Q4 2021 Despegar.com Corp Earnings Call
Reputation is accompanying today's webcast and is available on the investors section of the Companys website, www dot invested or <unk> dot com.
There will be an opportunity for you to ask questions at the end of today's presentation. This conference call is being recorded as a reminder, all participants will be on listen only mode. Now I would like to turn the call over to MS. Natalia Nirenberg Investor Relations. Please go ahead.
Good morning, everyone and thanks for joining.
Joining us today on the discussion.
Quarter 2021.
In addition to reporting financial results in accordance with U S. Generally accepted accounting principles, we discuss certain non-GAAP financial measure.
Metrics, including foreign exchange neutral calculations.
In there, especially with the definitions of these measures and metrics included in our press release carefully to ensure that they understand them non-GAAP financial measures and operating metrics.
It should not be considered a installation of substitute for or superior to the financial measures and have provided as supplemental information only.
Before we begin our prepared remarks allow me to remind you that certain statements made during the course of the discussion may constitute forward looking statements, which are based on management's current expectations and beliefs.
So a number of risks and uncertainties that glucose actual results materially.
Including factors that maybe on the on body I'm sorry.
These include but are not limited to expectations and assumptions related to the impact of the COVID-19 pandemic.
Based on performance of the businesses, we acquire including baseband volume for a description of this week. Please refer to our filings with the U S Securities and Exchange Commission and our press release.
Speaking on today's call is our CEO Debbie on smoking, who will provide an overview of the fourth quarter and update you on our strategic priorities.
All of it has to be our CFO will then discuss the quarter's financial results in more detail after that we'll open the call for your questions and please go ahead.
Yes.
Everyone. Thank you for joining <unk>.
South pole and for your interest in the product.
Despite the underlying earnings power became even more evident this past quarter as consistent execution of our strategy enable us to capture the growth coming from Siemens covering probably demand across our geographic footprint.
Our growth flow through our income statement.
We'll explain.
To start we achieved the highest levels of gross bookings sections and ASB since the beginning of the funded.
Further greater demand for more profitable products.
The travel packages and hotels.
And if we can offset currency depreciation in the region.
Although bookings were.
75% of fourth quarter to close on the 19 of levels. We grew adjusted EBITDA by 30% to $16 million when excluding extraordinary charges and cotton.
Our Medicare same solution in Brazil, we're investing to scale the business.
Taking a step back.
Multiple years are driving our performance.
First.
Our efficient cost structure that is now in place.
The synergies that we are now able to realize from past acquisitions, which reza.
With our cost cutting efforts, we showed the 37% reduction in <unk>.
Breaking expenses when compared to the fourth quarter of 2019 levels and excluding extraordinary charges and the impact from de and coin in both quarters.
Sorry.
More diverse sources of revenue in terms of geography and products for take.
Take rates of 13, 4% when excluding extraordinary cancellations and lastly, we are seeing a good result from our marketing efforts with the share of non trophy, increasing two percentage points, while the share of gross bookings capture through the app.
It was up four percentage points when compared to the fourth quarter of 2019.
Looking at him.
We probably see.
More pent up travel demand materializes, we expect the operating leverage.
Built into the business to accelerate and generate additional earnings.
Rover, we have maintained a solid balance sheet with cash and equivalents of nearly $280 million.
You mean us the flexibility to invest in technology and in market consolidation.
I love it.
Growth initiatives.
Let's move to slide four for a closer look at.
Improving demand conditions in our key markets.
Our markets gain additional momentum in October and November .
As more pandemic restrictions were lifted.
Travel activity picked up.
Although there has been a pause in.
In travel demand since December impacted by seasonality and the emergence of Omnicom, we expect industry travelers should resume growth subject study in the second quarter.
Our performance was strongest in Brazil.
The Oxford side.
Actions gross bookings rose, 52% sequentially with 56% over the fourth quarter of <unk>.
Domestic air group.
Restaurants are factors in Greece.
Turning to other relevant markets, Colombia, and Chile benefited from pent up demand, which drove bookings above fourth quarter 2018 levels by 43%.
And 39% respectively.
Growth in gross bookings was preferred not only by an increase in consumption, but also by an improvement in ASP.
Please.
Which rose, 19% sequentially and $410 per transaction.
<unk>, 9%.
No fourth quarter of 2018.
Returning to our growth strategy on slide five we show how our loyalty program.
It has.
<unk> been gaining significant momentum in Mexico.
Particularly in this market, we made adjustments to our website, which make the program obesity week to visitors and we simplified the registration process.
All these measures have resulted.
And a tripling of members.
This increase the level of customer engagement.
Critical in the context of changes in Idaho.
Would you be features 75% of total book cases were done by Yoga LTV program members.
Let's move to slide six.
The goal of further enhancing our alternative accommodation proposition, we have just entered into an agreement to acquire 51% ownership stake in states.
Brazil's leading vacation rental general manager for a total price of approximately 15 7 million.
Founded in 2016 states offer a comprehensive solution to vacation property managers and owners in Brazil.
<unk> is also a preferred integration partner of alternative accommodations for leading international booking platforms.
The near term these.
This latest acquisition will allow us to add new inventory of over 17 housing properties maybe throughout Brazil.
<unk>, our 400000 plus <unk>.
Total vacation rental inventory.
Today.
<unk> brings to us.
Just a couple easy and significant segment expertise.
Our vacation rental offering within Brazil.
Longer term.
<unk> will leverage <unk>, leading position in other key geographies.
He got to accelerate its expansion.
Note that only 10% of Latin American vacation property owners is digital talent management compared to 90% to Europe .
Ample growth potential for our partnership with space.
Turning to slide seven.
The heart of our strategy for coin another key component in our growth plan.
Probably hit aggressive wherever the consumer makes purchases.
As a means to effectiveness.
Platform.
We continue expanding smart.
Ecosystem.
Mainly consisting of direct merchant ecommerce platforms and payment gateway among other distribution channels.
As you can see on the slide some of these margins on platforms are leading brands in Latin America.
We are encouraged by the strong adoption of calling statements solutions for medicines today.
It is now available as a payment option to some 100% margin from a range of businesses.
From small to large.
The current rate of adoption is.
Setting the stage for calling to become another key growth driver for our company.
By way of example caused fourth quarter 2021 total purchase volume.
73% sequentially nearly $18 million in the fourth quarter.
Yes.
In January 23% of volume came from new markets.
Expansion in the customer base.
The collateral debated Thracian of colleagues.
<unk> solution accounts for 6% of gross bookings.
Reflecting intensive investment.
This business stand.
Alone adjusted EBITDA for calling resulting in the loss of just over $3 million.
I would like to point out that hundred percent of the solutions engine and risk model in house.
As a coin payment solutions, we offer Martin our fault probation and payments be upticks.
Very attractive potential from Cohen.
It's a buy now pay later and broke probation services have a total addressable market of between 15 and $20 billion.
Yeah.
That concludes my portion of the presentation Alberto Please go ahead.
Thank you Danielle and thank you all for joining us today.
For a review of our top line results. Please turn to slide eight.
Record levels of gross bookings and Asps.
Since the start of the pandemic resulted in a 49% sequential increase.
In as reported revenues.
Excluding the extraordinary cancellations stemming from the pandemic revenues would have increased 43%.
During the quarter and just 12% below comparable fourth quarter was 90 levels.
Note that cancellations continued to decline this quarter down by 49% sequentially.
We expect cancellations to continue in the first quarter due to omicron disruptions.
The level of cancellations normalize we should see a decline infotainment central costs.
Our take rate remained strong.
At 15, 4% when excluding cancellations, although it was up by over 200 basis points when compared with fourth quarter. Thank you.
The contribution from that day.
We are more advanced pricing strategy, which allowed us to get higher upfront incentives in countries where.
What are the key drivers behind this improvement.
Now please turn to slide nine.
We delivered significantly higher profitability this quarter.
When excluding extraordinary charges on coins.
<unk> adjusted EBITDA would have increased 30% when compared to fourth COVID-19 in numbers.
To just over $16 million.
We are cheap.
Even though gross bookings reached only 75% of pre pandemic levels.
This improved performance reflects the operating efficiencies.
<unk> and revenue diversification, we have built into the business over the past two years.
That is allowing this figure to emerge from this pandemic.
With a more sustainable business model and greater earnings power.
With respect to points impact on profitability.
Demand noted earlier.
Standalone adjusted EBITDA doubled.
Our merchant payment operations was a loss of just over $3 million.
<unk> significant investments to scale up businesses.
Now please turn to slide 10.
We ended the year with a strong balance sheet.
With cash and equivalents of nearly $280 million and breakeven operating cash flow.
In turn our net payable position remained relatively unchanged sequentially at nearly 187 years.
During the quarter the figure reported net cash flow of $3 million.
This compares to a use of cash of nearly 40 million in the prior quarter when customers redeemed a large amount of travel vouchers on demand pick up.
Now please turn to slide 11.
In summary, when excluding extraordinary charges coin.
Because EBITDA was over $16 million.
33% higher than in fourth COVID-19.
This is even more impressive when you consider the gross bookings, which only 75% of that quarter's level.
This substantial improvement in profitability together with breakeven operating cash flow.
Clear the operating leverage we are carrying into the future quarters.
Despite lower travel demand in December .
Saved by the Omicron variant.
Our business has strong momentum in the fourth quarter.
Particularly robust sequential growth in Brazil, Colombia and Chile.
We see that momentum building again.
The remainder of this year.
A substantial pent up demand drives travel purchases above pre pandemic levels.
We also entered 2022 with a strong cash position of those two kind of an $80 million. One that allows us to continue to invest in our growth drivers such as further consolidated our industry and scaling coins payments platform.
As market acceptance continues growing coins ecosystem of merchants is expanding setting.
Setting the stage for kind.
With purchase volumes in Brazil.
And finally, we would like to highlight again, the tripling of that loyalty members, who now number two 8 million customers.
Now moving to slide 12.
Why do we observed a slowdown in demand in recent months and concerns around the only convey them locally.
Going forward, we expect the volumes to have a diminishing impact on travel demand.
Despite first quarter seasonality and the recent pullback in demand. We nevertheless expect that they've got to be adjusted EBITDA positive in the first quarter when excluding coffee.
For the remainder of the year, we expect to continue investing in marketing activities in countries with promising demand trends.
Looking further out.
And acquisition of space, Brazil's leading additional rental channel will allow us to expand our vacation rental business in the country as well as in other key markets in Latin America.
We also remain focused on further enhancing client value proposition.
<unk> additional clients in the <unk> segment and developing new attractive features for our end consumers.
Finally, we expect sales to continue to recover throughout this year and beyond.
As long as Latin America is not impacted.
Current global state of Affairs.
In the meantime, we continue executing on our strategy that has proven to deliver solid results. Despite demand levels are in that.
Fully recovered yet.
This concludes our prepared remarks, we're ready to address questions.
Operator, please open the line for questions.
Thank you.
I would like to ask a question. Please press star followed by one on your telephone keypad.
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Again to ask a question that is star followed by one.
We kindly ask that you stick to one question and one follow up thank you.
Our first question today comes from Kevin Kopelman from Cowen and co. Kevin. Please do go ahead. Your line is now open.
Hi, Good morning. This is Emily on for Kevin Congrats on a strong Q4.
I was just wondering to what extent do you believe the improvement in gross bookings you saw in the quarter to minus 25% reflected market share gains versus pent up demand and then I have a follow up thank you.
Yes.
Yeah.
Hi, Emily this is Ed.
Thank you very much for your question as you know with truck.
Market share, maybe suddenly and we gain.
Slide market challenges in Q4, so it's a combination of two things the pent up demand and market share gains in most countries.
Okay.
Got it thank you.
Yeah.
And my follow up is how do you plan to manage your sales and marketing spend through throughout 2022 and.
Asked another way at what level of gross bookings would we see marketing levels increase thanks.
Well.
The marketing spend.
As you know is the result of.
Our Aberdeen, Idaho, leading evaluating the profitability of the ex vivo.
So.
Is not SaaS.
<unk> decision, which we cover in terms of a better more but we believe that there are really around the aspect Google series that increasing our organic traffic our non paid traffic in general.
Some of them.
Sustained across 2022 so even though we're the grid investments.
Market recovers our portion of organic traffic will remain at higher level that pre pandemic.
Thank you.
Thank you as a reminder, if you would like to ask a question. Please press star followed by one on your telephone keypad.
The next question today comes from Alejandro Aranda from <unk>. Please go ahead. Your line is now open.
Hi, good morning, and congratulations on the.
Really good results that you just show I'm wondering if you could share a little bit the breakdown between the revenues coming from peak from coin on the RASK on what should we expect there going forward.
In terms of cost savings.
Alright, Hello, Alejandro good morning, yes.
And.
As Amin pointed out.
And what are we seeing coin today's.
Approximately today.
20% of the of the activity comes from third party clients, Okay, and then the remaining <unk>.
Slightly.
As a low lower than that.
As related to the Nikola Dot com.
Captive clients on that front, what youre seeing is on a on a on a penetration basis for now a number of transactions. Okay. Because <unk> actual revenue is much much lower when it comes to the fixed product. Okay. Do you actually see that you have approximately six over 6% that is to penetrate.
I'm not one of our web site and then when it comes to peaks, that's an additional 4% for a total on average of approximately 10%.
Yeah.
Okay.
Okay. Thank you.
You're very welcome. Thank you.
Thank you next question today comes from Kieran Kenny from Morgan Stanley . Please go ahead. Your line is now open.
Thank you and congrats on the great results.
Could you talk a little bit about.
Bookings in <unk> and whether you expect.
Bookings.
<unk> 2019 levels to improve versus the 75% in <unk>.
And then second could you just talk a little bit about how you think.
Are you thinking about fuel costs, and whether or not you expect those to negatively impact demand over the short to medium term. Thank you.
Okay.
Sure good morning.
On the first piece.
Of your question regarding let's say visibility on Q1.
Importantly, it.
We are actually experiencing.
Or we can describe the situation very similar to what our competitors in the region.
Globally had that is certainly.
Booking activity came down.
In the very last weeks of December .
That that trailed into January and then by February started little while it is coming up and we actually have a perspective that.
Improvement will continue up until the end of Q1 so.
As we were in GB around minus 25% vis vis vis vis 2019, okay, we actually see that our bookings overall.
We've come slightly down.
From from what we actually saw in Q4.
That is b savvy omicron, if on top of that you add the seasonality factor okay.
No Q1.
In relative terms, the weakest quarter for the company. So you actually you will see that as a percent of <unk>.
As a percent of 2019, you actually have let's say from between 5% to 10% decreased <unk> 19, and then on top of that you need to add the seasonality.
What would be the level of activity.
But most importantly.
As you look into <unk>.
How far out into Q2, Q3, and the rest of the year, we believe omnicom will end up impacting it.
The industry in Latin America, we are very positive on that front, so that the impact will be mostly contained to Q1.
On your second question.
Okay.
The geopolitical developments.
Certainly.
Very very sad news for all.
Do not have.
Direct impact in the region or particularly for this payout.
It's immaterial amount of revenue so transactions that we actually are related to travel to eastern Europe . So that's certainly good news with regards to the impact on.
Jet fuel prices that could potentially push.
Asps up because our suppliers would actually particularly on the air side with likely pushed prices up I think the key thing to look at there is the balance between foreign exchange in the region, because Latin America could potentially benefit from high commodity prices on the on such consumers through the <unk>.
<unk> could benefit so the balance would be between okay jet fuel price at Asps going up.
It may be that less transactions, but in FX in the region actually appreciates that should be positive. So it's still too soon to tell but.
The way to from a framework perspective, how to analyze it.
That's really helpful. Thank you.
Youre welcome.
Yeah.
Thank you.
Currently no further questions registered so as a reminder, that is star followed by one on your telephone keypad.
There are no additional questions waiting at this time, so I'd like to pass the conference over to Damian <unk> CEO for closing remarks Damien. Please go ahead.
Right.
We thank you again for your interest in this regard and we hope you all remain healthy and safe. Thank you for joining us today.
Your interest in the company.
Goodbye and have a nice day bye.
Bye.
That concludes todays <unk> fourth quarter two into 'twenty one earnings call. Thank you for your participation you may now disconnect your lines.
Yeah.
Okay.