Despegar.com Announces 2Q23 Financial Results

Despegar.com, Corp. (NYSE: DESP) (“Despegar” or the “Company”), Latin America’s leading online travel company, today announced unaudited financial results for the three-months ended June 30, 2023 (“second quarter 2023” or “2Q23”). Financial results are expressed in U.S. dollars and are presented in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). Financial results are preliminary and subject to year-end audit and adjustments. All comparisons in this announcement are year-over-year (“YoY”), unless otherwise noted.

2Q23 Financial and Operating Highlights
(for definitions, see page 15)

• Gross Bookings for 2Q of $1.3 billion, up 16% YoY as travel demand continues to recover in Latin America
• Travel Packages as a percentage of Gross Bookings reached 33%, up 577 basis points (bps) YoY
• Average Selling Prices (ASPs) increased 15% YoY to $585, while Transactions were flat YoY, reflecting sustained focus on expanding higher-margin package transactions
• Revenues increased 23% YoY to $165.5 million, reaching a record quarterly level, with a 12.9% Take Rate, as Packages, Hotels and Other Travel Products Revenue reached $102.0 million (+27% YoY)
• Cost of Revenue as a percentage of Gross Bookings rose to 4.7% from 4.1% in 2Q22, in part due to one-time impacts during the quarter
• Total Adjusted EBITDA increased 183% YoY to $30.0 million, and excluding one-time items Adjusted EBITDA increased 71% YoY to $20.2 million
• Net Income of $28.0 million, the first positive quarter since 2019
• Operating cash flow was positive $28.9 million, compared to positive $5.7 million in 2Q22
• Cash position of $243.9 million, including restricted cash, at June 30, 2023
• Loyalty Program members increased 194% YoY to 16.9 million
• Net Promoter Score (NPS) increased 4.0 percentage points YoY to 67.4%

Message from the CEO

Commenting on Despegar’s performance, Damian Scokin, CEO, said:

“Our momentum accelerated and we achieved a remarkably strong performance in the second quarter, with revenues reaching a new all-time high of $165.5 million despite operating in our seasonally weakest quarter.

There were three driving forces behind this growth. First, a significant improvement in revenue mix, as we continue to successfully increase sales of vacation Packages, further expanding our margins. Second, a sustained rise in average sales prices, reflecting the value and quality that we consistently deliver to our customers. And third, our steadfast focus on profitable growth, resulting in a robust 12.9% Take Rate.

From a geographic standpoint, we are particularly pleased with the continued expansion of Despegar’s key Brazilian business, with transactions up 39% YoY. Additionally, demand for international traffic continued recovering across our footprint and contributed to a 16% YoY increase in Gross Bookings.

Excluding one-time benefits in the quarter, comparable Adjusted EBITDA increased 71% YoY to $20.2 million, with reported Adjusted EBITDA of $30.0 million. Our top line momentum and sustained profitability are keeping us firmly on track to achieve our revenue and Adjusted EBITDA guidance for the year. In addition, we are particularly pleased with our return to positive Net Income, which reached a solid $28 million in the quarter, or $5 million excluding one-time items.

Profitability at Koin, our Buy Now, Pay Later business, improved to an EBITDA loss of only $0.6 million from the $4.5 million loss in 2Q22. Thanks to our disciplined focus on cost control, margin expansion and asset quality, Koin remains on target to not only reach EBITDA breakeven in the second half of this year but become EBITDA accretive.

Regarding our key growth initiatives, we continue to make significant progress toward the milestones presented at our Investor Day a little over year ago. The share of high-margin Travel Packages in Gross Bookings expanded 577 bps YoY to 33%. While the expansion of our B2B service, HotelDo, together with our white-label solutions, also remain on track with the combined share of these two business linesexpanding 567 bps to 15% of Gross Bookings. In addition, our Mobile Apps continue to be an important tool to drive customer engagement, with Mobile App transactions increasing 334 bps YoY and reaching 37.8% of total Transactions. Our unwavering client focus coupled with our ambition to provide excellent B2B solutions underscore our commitment to provide the best travel options to both customers and travel partners.

Continuously strengthening our technology advantage, we’re increasingly employing artificial intelligence (“AI”) and large language models to enhance the customer experience as well as our operational effectiveness. We are preparing to introduce a Beta version of our innovative AI trip planner in the third quarter of this year. Building on our robust machine learning models, this new tool will not only offer bespoke travel and accommodation recommendations, but also go further by creating a conversational experience to enhance our customers’ trip planning. Additionally, our developer team is using AI for code writing and aiding our after-sales team when addressing customer requests.

Finally, we are leveraging our technology platform and experience operating highly profitable brick-and-mortar travel agencies in the Andean Region and Mexico, as we embark on expanding Despegar’s offline business. In an initial deployment, we will be opening 10 mostly asset-light stores in Brazil and 5 in Argentina by year end. These new stores will enable us to reach more of Latin America’s still large cash-based economy, while providing a personalized experience that more than half ofthe region’s travel consumers prefer today.

Our outstanding financial performance, noteworthy achievements across business segments, and substantial progress with each of our strategic growth initiatives are all enabling us to effectively and efficiently deliver higher value to our customers and travel partners alike. And as the most recent quarter makes clear, we continue driving earnings power by growing in more profitable product segments and by scaling our market-leading travel platform to further penetrate and consolidate Latin America’s fast-growing and fragmented travel market.”

2023 Financial Guidance

The Company reaffirms its 2023 annual guidance, which is as follows:

• Revenue: $640 million to $700 million
• Adjusted EBITDA: $80 million to $100 million

The above guidance assumes that the Latin American travel market will continue to recover and reach 2019 demand levels by year-end 2023. This guidance is in line with the 2024 financial targets presented at the Company’s June 2022 Investor Day. See our Investor Relations website at www.investor.despegar.com.

Disclaimer: The 2023 financial guidance reflects management’s current assumptions regarding numerous evolving factors that are difficult to accurately predict, including those discussed in the Risk Factors set forth in the Company’s Annual Report on Form 20-F filed with the United States Securities and Exchange Commission (the “SEC”).

Reconciliations of forward-looking non-GAAP measures, specifically the 2023 Adjusted EBITDA guidance, to the relevant forward-looking GAAP measures are not being provided, as the Company does not currently have sufficient data to accurately estimate the variables and individual adjustments for such guidance and reconciliations. Due to this uncertainty, the Company cannot reconcile projected Adjusted EBITDA to projected net income without unreasonable effort.

The 2023 financial guidance constitutes forward-looking statements. For more information, see the “Forward-Looking Statements” section in this release.

Operating and Financial Metrics Highlights

The following table presents key operating metrics of Despegar’s travel and financial services businesses as well as key financial metrics on a consolidated basis, post-intersegment eliminations between these businesses.

Key Operating Metrics

Transactions were flat YoY at 2.2 million, as the Company continues to focus on expanding Package Transactions, which increased 270 bps YoY as a percentage of total Transactions. In Brazil and Chile, non-air Transactions increased 58% and 22% YoY respectively, as the Company continues to effectively capitalize on the demand recovery in those markets. Accordingly, the consolidated share of higher-margin Packages, Hotels and Other Travel Products Transactions increased to 52% from 47% in the previous year. Conversely, Air Transactions declined 8% YoY, mostly due to a decrease in lower margin domestic Transactions in Mexico and Colombia as Despegar maintained its focus on profitable growth.

ASPs in 2Q23 increased 15% YoY (+28% FX neutral) to $585 per transaction. The increase in ASPs was mostly driven by a combination of the aforementioned improvements in product mix reflecting sustained growth in higher average ticket Package sales, as well as higher lodging fares.

Gross Bookings increased 16% YoY (+29% FX neutral), reaching $1.3 billion for the quarter. Specifically, international Gross Bookings grew 14% YoY while domestic gross bookings increased 16% over the same period.

Geographic Breakdown