   1,176   930   959   1,224 983   1,266   1,393
Adjusted EBITDA   $24,751   $13,096   $24,337   $32,678 $27,284   $11,972   $14,520
 

 

Unaudited Consolidated Balance Sheets as of September 30, 2018

(in thousands U.S. dollars, except as noted)

 
As of September 30, 2018 As of December 31, 2017
ASSETS    
Current assets    
Cash and cash equivalents $357,399 $371,013

Restricted cash and cash equivalents

$9,295 $29,764
Accounts receivable, net of allowances $187,467 $198,273
Related party receivable 6,513 5,253
Other current assets and prepaid expenses 53,485 29,405
Total current assets 614,159 633,708
Non-current assets    
Other Assets 11,691 4,658
Restricted cash and cash equivalents 10,000 10,000
Property and equipment net 17,838 16,171
Intangible assets, net 36,943 35,424
Goodwill 35,738 38,733
Total non-current assets 112,210 104,986
TOTAL ASSETS 726,369 738,694
LIABILITIES AND SHAREHOLDERS’ DEFICIT    
Current liabilities    
Accounts payable and accrued expenses 46,405 45,609
Travel suppliers payable 146,536 174,817
Related party payable 83,152 84,364
Loans and other financial liabilities 31,258 8,220
Deferred Revenue 249 30,113
Other liabilities 36,282 39,751
Contingent liabilities 4,026 4,732
Total current liabilities 347,908 387,606
Non-current liabilities    
Other liabilities 314 1,015
Contingent liabilities 2,128 7,115
Related party liability 125,000 125,000
Total non-current liabilities 127,442 133,130
TOTAL LIABILITIES 475,350 520,736
 
SHAREHOLDERS’ EQUITY (DEFICIT)    
Common stock 253,705 253,535
Additional paid-in capital 320,052 316,444
Other reserves (728) (728)
Accumulated other comprehensive income 2,641 16,323
Accumulated losses (308,855) (367,616)
Treasury Stock (15,796)
Total Shareholders' Equity Attributable / (Deficit) to Despegar.com Corp 251,019 217,958
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY 726,369 738,694
 

 

Unaudited Statements of Cash Flows for the three and nine-month period ended September 30, 2018 and 2017

(in thousands U.S. dollars, except as noted)

     
3 months ended September 30, 9 months ended September 30,
    2018   2017     2018   2017
Cash flows from operating activities                  
Net income   ($1,474)   $11,207     $16,124   $30,008
Adjustments to reconcile net income to net cash flow from operating activities                  
Unrealized foreign currency translation losses   249   (229)     1,477   457
Depreciation expense   1,338   1,337     3,672   4,042
Amortization of intangible assets   2,738   2,454     6,984   6,010
Stock based compensation expense   1,393   959     3,642   3,065
Interest and penalties   597   156     597   610
Income taxes   (1,720)   3,081     1,287   5,876
Allowance for doubtful accounts     (55)     313   688
Provision / (recovery) for contingencies   (182)   (1,285)     942   (506)
Changes in assets and liabilities, net of non-cash transactions                  
(Increase) / Decrease in accounts receivable, net of allowances   3,116   944     (14,472)   (39,600)
(Increase) / Decrease in related party receivables   (512)   (956)     (1,269)   (2,342)
(Increase) / Decrease in other assets and prepaid expenses   (18,197)   (6,921)     (45,388)   (6,491)
Increase / (Decrease) in accounts payable and accrued expenses   712   864     8,339   14,485
Increase / (Decrease) in travel suppliers payable   (8,925)   14,579     536   28,830
Increase / (Decrease) in other liabilities   5,585   (5,765)     8,092   (3,237)
Increase / (Decrease) in contingencies   (1,003)   (9,484)     (5,386)   (10,121)
Increase / (Decrease) in related party liabilities   (9,497)   (865)     4,733   9,343
Increase / (Decrease) in deferred revenue   (928)   692     (2,408)   (5,123)
Net cash flows provided by / (used in) operating activities   (26,710)   10,713     (12,185)   35,994
Cash flows from investing activities                  
Payments for short-term investments     238      
Acquisition of property and equipment   (1,129)   (2,232)     (8,393)   (6,354)
Increase of intangible assets including internal-use software and website development   (2,615)   (2,830)     (9,247)   (8,987)
(Increase) / Decrease in restricted cash and cash equivalents          
Net cash (used in) /provided by investing activities   (3,744)   (4,824)     (17,640)   (15,341)
Cash flows from financing activities                  
Increase / (Decrease) in loans and other financial liabilities   7,640   (5,717)     24,016   959
Capital contributions   136   (6,247)     136   254,305
Treasury Stock   (15,796)              
Net cash (used in) / provided by financing activities   (8,020)   248,588     8,356   255,264
Effect of exchange rate changes on cash, cash equivalents and restricted cash   1,662   267     (12,614)   956
Net increase / (decrease) in cash, cash equivalents and restricted cash   (36,812)   254,744     (34,083)   276,873
Cash, cash equivalents and restricted cash as of beginning of the period   413,506   141,294     410,777   119,165
Cash, cash equivalents and restricted cash as of end of the period   376,694   396,038     376,694   396,038

Contacts

Investor Relations:
Despegar.com, Corp.
Javier Kelly
Investor Relations
(+5411) 5173 3501
investorelations@despegar.com

Contacts

Investor Relations:
Despegar.com, Corp.
Javier Kelly
Investor Relations
(+5411) 5173 3501
investorelations@despegar.com