Despegar.com Announces 2Q22 Financial Results

·10 min read

Gross Bookings up 129% YoY and in line with 2Q19 levels, with Adjusted EBITDA of $10.6 million

BRITISH VIRGIN ISLANDS, August 18, 2022--(BUSINESS WIRE)--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, 2022 ("second quarter 2022" or "2Q22"). 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 adjustment. All comparisons in this announcement are year-over-year ("YoY"), unless otherwise noted.

2Q22 Financial and Operating Highlights
(For definitions, see page 14)

  • Gross Bookings of $1.1 billion, up 129% year-over-year ("YoY") and in line with 2Q19 levels, as travel restrictions were largely eliminated and demand continued to recover steadily

  • Transactions increased 65% YoY to 90% of 2Q19 volume

  • Room nights increased 67% YoY to 69% of 2Q19 levels

  • Mobile represented 46% of Transactions, up 175 basis points ("bps") YoY and 550 bps compared to 2Q19

  • Revenues increased 113% YoY to $134.4 million, 18% above 2Q19

  • Adjusted EBITDA increased to $10.6 million, marking the third consecutive positive quarter, up from negative $22.3 million a year ago

  • Generated $4.2 million in operating cash flow, compared with use of cash of $0.7 million in 2Q21 and positive operating cash flow of $15.9 million in 2Q19

  • Loyalty Program reached 5.7 million members in 2Q22, increasing 82% QoQ

  • Closed two acquisitions in Brazil: i) 51% of the shares of Stays, Brazil’s leading vacation rental channel manager, for approximately $3.1 million, and ii) of the shares of Viajanet an online travel agent for approximately $15.5 million

  • On June 14, 2022, the Board of Directors approved a new $40 million share repurchase program that expired August 12, 2022. Under the program, a total of $5.4 million worth of shares were repurchased during the second quarter

Subsequent Events

  • Repurchased $4.6 million of Despegar shares in July, bringing total repurchases to $10 million

Message from the CEO

Commenting on the Company’s performance, Damian Scokin, CEO said:

"Our winning business model and expanding travel ecosystem are enabling us to continue effectively capturing rising travel demand, particularly in Brazil, our largest market. Gross bookings, which were near pre-pandemic levels, combined with increasing operating leverage, higher ASPs and an improved revenue mix, helped us deliver a third consecutive quarter of positive Adjusted EBITDA, which rose substantially year-over-year to $10.6 million.

During the second quarter of 2022, we completed the acquisitions of Viajanet and Stays under our regional consolidation strategy, further enhancing our B2C and B2B offerings. Building on our M&A experience, we have been seamlessly integrating these businesses, in order to achieve revenue, cost and technology synergies.

In addition to enhancing our offering, which focuses on affordable travel options and vacation packages, Koin continues to expand our addressable market, raise average ticket prices, and increase conversion rates. With purchase volume rising almost seven times over the last twelve months and NPLs remaining at healthy levels, our Buy-Now-Pay-Later ("BNPL") business is expected to reach EBITDA positive by mid-2023.

Customer loyalty remains a key growth initiative, as it drives engagement and repeat purchases. We are pleased that another 2.6 million travelers became Passaporte Despegar members during the second quarter of 2022, increasing 82% sequentially to 5.7 million.

Operating cash flow was $4.2 million as of the second quarter of 2022, contributing to a solid cash position of $275 million, which gives us the financial flexibility to capture more of Latin America’s $88 billion(1) travel market. During June and July we repurchased $10.0 million of our shares under our share repurchase program, which we believe continue to trade at a substantial discount in comparison to our peers.

Based on current data and trends, we expect travel demand to sustain its recovery during the remainder of the year. We are aware of the current global macroeconomic volatility, particularly rising inflation and interest rates, however we have been operating in this challenging environment during the last four months and still see travel demand recovering. Longer term, we remain focused on executing the strategy outlined during our Investor Day. Its aim is to capture more of the market’s growth more effectively and further strengthen earnings power, driving Adjusted EBITDA to $150 million when the industry’s Gross Bookings reach 2019 levels."

1 Euromonitor 2022 Data. Considering Only Airlines, Lodging, Car Rentals, Attractions and Experiences.

Operating and Financial Metrics Highlights

(In millions, except as noted)

2Q22

2Q21

% Chg

2Q19

% Chg

Operating metrics

Number of transactions

2.193

1.331

65%

2.448

(10%)

Gross bookings

$1,120.2

$488.9

129%

$1,118.1

0%

Financial metrics

Revenues

$134.4

$63.1

113%

$114.1

18%

Net income (loss)

($13.2)

($31.4)

n.m.

($16.5)

n.m.

Net income (loss) attributable to Despegar.com, Corp

($13.2)

($31.1)

n.m.

($16.5)

n.m.

Adjusted EBITDA

$10.6

($22.3)

n.m.

($7.3)

n.m.

EPS Basic 2

($0.24)

($0.46)

n.m.

($0.24)

n.m.

EPS Diluted 2

($0.24)

($0.46)

n.m.

($0.23)

n.m.

Extraordinary Charges

Adjusted EBITDA

$10.6

($22.3)

n.m.

($7.3)

n.m.

Extraordinary Cancellations due to COVID-19

$0.5

($7.5)

n.m.

n.m.

Extraordinary Charges

($1.7)

($4.3)

n.m.

($10.2)

n.m.

Adjusted EBITDA (Excl. Extraordinary Charges)

$11.8

($10.5)

n.m.

$2.9

n.m.

Average Shares Outstanding - Basic (1)

82,362

81,452

1%

69,539

18%

Average Shares Outstanding - Diluted (1)

82,362

81,452

1%

69,539

18%

EPS Basic (Excl. Extraordinary Charges) (2)

($0.23)

($0.32)

n.m.

($0.09)

n.m.

EPS Diluted (Excl. Extraordinary Charges) (2)

($0.23)

($0.32)

n.m.

($0.09)

n.m.

(1) In thousands

(2) Round numbers

n.m.: Not Meaningful

Overview of Second Quarter 2022 Results

Key Operating Metrics

(In millions, except as noted)

2Q22

2Q21

% Chg

FX Neutral
% Chg

2Q19

% Chg

$

% of total

$

% of total

$

% of total

Gross Bookings

$1,120.2

$488.9

129%

140%

$1,118.1

0%

Average selling price (ASP) (in $)

$511

$367

39%

45%

$457

12%

Number of Transactions by Segment & Total

Air

1.1

51%

0.6

48%

77%

1.5

60%

(23%)

Packages, Hotels & Other Travel Products

1.0

47%

0.7

52%

49%

1.0

40%

4%

Financial

0.0

1%

-

-

Total Number of Transactions

2.2

100%

1.3

100%

65%

2.4

100%

(10%)

On a year-over-year ("YoY") basis, transactions increased 65% to 2.2 million, reaching 90% of 2Q19 levels. Transactions in the air travel segment outgrew the recovery in Packages, Hotels & Other Travel Products by 33 percentage points, as travel restrictions were lifted across Latin America.

Gross Bookings increased 129% YoY to $1.1 billion and reached 2Q19 levels.

Domestic Gross Bookings increased 76% YoY and exceeded 2Q19 levels by 28%, while International Gross Bookings increased 200% YoY, reaching 85% of 2Q19 levels, as travel restrictions in Latin America were lifted, boosting demand for international travel in particular.

ASPs rose 39% YoY - and 45% on an FX neutral basis - to $511, mainly reflecting rising travel demand, particularly for international trips, higher fuel prices that increased airfares, as well as other inflation pressures. Compared to 2Q19, ASPs increased 12%.

Geographic Breakdown

Geographical Breakdown of Select Operating and Financial Metrics

(In millions, except as noted)

2Q22 vs. 2Q21 - As Reported

Brazil

Mexico

Rest of Latin America

Total

2Q22

2Q21

% Chg.

2Q22

2Q21

% Chg.

2Q22

2Q21

% Chg.

2Q22

2Q21

% Chg.

Transactions ('000)

709

328

116%

459

486

(5%)

1,025

517

98%

2,193.1

1,331

65%

Gross Bookings

363

82

345%

247

211

17%

510

196

160%

1,120

489

129%

ASP ($)

512

249

106%

537

434

24%

498

380

31%

511

367

39%

Revenues

134

63

113%

Gross Profit

89

25

262%

2Q22 vs. 2Q21 - FX Neutral Basis

Brazil

Mexico

Rest of Latin America

Total

2Q22

2Q21

% Chg.

2Q22

2Q21

% Chg.

2Q22

2Q21

% Chg.

2Q22

2Q21

% Chg.

Transactions ('000)

709

328

116%

459

486

(5%)

1,025

517

98%

2,193.1

1,331

65%

Gross Bookings

339

82

316%

247

211

17%

586

196

198%

1,172

489

140%

ASP ($)

479

249

92%

537

434

24%

572

380

51%

534

367

45%

Revenues

140

63

122%

Gross Profit

94

25

282%

Brazil accounted for 32% of total Transactions in 2Q22, increasing 116% and 23% below 2Q19 levels.

Gross Bookings grew 345% YoY and were 20% lower when compared to 2Q19. ASPs increased 106% YoY and 4% compared to 2Q19.

Mexico represented 21% of 2Q22 Transactions. Gross Bookings in Mexico increased 17% YoY, while Transactions were down 5% as Mexico was one of the first markets to lift mobility restrictions in 2021 thus affecting the comparable base. In addition, domestic flights decreased YoY due to the implementation of price increases. Compared to 2Q19, Transactions increased 26% while Gross Bookings rose 74%, reflecting the contribution of Best Day, which was acquired in October 2020. ASPs increased 24% YoY and 37% when compared to 2Q19.

Across the rest of Latin America, Transactions and Gross Bookings, on a YoY basis, rose 98% and 160%, respectively, but were 12% and 3% lower when compared to 2Q19. ASPs increased 31% YoY and 11% versus 2Q19.

Revenue

Revenue Breakdown

2Q22

2Q21

% Chg

2Q19

% Chg

$

% of total

$

% of total

$

% of total

Revenue by business segment (in $Ms) (Excluding Cancellations)

Air

$53.3

40%

$20.8

33%

157%

$47.4

42%

12%

Packages, Hotels & Other Travel Products

$78.8

59%

$41.7

66%

89%

$66.7

58%

18%

Financing

$0.9

n.m

n.m

n.m

Unallocated

$1.5

1%

$0.7

n.m

n.m

n.m.

n.m

Total Revenue

$134.4

99%

$63.1

99%

113%

$114.1

100%

18%

Total revenue margin

12.0%

12.9%

(90) bps

10.2%

+180 bps

Extraordinary Charges

Extraordinary Cancellations due to COVID-19

$0.5

($7.5)

n.m.

n.m.

Total Revenue (Excluding Extraordinary Charges)

$133.9

$70.5

90%

$114.1

17%

Total revenue margin (Excluding Extraordinary Charges)

12.0%

14.4%

(248) bps

10.2%

+175 bps

On a YoY basis, Revenues increased 113% to $134.4 million. Revenue Margin decreased 90 bps YoY to 12.0%, due to targeted price promotions aimed at increasing market share in Brazil and Argentina while maintaining take rates in line with long-term guidance.

Compared to 2Q19, Revenues increased 18%, while Gross Bookings performed at similar levels. Additionally, total Revenue Margin improved 180 bps, mainly due to higher up-front incentives and customer fees as a percentage of Gross Bookings.

Cost of Revenue and Gross Profit

Cost of Revenue and Gross Profit

(In millions, except as noted)

2Q22

2Q21

% Chg

2Q19

% Chg

Revenue

$134.4

$63.1

113%

$114.1

18%

Revenue Margin

12.0%

12.9%

(90) bps

10.2%

+180 bps

Cost of Revenue (1)

$45.1

$38.4

17%

$40.9

10%

Cost of Revenue as a % of GB

4.0%

7.9%

(383) bps

3.7%

+37 bps

Gross Profit

$89.3

$24.6

262%

$73.2

22%

Gross Profit as a % of GB

8.0%

5.0%

+293 bps

6.5%

+143 bps

Extraordinary Charges

Total Revenue

$134.4

$63.1

$114.1

Extraordinary Cancellations due to COVID-19

$0.5

($7.5)

n.m.

-

n.m.

Total Revenue (Excl. Extraordinary Cancellations)

$133.9

$70.5

90%

$114.1

17%

Revenue (Excl. Extraordinary Charges) as a % of GB

12.0%

14.4%

(248) bps

10.2%

+175 bps

Total Cost of Revenue

$45.1

$38.4

$40.9

Extraordinary Charges

($0.8)

($4.2)

n.m.

($1.6)

n.m.

Total Cost of Revenue (Excl. Extraordinary Charges)

$44.3

$34.3

29%

$39.7

12%

Cost of Revenue (Excl. Extraordinary Charges) as a % of GB

4.0%

7.0%

(305) bps

3.6%

+41 bps

Gross Profit (Excl. Extraordinary Charges)

$89.5

$36.3

147%

$74.4

20%

Gross Profit (Excl. Extraordinary Charges) as a % of GB

8.0%

7.4%

+58 bps

6.6%

+134 bps

(1) Financial Bad Debt was reclassified from General and Administrative expenses to Cost of Revenue. As such, Cost of Revenue normalizes the inclusion of financial bad debt in every period under analysis, thus including $2.1 million of financial bad debt in 2Q22, $2.6 million in 2Q21 and $0.6 million in 2Q19.

Cost of Revenue consists mainly of credit card processing fees, bank fees related to customer financing installment plans, and fulfillment center expenses. Starting 2Q22, and the Company reclassified under Cost of Revenue $3.8 million and -$1.6 million of financial bad debt related to Koin and Despegar, respectively to more accurately reflect Despegar´s cost structure. This cost was previously accounted for under General & Administrative expenses. Management believes that accounting for financial bad debt as a Cost of Revenue is consistent with Koin´s strategic role in helping expand the Company's addressable market and increase conversion rates.

On a YoY basis, Cost of Revenue increased 17%, significantly below the 113% revenue growth in the period. As a percentage of Gross Bookings, Cost of Revenue decreased 383 bps to 4.0%, reflecting the Company's ongoing efforts to reduce its cost structure to drive operating leverage and customer care demand converging toward lower pre-pandemic levels.

As reported Gross Profit increased 262% to $89.3 million from $24.6 million in 2Q21. Gross Profit, excluding Extraordinary Charges, increased 147% to $89.5 million, accounting for 8.0% of Gross Bookings compared to 7.4% in 2Q21.

Compared to 2Q19, Cost of Revenue increased 12%, due to higher fulfillment center expenses, installment costs and credit card processing fees. Accordingly, Cost of Revenue as a percentage of Gross Bookings was only 37 bps above 2019 levels, while Gross Profit increased 22%, reflecting increased operating leverage.

Operating Expenses

Operating Expenses

(In millions, except as noted)

2Q22

2Q21

% Chg

2Q19

% Chg

Selling and marketing

$42.2

$19.2

120%

$50.7

(17%)

S&M as a % of GB

3.8%

3.9%

(16) bps

4.5%

(77) bps

General and administrative (1)

$27.0

$22.7

19%

$20.7

31%

G&A as a % of GB

2.4%

4.6%

(223) bps

1.8%

+57 bps

Technology and product development

$21.4

$18.3

17%

$18.1

18%

T&C as a % of GB

1.9%

3.8%

(184) bps

1.6%

+29 bps

Impairment of long-lived assets

n.m.

n.m.

Total operating expenses

$90.7

$60.2

51%

$89.4

1%

Operating Expenses as a % of GB

8.1%

12.3%

(423) bps

8.0%

+9 bps

Extraordinary Charges