Despegar.com, Corp. (DESP) Q3 2024 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
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.
Key Financial Performance
Gross Bookings $1.3 billion, down slightly year-over-year due to foreign exchange headwinds, particularly in Brazil and Mexico.
Constant Currency Gross Bookings Growth 35% year-over-year growth, indicating strong fundamental trends in the business.
Take Rate 14.6%, up 250 basis points year-over-year, driven by increased package sales and recovery in travel demand in Argentina.
Total Revenues $194 million, up 9% year-over-year; adjusted for foreign exchange, revenues increased by 53% year-over-year.
Non-Air Revenues 62% of total revenues, consistent with last year's results, indicating a diversified revenue mix.
Gross Margin 74%, the strongest since Despegar's IPO in 2017, driven by cost savings in installment-related expenses and credit card processing.
Adjusted EBITDA $48 million, up 94% year-over-year, reflecting improved operational efficiency and profitability.
Adjusted EBITDA Margin 25%, marking an all-time high for Despegar.
Adjusted Net Income $36 million, up 309% year-over-year, leading to adjusted earnings per share of $0.34, up from $0.10 in the previous year.
B2C Gross Bookings $1.1 billion, down 8.4% year-over-year, in line with anticipated foreign exchange impacts.
B2B Gross Bookings $250 million, up 23% year-over-year, now accounting for almost 19% of total gross bookings.
Cash Balance $220 million, an increase of $15.2 million compared to the end of Q2 2024.
Operating Cash Flow $26.6 million, compared to $12.7 million in the last quarter.
Capital Expenditures $7.7 million for the quarter, remaining steady.
Perpetual Contingent Liability Amortization $155 million liability will now be amortized over 10 years, improving net asset position.
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Operating Highlights
AI Travel Assistant SOFIA: Despegar launched SOFIA, an AI-powered travel assistant, which has evolved to allow customers to search, browse, and book travel services directly within the conversation prompt. SOFIA's capabilities have expanded to include after-sales support and managing multiple travel conversations.
Loyalty Program Growth: The loyalty program, Pasaporte Despegar, grew by over 50% year-over-year, reaching 30 million members, with 12% of transactions completed using loyalty points.
B2B Segment Growth: B2B gross bookings grew by 23% year-over-year, now accounting for almost 19% of total gross bookings, driven by partnerships with over 17,000 travel agencies.
New Partnership with Expedia: Despegar signed a new 10-year lodging outsourcing agreement with Expedia, effective January 1, 2025, enhancing collaboration and growth opportunities.
Operational Efficiency: Despegar achieved a gross margin of almost 74%, the highest since its IPO, driven by cost savings in installment-related expenses and credit card processing.
Adjusted EBITDA Growth: Adjusted EBITDA increased by 94% year-over-year, reaching $48 million, with a margin of 25%, marking a record for the company.
Market Positioning in Argentina: Despegar gained significant market share in Argentina by offering innovative payment solutions, leading to a recovery in bookings.
SaaS Offering Expansion: Despegar is expanding its SaaS offerings, having signed its first agreement with Charisma Hotels and Resorts to integrate SOFIA into their operations.
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Risk or Challenges
Foreign Exchange Headwinds: The company faced foreign exchange headwinds, particularly in Brazil and Mexico, which impacted gross bookings and overall financial performance.
Regulatory Issues in Argentina: The company is navigating various exchange rate regulations in Argentina, which could introduce currency risk and FX hedging costs in the P&L.
Supply Chain Challenges: There were challenges related to reduced air capacity in Mexico, affecting transaction volumes and bookings.
Competitive Pressures: The company is experiencing competitive pressures in the travel market, necessitating innovative payment solutions and differentiated offerings to maintain market share.
Economic Factors: The overall economic environment, including inflation and currency fluctuations, is affecting consumer travel behavior and spending.
Impact of Natural Disasters: The company reported an estimated $10 million impact on revenues due to storms affecting bookings.
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Guidance & Outlook
B2B Growth: B2B gross bookings grew by 23% year-over-year, now accounting for almost 19% of total gross bookings.
Partnership with Expedia: Despegar signed a new 10-year lodging outsourcing agreement with Expedia, effective January 1, 2025, enhancing collaboration and growth opportunities.
SOFIA AI Assistant: Despegar's AI travel assistant, SOFIA, has evolved significantly, now offering enhanced customer support and a software-as-a-service solution for partners.
Loyalty Program Growth: The loyalty program, Pasaporte Despegar, grew by over 50% year-over-year, reaching 30 million members.
Mobile App Engagement: Mobile app downloads increased by 47% year-over-year, with updated transactions accounting for almost 51% of total bookings.
Revenue Guidance: Maintaining full year revenue guidance of at least $760 million, representing year-over-year growth of 8%.
Adjusted EBITDA Forecast: Raising adjusted EBITDA forecast from a minimum of $160 million to at least $170 million, equating to a year-over-year increase of 47%.
Take Rate Expectations: Expecting a long-term take rate around 13%, with current strong performance driven by package sales and innovative payment solutions.
Market Trends in Argentina: Positive market trends in Argentina expected to continue, supported by unique payment solutions and market share gains.
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Shareholder Return Plan
Shareholder Return Plan: Despegar announced a new 10-year lodging outsourcing agreement with Expedia, effective January 1, 2025, which will allow Despegar to optimize its lodging supply and enhance profitability. This agreement will amortize a previously recorded $155 million perpetual contingent liability over 10 years, improving the company's net asset position.
Adjusted Net Income: Adjusted net income rose 309% year-over-year to $36 million for the quarter, contributing to a significant increase in shareholder value.
Adjusted Earnings Per Share: Adjusted earnings per share increased to $0.34 during the third quarter of 2024, up from $0.10 in the year-ago quarter.
Cash Position: Despegar reported a total cash balance of $220 million, an increase of $15.2 million compared to the end of the second quarter of 2024.
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Key Q&A
Q:How should we think about your ability to maintain strong take rates in Q4 and 2025?
A:The company has a strong focus on driving profitable growth, which is reflected in our P&L across geographies. We believe the right take rate for us in the mid to long term is around 13%, but in the short term, our focus on profitability is yielding strong results.
Q:When should we expect the benefits from the Expedia renegotiation to reflect in the P&L?
A:The new agreement with Expedia is transformational and will start reflecting on our P&L as early as the first quarter of next year.
Q:What are the factors that could bring the take rate down from 14% to 13%?
A:B2B is one factor, and we also expect air take rates to potentially decrease. Our strategies to gain market share may also impact the take rate.
Q:What was the impact of storms on bookings in Q3?
A:The overall impact from storms is around $10 million, with FX having a more significant impact on our revenue expectations.
Q:What changed in Argentina's market this quarter?
A:The market evolved positively, and we gained market share by offering unique payment solutions that helped customers pay less for travel.
Q:Do you see Argentina sustaining a higher take rate?
A:Currently, we expect to maintain strong take rates in Argentina due to our differentiation, but we anticipate some reversion in the long term.
Q:What are the Q4 trends in transaction growth?
A:We don't specifically guide to transactions, but our revenue guidance implies growth. Q4 is generally our strongest quarter.
Q:What are the trends in Mexico?
A:Mexico is experiencing a decline in transactions due to FX and reduced air capacity, but we expect some of these factors to be temporary.
Q:Review of Unclear Management Responses
A:Management did not provide specific details on the exact impact of FX on transactions in Mexico and Brazil, nor did they clarify the expected timeline for recovery in those markets.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI travel
BB segment
Charisma
Chief
FX headwind
PL
SaaS
Today
ability
advance
agreement Expedia
air capacity
assistant
benefit
capital
collaboration
conversation
decline
engine
evolution
expansion
goal
guest
ish
kind
launch
margin profile
momentum BB
partnership
payment solution
planning process
saving
service SOFIA
side
software service
support
term expectation
travel assistance
type
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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