Despegar.com, Corp. (DESP) Q2 2024 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call reveals mixed signals. While there is strong growth in constant currency and a significant increase in adjusted net income, the company faces FX headwinds and a reduced cash balance. The Q&A highlighted concerns about FX impacts and unclear guidance on the divestiture's effects. The EBITDA guidance raise is a positive, but elevated marketing expenses and the divestiture create uncertainties. The neutral rating reflects these balanced positives and negatives, predicting a stock price movement within -2% to 2% over the next two weeks.
Key Financial Performance
Gross Bookings $1.3 billion, up 4% year-over-year; impacted by foreign exchange headwinds.
Gross Bookings (Constant Currency) Increased by 37% year-over-year; considered industry-leading globally.
Packages as a Percentage of Gross Bookings Expanded 190 basis points year-over-year to 35%; reflects focus on higher-margin package sales.
Take Rate 13.8% for the quarter; driven by improved product mix with higher margin non-air revenues accounting for 64% of sales.
Total Revenues $185 million, up 12% year-over-year; impacted by foreign exchange headwinds.
Total Revenues (Constant Currency) Increased by 46% year-over-year; considered industry-leading globally.
Adjusted EBITDA $37 million, up 22% year-over-year; last year's EBITDA included a one-time benefit of $9.8 million, adjusted growth would be 82%.
Adjusted Net Income $30.2 million, up 397% year-over-year from $6.1 million; highest quarterly adjusted net income ever.
Operating Cash Flow $12.7 million, down from $28.9 million year-over-year; decline attributed to temporary change in working capital.
Total Cash Balance $204 million, down from $244 million year-over-year; decline due to temporary working capital changes and extraordinary dividends.
Average Selling Prices Decreased by 8.3% year-over-year to $472; largely due to foreign exchange headwinds.
B2B Gross Bookings Increased by 43% year-over-year; reflects strong growth trends in B2B segment.
B2C Bookings Reached $1.1 billion; driven by strong consumer demand in Brazil and Mexico.
Pasaporte Despegar Members Grew by 65% year-over-year to 27.9 million members; approximately 75% of transactions made by program members.
Mobile App Downloads Increased by 43% year-over-year to 18 million; app transactions represent around 50% of total transactions.
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Operating Highlights
New Brand Partnership: Despegar announced a new brand partnership with globally recognized artist Shakira, featuring in the campaign 'Dream, Choose, Travel' to strengthen brand presence in Latin America.
AI Travel Assistant SOFIA: Significant enhancements were made to the AI travel assistant SOFIA, including after-sales support, improved conversational capabilities, and expanded knowledge base.
B2B Growth: B2B gross bookings increased by 43% year-over-year, with new white-label partnerships and expansion into new markets.
Market Positioning: Despegar's inclusion in the Russell stock indexes marks a significant milestone, enhancing its market positioning.
Operational Efficiency: Adjusted EBITDA grew by 22% year-over-year to $37 million, with a focus on increasing non-air revenue.
Loyalty Program Growth: The loyalty program, Pasaporte Despegar, grew by 65% year-on-year to 27.9 million members, driving customer retention.
Divestment of DMC Business: Despegar divested its Destination Management Company business to streamline operations and focus on core areas.
International Expansion: Despegar is in discussions for partnerships beyond Latin America to expand its reach.
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Risk or Challenges
Foreign Exchange Headwinds: The company faced much higher than expected foreign exchange headwinds during the quarter, impacting gross bookings and revenues.
Severe Flooding Impact: Severe flooding in Rio Grande do Sul resulted in temporary air cancellations in Brazil, affecting approximately 5% to 8% of transactions.
Regulatory and Market Conditions: The company is subject to various regulatory and market conditions that could impact its operations and growth, particularly in Latin America.
Economic Factors: Economic pressures in Latin America, including inflation and currency fluctuations, pose risks to revenue growth and profitability.
Integration Risks: There are risks associated with the integration and performance of acquired businesses, which could affect overall business performance.
Cash Flow Variability: A temporary change in working capital affected operating cash flow, which declined compared to the previous year.
Revenue Guidance Adjustment: The company lowered its revenue guidance for the year from at least $820 million to at least $760 million due to various pressures.
Employee Transition Risks: The divestment of the DMC business resulted in the transition of almost 600 employees, which could impact operational continuity.
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Guidance & Outlook
Gross Bookings Growth: Gross bookings grew by 4% year-on-year to $1.3 billion, with a robust 37% increase in constant currency.
Adjusted EBITDA: Adjusted EBITDA of $37 million, up by 22% year-over-year, with an adjusted EBITDA growth of 82% when excluding a one-time benefit from last year.
B2B Growth: B2B gross bookings increased by 43% year-over-year, with significant expansion in white-label operations.
Loyalty Program Growth: Pasaporte Despegar loyalty program grew by 65% year-on-year to 27.9 million members.
Mobile App Engagement: Mobile app downloads increased by 43% year-on-year to 18 million, with app transactions representing around 50% of total transactions.
Strategic Partnerships: Formed a strategic alliance with World2Meet and signed new white-label partnerships with major brands.
AI Travel Assistant SOFIA: SOFIA's user engagement increased significantly, with enhancements to its capabilities for customer support and sales.
Revenue Guidance: Lowered revenue guidance for the year from at least $820 million to at least $760 million.
Adjusted EBITDA Guidance: Raised full-year adjusted EBITDA guidance to at least $160 million, implying year-over-year growth of almost 40%.
Long-term Growth Outlook: Confident in the long-term growth potential and operational leverage despite FX headwinds.
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Shareholder Return Plan
Adjusted EBITDA Guidance: The company raised its full-year adjusted EBITDA guidance from at least $155 million to at least $160 million, implying year-over-year growth of almost 40%.
Cash Balance: Despegar reported a total cash balance of $204 million, down from $244 million in the same quarter last year.
Adjusted Net Income: Adjusted net income for the quarter reached $30.2 million, increasing by 397% year-over-year.
Total Revenues: Total revenues for the quarter were $185 million, growing at 12% year-over-year.
Gross Bookings: Gross bookings grew by 4% year-on-year to $1.3 billion, with a robust 37% increase in constant currency.
Shareholder Return Focus: The divestment of the Destination Management Company (DMC) business reflects a focus on technology and deploying capital where it generates the highest returns for shareholders.
Cash Generation: Operating cash flow for the quarter was $12.7 million, compared to $28.9 million in the same quarter of 2023.
Dividends to Preferred Shareholders: The decline in overall cash balance was in line with expectations given extraordinary dividends to preferred shareholders.
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Key Q&A
Q:Can you walk us through the different pieces of the guidance changes, including FX headwinds, divestiture, and flooding impacts?
A:We have lowered our top-line guidance but raised our EBITDA guidance. The core business is performing strongly, with positive surprises in Argentina. However, we face FX headwinds estimated at $35-$40 million for the year, a divestiture of DMC, and a temporary $5-$10 million impact from flooding in Brazil.
Q:What is the impact of sales and marketing expenses on margins, and how should we think about their leverage?
A:Sales and marketing expenses were higher in Q2 due to a partnership with Shakira, which involves incremental investments. We expect these expenses to remain elevated in the back half of the year.
Q:What is the difference in FX impact on demand between Brazil and Mexico?
A:The FX impact is primarily affecting ASPs, but underlying demand remains strong. The differences between Brazil and Mexico are due to the intrinsic market dynamics.
Q:Can you share the revenue and EBITDA contribution from DMC prior to the divestment?
A:Due to confidentiality, we cannot provide exact figures, but DMC had 600 employees and lower revenue per employee compared to the rest of the business.
Q:How much of the EBITDA raise is from employee transition versus cost efficiencies?
A:The EBITDA raise is primarily from efficiencies across various line items, not significantly from the employee transition.
Q:What is the outlook for gross margins going forward?
A:We expect to continue driving efficiencies through AI, but we do not provide specific guidance on gross profit.
Q:What should we expect for operating cash flow in the back half of the year?
A:The second half is generally stronger for operating cash flow, and we expect improvements due to timing-related impacts from Q2.
Q:Review of Unclear Management Responses
A:Management avoided providing specific revenue and EBITDA figures related to the DMC divestment due to confidentiality agreements. Additionally, there was a lack of clarity on the exact impact of the divestiture on overall margins.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI travel
API
America travel
Chief
Chile
DMC employee
Damian
Elektra
FX headwind
HTML solution
Pasaporte
SOFIA
Scotiabank
Travel
ability
agency Latin
agent
agreement
alliance WorldMeet
benefit
campaign
capital
conversation
cost sale
country
customer experience
divestiture
divestment DMC
effect
employee DMC
exchange headwind
flooding
objective
repeat
sale marketing
selling
support
travel assistant
traveler
user
DESP Transcript
Despegar.com, Corp. (DESP) Q3 2024 Earnings Call Transcript
Positive11-15
The earnings call summary indicates strong financial performance with a record gross margin and significant adjusted net income growth. The strategic partnership with Expedia and positive trends in Argentina are promising. Despite FX headwinds and lowered revenue guidance, the raised EBITDA guidance and strong cash position are positive indicators. The Q&A suggests analysts are cautiously optimistic, with concerns about FX impacts and sustainability of take rates. Overall, the strong earnings, strategic partnerships, and optimistic guidance outweigh the negatives, suggesting a positive stock price movement.
Despegar.com, Corp. (DESP) Q2 2024 Earnings Call Transcript
Unknown8-16
The earnings call reveals mixed signals. While there is strong growth in constant currency and a significant increase in adjusted net income, the company faces FX headwinds and a reduced cash balance. The Q&A highlighted concerns about FX impacts and unclear guidance on the divestiture's effects. The EBITDA guidance raise is a positive, but elevated marketing expenses and the divestiture create uncertainties. The neutral rating reflects these balanced positives and negatives, predicting a stock price movement within -2% to 2% over the next two weeks.
Despegar.com, Corp. (DESP) Q1 2024 Earnings Call Transcript
Positive5-17
The earnings call highlights strong financial performance with record bookings and revenue growth. The positive guidance for 2024, strategic partnerships, and successful AI implementation indicate continued growth. While some management responses were vague, the overall sentiment from the Q&A was optimistic, especially regarding market expansion and investment strategies. The improved EBITDA and margins further support a positive outlook, suggesting a likely stock price increase.
Despegar.com Corporation (DESP) Q4 2023 Earnings Call Transcript
Positive3-15
The earnings call shows strong financial performance with significant growth in revenue, bookings, and profitability across various segments. The new partnership with Banco Davivienda and improved cost efficiencies support a positive outlook. Despite the lack of specific targets for packages and Koin, the overall guidance and expected improvements in EBITDA and free cash flow conversion suggest a positive market reaction. The Q&A reinforces confidence with no observed demand slowdown and stable financial expectations. The absence of market cap data limits the precise prediction, but the overall sentiment is positive.
DESP Report
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