Q4 2023 Despegar.com Corp Earnings Call
Please wait the conference will begin shortly.
[music].
Good afternoon, and welcome to desperate GARS for fourth quarter 2023 earnings conference call.
My name is Abby and I will be the operator for today's call.
At this time all participants are in a listen only mode and please note that this call is being recorded.
There will be an opportunity for you to ask questions at the end of todays presentation.
Now I would like to turn the call over to Mr. Luca Pfeifer Investor Relations. Please go ahead.
Good morning, everyone and thanks for joining us today.
In addition to reporting unaudited financial results in accordance with U S. Generally accepted accounting principles, we will be discussing certain non-GAAP financial measures and operating metrics.
Foreign exchange neutral calculations.
Rest assured carefully read the definitions of these numbers in metrics included in our press release to ensure that they understand them.
non-GAAP financial measures and operating metrics should not be considered in isolation.
<unk> for or superior to GAAP financial measures and have provided a supplemental information only.
We begin our prepared remarks. Please 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 and are subject to a number of risks and uncertainties that could cause actual results to materially differ including factors that maybe beyond the companys control.
These include but are not limited to expectations and assumptions related to the integration and performance of the businesses we acquire.
For a description of these risks 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 Damian skulking, who will provide an overview of <unk> fourth quarter and full year performance as well as an update on our many strategic growth initiatives next our CTO on salaries day, what I know will introduce you to a new innovative technology feature that we've recently launched and explain why.
We are excited about its potential.
Seeing our CFO will follow with a more detailed review of the quarter's financial results as well as a discussion of our 2020 for annual guidance.
After that <unk> will end, our prepared remarks with a wrap up before we open the call for questions.
Please go ahead.
Thank you Luca and thank you everyone for joining our earnings call.
The fourth quarter of 2020 with a remarkable period for the spin.
Several major strategic milestones, our consistent and robust commercial execution, coupled with strong demand trends across the region, resulting in our highest gross bookings since the company's IPO growing an impressive 44% year over year.
So $1 billion or 78% year on year in constant currency.
Moreover, this was a plus.
Year on year growth in gross bookings since our IPO when excluding COVID-19 related recovery.
Notably, our Brazil, and Mexico businesses continued to experience strong demand with Brazil in particular benefiting from our commercial execution competitive strength and positive secular tailwind as we believe more and more customers allocate that.
Higher proportion of their spending the west travel and experiences.
For the full year 2020 feet, we reported $5 $3 billion in total gross bookings an increase of 31% year on year or 52%.
Okay.
As we reached the end of the year. It was clear that our industry has made a remarkable recovery from the pandemic. We believe the impacts of the pandemic are now largely behind us.
And we are operating in a normal normal growth environment.
Sterling to Euro monitor project shows the overall travel market in Latin America is approximately $150 billion in size.
When PC base I think we will continue growing at a low double digit rate for the foreseeable future in other words, we believe that we have lots of runway for growth in our markets.
It is important to note that a recovery in trouble.
<unk> has been limited to add capacity as we are noticing a significant shift in overall consumer behavior, We believe Latin America, and now increasingly focusing more on experiences and services.
A similar trend with social cited by Steve and it's 2024 outlook remarks at SAR base revealed that consumers across all ages and regions state that travel remains a top priority.
This suggests a fundamental shift towards a more experiential and service oriented economy.
New opportunities for our industry.
In line with these positive secular trend.
Packages continues to be an integral part of our commercial strategy and value proposition for our clients.
That's the.
The proportion of packages as a percentage of our gross bookings came in at 32%.
Our package sales in addition to increasing Nomura sizes.
Our average take rate to 13, 4% and generated record breaking revenues of $204 million for the quarter.
A 40% year on year increase in U S dollars and 82% in constant currency.
For the full year 2020, our revenues of $706 million.
<unk> had a 1% year over year in U S dollars.
55% in constant currency.
In addition to our focus on improving our revenue mix, we further streamlined our cost structure during the quarter.
We implemented several cost reduction measures beginning more operating leverage and facilitating additional margin expansion.
The combination of increasing operational leverage and top line growth.
Resulted in our highest adjusted EBITDA since the company's inception at $43 6 million.
Adjusted EBITDA for 2023 with a $116 million.
Highest full year EBITDA Adler with margin expanding eight six percentage points year over year to 16, 4%.
This desire also generated very strong operating cash flows in the quarter with total $26 million.
Later in the call Amit will provide more details on our financial performance.
Now to provide a little color on our business segments, our b to C segment experienced robust growth of 41% during the quarter, reaching one 6 billion in gross bookings.
This achievement was largely due to our effective commercial strategies across all our sales channels and platforms will enable us to increase revenues by an impressive 49% year over year.
Reaching a total of 126 million for the quarter.
Our growth was primarily driven by robust sales in hotels and packages.
Really in Brazil, and Mexico, as we continue to uphold our leadership position by providing attractive product offerings at the most competitive prices and offering a wide range of payment options.
This is strategic approach has allowed us to meet diverse customer needs and preferences reinforcing our market leadership through a combination of quality affordability and financial flexibility by focusing on these key markets and maintaining our competitive edge, we ensure sustained growth and gaslog.
Satisfaction.
Moreover, our air segment also demonstrated solid growth strength with revenues, increasing 25% year on year to $75 million during the same period.
During the quarter, our b to B and White label businesses continued to be significant growth drivers specifically need to be so remarkable expansion of 63% in gross bookings.
While our white label operations grew an impressive 69% year on year.
And no double and recent development under our White label growth strategy is a partnership that we recently forged with Banco <unk>.
One of Columbia's largest banks and a prominent brand in the country's financial services sector.
We're very excited about the potential of this partnership and we have already begun.
But the process.
These most recent collaboration plus particular promise as <unk> more than 16 million clients will gain access to exclusive travel experiences through this big <expletive> platform.
Given the success of similar partnerships, we anticipate that our leading technology product will foster greater customer loyalty for WEX.
As a way to generate additional revenue streams for them.
Our white label partnerships have grown to 80 in number.
Several significant ones in the pipeline.
Which will be on boarded in the coming months and quarters.
These partnerships underscore the strength of our best in class technology platform, which enable us to provide customized solution to our partners regardless of their size.
We eagerly look forward to working with value in that and we continue actively seeking additional opportunities to expand our white label operations throughout Latin America.
Also as we noted during our PGA use earnings close.
Intend to further leverage the strength and scalability of our platform.
<unk> targeted areas of the $2 two trillion global color market as a next phase of our long term growth strategy.
One of our most critical strategic advantages lies in our commitment to continuous innovation and utilization of our technology platform alongside our extensive customer database to keep the pulse of our various markets and deliver unique offerings.
Silver customers.
This focus extends to our mobile app, which serves as a pivotal tool for driving customer engagement and increasing customer retention.
The fourth quarter.
This will mark a significant achievement in terms of App engagement.
Not only did our.
Downloads increased by 28% year over year.
Reaching a total installed base of almost 15 million devices, but we also processed a record 45% of transactions through our apps.
Crucially, our up first approach boost organic traffic to our own channels, which currently stands at approximately 75% of transactions.
It also enhances customer retention.
49% of customers, who make a two part phase on our App typically making another transaction within 12 months of their initial purchase.
Next I'd like to discuss a core project, we've been diligently working on over several months and have recently unveiled an exciting new product feature a base level in the travel market.
On March 4th we launched our AI trip planner.
Through large language models. It is trained on our bus customer data.
<unk> product inventory.
While the information. The result is our digital travel assistant branded as Sofia.
So Fiat is powered by artificial intelligence and it's literally transforming customer interactions with our platform rapidly offering tailored solutions.
Solutions and doing so in a way that exceed customer expectations Sophia puts searches on bookings of personalized travel experiences at their fingertips.
Operating in a multimodal fashion.
Later on our presentation, our CTO bond silo will elaborate on Sofia, including our ambition for and the tremendous possibilities of this new technology.
Throughout the year, we have made great progress on our three key focus areas, which are already discussed as revenue diversification, our multichannel capabilities by importantly, our strong brand identity and customer focus remained one of the biggest key competitiveness trends.
With unaided brand awareness consistently ranking highest across all markets we operate in.
Surpassing both global and local competitors.
Brand leadership, not only affords us visibility across the region, but also position us as a preferred partner for travel products suppliers.
<unk> substantial customer traffic for them.
Additionally, we've made significant strides.
Improving our net promoter score, which now stands at 69%.
This score reflects our unwavering commitment to delivering the best travel experiences to our customers.
We achieved this result, while developing an efficient and scalable service model that effectively leverages, our technology platform, enabling our customers to quickly and easily resolve covered related inquiries through self service in most of the cases.
This model combined with our ongoing focus on cost reductions have lowered our cost per order by almost 30% since 2018.
Recently, we have expanded our exploration into how artificial intelligence can enhance customer interactions and create additional operational efficiency, especially in the context of training and providing tools.
Lease agents as well are synthesizing customer interactions.
By integrating AI into our processes ways to further improve customer satisfaction, while also enhancing our overall business performance.
Another cornerstone of our brand identity and a key driver of customer stickiness is our loyalty program <unk>, which has maintained its impressive growth trajectory at the end of the quarter total loyalty members reached 23 million, making it a 90% year over year.
The increase.
Furthermore, point redemptions increased by over four five percentage points, reaching 10 four percentage of total transactions.
Now a brief word about payments another unique aspect of the Latin American market and where we also have a significant competitive advantage.
Our long established local presence tends to this figure out apart from our competitors by enabling us to not only procure inventory at competitive prices, but also offer customers an extensive range of payment options on installment plans.
Lansing is crucial and integral to travel purchases in Latin America, a need that we can effectively meet as a local player in the region among.
Among the many financing options available to our clients through our partnerships with local financial institutions is our buy now pay later product coin.
As part of this big <expletive> travel ecosystem.
And extends our reach to customers, who may note process, a credit card or have limited credit balances.
As many of you may recall in 2022, we've committed to coin achieving a navy that breakeven point by the second half of 2023.
Therefore, I am particularly pleased.
Loans today that did more than that.
Continued tier $3 million to this big <expletive> consolidated adjusted EBITDA during the fourth quarter, while also being cash flow accretive.
<unk> was not shocked a year in which we made substantial progress financially operationally and technologically. We also work hard to foster a more positive working environment, we anticipate that.
During the year additional level fell to historic lows, reflecting a high level of employee satisfaction and retention of key talent in.
In summary, our sharp focus on our strong commercial execution and improving operational efficiencies combined with a more profitable product <unk> growing organic traffic and further penetration of adjusting <unk> market segments resulted in yet another record quarter for the.
With 706 million of full year revenues, we exceeded the top end of the range of our updated revenue guidance, which was 682 $700 million.
And at $816 million in adjusted EBITDA. We also exceeded the upper end of our upwardly revised EBITDA guidance by $6 million.
As a result.
We believe this big I remain the worlds fastest growing travel technology company in terms of both revenue and profitability.
I think we'd like to end here by noting that our unprecedented results would not have been possible without the hard work and dedication of the employees across our organization.
So congratulations to the entire team at this pickup.
Looking ahead.
We are very enthusiastic about the growth opportunities that await us.
Our commitment to maintaining our strong position as industry leaders in growth is unwavering and we are dedicated to continuously pursuing excellence.
Through continuous innovation, we aim to stay ahead of industry trends and challenges in order to sustain our momentum and further solidify our leading position in the market.
I will now turn the call over to <unk>, who will walk you through our exciting AI innovation Sofia.
Good afternoon, everyone and thank you Daniele for the introduction.
We are seeing plus <unk>, a groundbreaking technology development that reflects our commitment to innovation, we test, meaning reined in our DNA since the inception of our company.
Almost 25 years ago.
Evolution is the Latin American private industry by enabling convenient secure and credit based ticket RBC from the comfort of one's home service previously unavailable through traditional agency or directly from the airlines.
In essence.
This data was first in Latin America to bring accessibility to the forefront.
<unk> extended this business concept to other color clarity.
And geography in the ensuing years.
Yes later traveled website beginning increasingly common data once again distinguish itself in the region.
<unk> seen the first fully transactional travel app.
Which more recently has been accounting for a rapidly growing portion of our business.
It's now a resounding success.
So once again.
Is it getting Americans unprecedented and accessibility to trial at this time in the form of a bucket taste experience, namely their mobile phones.
However, as well as take 18 earlier development titles.
Our technology keeps advancing our ambition remains to lead through innovation and technology, prompting us to think about the next leap forward.
It was then we observed that although many travelers have migrated to digital platforms.
We have not managed to completely replicate that revelation any ability to inspire.
Through the booking process and no Farah personally every along the whole travel lifecycle.
The acquisitions of most of the final Elan best Nate.
Fully understand the true value of comprehensive advice and service in both sales and post sales support.
And became a game concepts for our digital innovation team.
At the same time.
We saw in the emergence of large language models and opportunity to bring to the online world.
The tailor made travel advice.
Customers can expect from an experienced calculation.
Today, we are thrilled to introduce Sofia.
Our digital travel assistant powered by artificial intelligence.
Representing yet another leap.
No logical Jeremy.
I am convinced that the technology, we are meeting today.
We'll have an equally important implications from the standpoint of both.
<unk> enhancement and business performance that previous once represented furthest payout.
We will now be discussing in the debates of Sofia.
And therefore encourage you to watch a short video we have posted on our Investor Relations website.
Www investor.
<unk> they stayed at about Com at your convenience.
I would like to highlight several elements that make our digital assistant unique in the market.
And this data we are convinced that this is the beginning of a new revolutionary products.
First Sofia.
Multimodal each like interacting with an in store agent, where we can talk or exchange messages with a sales representative.
You can't do that yet Sofia can do much more by also showing the customer at that time.
Matching destinations are displaying flight options on the screen in the same way I'd rather Nathan.
In other words, it's no longer just the Tesla Sofia is that true.
Digital travel assistant that allows us to recently communicate.
By interacting with the visual element are speaking to Sofia.
Excluding the UAE.
With fully interactive withheld components that is custom built during the customer interaction this unique.
I am convinced that they represent a leap forward in how people will interact with digital platforms going forward.
Secondly.
One, which we consider fundamental to travel planning experience each sophie's flexibility.
It's much like a human interaction in that he doesn't have to follow a predetermined or there are flow that is common with so many of <unk> platforms and applications.
Our technology allows the traveler.
<unk> never thought of in the efficient flow of outright eastern on a website or app.
For example, <unk>.
Asking any one to compare flight to defend destinations are in defending.
On the website it is possible to luisa, but that would require me to open multiple tabs on my screen.
Relating to date matrix that may not cover that these higher thanks.
With the Este edit digital assistant EDC I simply tell it what I'd like to do for <unk> and it has the flexibility not only to that other information.
But also to prepare a visual representation of built yet for that.
<unk>.
This is Dan I'll tournaments, many by Sofia without anyone at this data having had to anticipate and building that precise interaction beforehand.
The third key differentiator is sofia ability to adapt to our customers' reactions.
When the customer says for example, no suggested current destination is to fire I want to go starting in Brazil.
Sofia in ESP and understand that for these passenger excepting options outside Brazil are not suitable.
Put another way Sofia is social and pathetic and thoroughly intuitive translation. Unlike our website or app that has no way of incorporating the customers' reaction into its next propulsion.
Imagine a platform that is instantly, yes that customer's reaction and powering its responses.
By all the previous knowledge that <unk> has accumulated over the years of other travel back GT her teeth and radio.
It is hyper personalization.
Finally, and potentially the biggest differentiator is that Sofia is based on a technology that successfully combined.
The full power of large language model.
With all of our technology platform uncovered ecosystem that we developed during the last 20 years.
This means.
But we are enabling Sofia to use all of our b cell component and Internet services that compose our other platforms.
Also the planning and the booking of a trick.
A more natural way than it is today.
And also later.
While the timing and anticipating their journey and of course, while experiencing it and later sharing their memories with others.
Hello, This technological shift is enormous.
Will allow us not only to leverage our.
Capabilities.
Also those of other partners, allowing Sofia to fully assess deal with every aspect of our strategy.
We strongly believe that this technology has the potential to transform the industry and we expect to continue setting the base a much faster one.
In addition to Sophia we anticipate artificial intelligence to further strengthen our already robust competitive advantages.
As we continue to explore the opportunities that this new technology offers across our business to enhance internal capabilities and reduce operational costs.
With that I'd like to turn the call over to Amy who will walk you through the details of her strong finished the year.
Thank you Gonzalo for that insightful presentation of this revolutionary new way to make travel plans.
I'll now provide a detailed overview of our fourth quarter and full year 2020 results, which as I noted in his introduction were exceptional.
Throughout the first nine months of the year, we leveraged our outstanding commercial execution as we capitalized on strong demand trends in the region.
Which continued in the fourth quarter, particularly in our key markets, Brazil and Mexico.
During the quarter gross bookings in our core <unk> business expanded an industry, leading 41% year over year, reaching one 3 billion.
As we continue to gain share across the region.
In addition, we further solidified our position through our focus on driving <unk> and white label growth that each of these business lines, expanding gross bookings by 63% and 69% respectively year over year.
This strong growth combined with increasing non air transactions led to total gross bookings, increasing 44% year over year and 78% in constant currency terms, reaching one 5 billion in the quarter.
Importantly, travel packages reached 32% of total gross bookings.
As a result of our strategy to improve the revenue mix during the quarter, we achieved a strong 13, 4% take rate and a record $204 million in revenue.
Which grew 40% year over year and 82% in constant currency.
We believe that our topline growth again led the travel technology sector globally.
For the year, we generated $5 3 billion in gross bookings, increasing 31% year over year and 52% in constant currency.
Accordingly, we achieved $706 million in revenues exceeding the upper end of our full year revenue guidance range as Damien pointed out.
In addition to achieving record breaking revenues, we remain laser focused on expanding our margin we increased adjusted EBITDA by 248% year over year to $44 million for the quarter.
We achieved this milestone in several ways, we continued focusing on commercial execution on driving more profitable non nir revenues. In addition to reducing cost of revenues to improve cost efficiencies.
Lastly throughout the quarter, we continued to focus on generating additional cost efficiencies, achieving significant introduction and technology and content and G&A expenses.
Our particular focus was streamlining our head count to align with our targeted growth strategy, which will further contribute to our operating leverage on top of the growth momentum that we're carrying into 2024.
We are very proud of what we achieved on the top line, which along with our efficiency gains enabled us to exceed by $6 million. The upper range of our updated adjusted EBITDA guidance of $105 million to $110 million for 2023.
The adjusted EBITDA margin, expanding eight 6% point year over year to 16, 4% for the year.
These results are testament to our relentless focus on profitable growth and strong commercial drive.
I would also like to highlight that we have incorporated the adjusted net income metric into our quarterly report the.
The purpose of introducing this metric is to offer investors a clearer idea of what our net income would amount to in a normalized basis.
To calculate this metric, we exclude nonrecurring or non cash expenses.
Details of the adjustments are provided in our earnings release.
So for this quarter, our adjusted net income was $21 1 million.
Solid increase compared to adjusted net income in the fourth quarter of 2022 of $2 7 million.
Adjusted net income for the full year 2018 was $49 3 million compared to adjusted net loss for 2022 of $6 2 million.
Now, let's delve into more details with a look at our regional performance starting with our most important market Brazil.
As Donnie I explained there has been an ongoing shift in consumer spending behavior towards services and experiences. This trend combined with competitive tailwind resulted in year over year gross bookings in the fourth quarter growing 56% or 47% on an FX neutral basis to $617 million.
Our highest level to date in Brazil.
The record bookings were mainly driven by an increase in packet and hotel sales as a direct result of our commercial efforts and by continuous market share gains as our gross bookings growth remained industry leading.
For the year total gross bookings in Brazil reached $2 1 billion, increasing 55% year over year.
Moving on to our second largest market Mexico. We are very pleased with our fourth quarter performance there to gross bookings increased 28% year over year or 14% on an FX adjusted basis.
<unk> 253 million USD for the quarter.
On a full year basis, Mexico contributed $1 billion in gross bookings, increasing 22% when compared to 2022.
Turning to the rest of Latin America, we reported a 40% increase in gross bookings are plus 133% in constant currency terms, reaching $645 million for the quarter.
For the year, we generated $2 2 billion in gross booking and the rest of Latin America, implying a 17% year over year growth.
Looking at our operating cash flow, we generated $26 million during the quarter, which compares to $18 million of cash used during the fourth quarter of 2022 more.
More specifically capex during the quarter was approximately $11 million in line with expenditure in the years prior quarters.
As such cash and cash equivalents totaled $251 million at year end above last year's cash position.
In addition to the ordinary course of business expenses throughout the fourth quarter, the incurred M&A related expenses of $16 $5 million due to the promissory note that we assumed when acquiring best day in 2020.
Throughout the year, we also paid a total of $17 8 million of preferred dividends to our <unk> shareholders.
Another $6 8 million cash outflow over the quarter relates to the head count reduction we implemented with the strategy of focused growth initiatives driving margin improvement and hand dancing cash conversion.
By adjusting the workforce to better match current focus growth initiatives business needs and efficiencies, we aim to optimize our resources focusing on productivity and operational excellence.
This decision will drive operating leverage going forward and put us in a stronger financial position, giving us greater flexibility to make future investments in growth.
In summary, despite our capex M&A related payments preferred dividend payments and one time severance cost we maintain our financial flexibility to further capitalize on the significant secular tailwind of our industry and in further strengthening our competitive moat.
Lastly, I'd like to walk you through our financial guidance for 2024.
Based on the demand trends, we have observed so far this year and on the continued success of our strategic initiatives to drive revenue and profitability. These forecasts the cigar achieving at least $820 million in revenues in 2024.
Which implies a year over year growth of at least 16%.
And given our ongoing focus on efficiency gains as well as our ability to drive operating leverage we expect to generate at least $150 million and adjusted EBITDA or at least 28% year over year increase.
We look forward to maintaining our position as the world's travel technology leader with our exceptional growth in both revenue and adjusted EBITDA.
Our continued success is predicated on our proven commercial strategies.
<unk> local expertise and a strong emphasis on cost efficiency setting the stage for future operating leverage and industry, leading top line growth and margin expansion in the foreseeable future.
Now back over to Danielle, who would like to summarize todays review before we open the call for your questions.
Thanks, Amit.
To conclude our results for the quarter and full year were et cetera, marking the most successful period for this big <expletive> in many ways.
This success is a result of a well planned and well executed growth strategy.
It is also attributed to our local market expertise commercial excellence brand strengths and best in class technology platform.
These factors continue to increase our competitive advantage as we strengthen our brand across the region.
Additionally, our b to B and wide level solutions are providing us with exciting growth opportunities not only in Latin America, but beyond the region.
With the adverse impact of the pandemic is actually behind us the spread is now at an inflection point, our 2020 results make this very clear.
And we expect to maintain our strong momentum.
We remain focused on expanding package revenues driving more data traffic mainly through our portfolio was strongly branded apps and growing our successful loyalty program.
All while maintaining a competitive cost structure.
We therefore expect to continue driving solid top line growth.
And at the same time.
<unk> increasing operational leverage.
I would also like to reiterate that we are thrilled about the opportunities and disruptive capabilities that we expect from our digital travel assistant Sofia.
Sofia set of strategic assets, representing the future of rapid highly personalized flexible and interactive travel booking.
We will really be updating you on sophie's latest features as we introduce them to the market.
And finally, we invite you to join us on our journey towards even higher levels of profitable growth in the years ahead.
With that let's open the floor for questions.
Thank you at this time, we will open the floor for your questions as.
As a reminder, you can also submit your questions online by using the Q&A function of the webcast platform.
And.
If you would like to ask a question on the phone lines. Please press star one on your telephone keypad.
And we will take our first question from not bad Kang with B Riley Securities. Your line is open.
Yes, hi, Thank you very much and congrats guys on the on the results.
A couple of questions from me.
One maybe a higher level question.
So Dan.
If I have to think about the business maybe.
235 years out.
Where do you think the mix of package would be as a person Joseph overall mix.
That's one and then.
Maybe one for Mike just on the outlook for 2024.
You said, it's based on the trends that you've seen so far is it fair to assume that.
The implied 16% growth as is.
What are you seeing for the quarter and obviously the comps are different as we as we go further out than they used to just talk to us about how.
Should we be thinking about the growth comps are that our first half growth versus second half or things like that thank you.
Yes.
Regarding the mix of packages.
Having said the fixed target, but you'll have to keep in mind two things first of all that overall, we expect our company wide growth in the other 20% as we said to do that in our Investor day, we're targeting for that within that growth. You also have to keep in mind that in Latin America.
<unk>.
As penetration within the overall talent.
So we expect not only to grow this call, but the penetration to continue growing with the misbegotten up quite a bit.
Growth.
Fortuity behavior is huge.
If you look at how we let the Omega by Tyler products is still highly in the U S.
So we haven't said exactly because we do this is they are wrong approach to seed the market penetration today.
<unk> room for growth by integrating what do they sold individually.
And to your question on the outlook.
As you mentioned on the prepared remarks.
The overall demand trends across all the countries that we operate in remains very strong and we the way we have been executing in the results that we are seeing from that execution also remains very strong.
We're very optimistic about how 2024 is going to look for us Germany for a company if you have seen us.
For us the second half of the year is generally stronger for us as compared to first half.
And then to put things in perspective, yes last year was a very strong growth year for us, but as we have talked about in the past.
While we are the market leader across Latin America in pretty much every country that we operate in we still have ample room to grow.
Given how big the market is in this market is still growing at 10% or above year over year. So we feel very optimistic about next year's outlook.
Then if we're looking at.
The general seasonal trends second half of the year is generally stronger than first half of the year for us.
Okay. A quick quick follow up just on the profitability side of the equation for 24.
No.
What are your expectations in terms of contribution to the EBITDA.
Sure first of all.
We had guided to before we expected <unk> to turn positive in terms of EBITDA in the second half of the year.
And it did better than that.
If you look at our fourth quarter result, and as we look at.
2024, we expect we havent, specifically guided to client contribution to our overall EBITDA, but it should be a positive contributor to our EBITDA and a positive contributor to our overall cash flow. So we are very excited about how <unk> is progressing both in terms of top line growth and profitability.
Thank you guys.
And we will take our next question from Kevin Kopelman with TD Cowen Your line is open.
Great. Thanks, So the first one is on on take rate it looked like it was.
Pretty.
Table this year and 2023.
Is that is that what youre seeing for 2024, as well and if not any kind of.
Puts and takes there to think about.
Sure. Thank you very much for your question.
So.
If you look at the progression of our take rate.
We were at 11% a couple of years ago. During our analyst day in 2022, we had guided to take rate being around that 12, 5%, but then since then as packages as a proportion of our overall bookings has continued to drive has continued to increase as we have driven other leverages.
Within our take rate.
We now expect our take rate to remain at that 13% level again, 30 to 40 basis point up or down quarter over quarter going forward to so to answer your question, yes, largely stable ish going forward. There are multiple things going on within our take rate we continue to get.
<unk> leverage on our take rate from from packages continue to increase and our product mix keeps on moving towards more and more profitable products, but at the same time, our <unk> business is growing extremely strongly.
Much stronger then.
Even stronger than our B to C business. So in our <unk> business. While it is similar in EBITDA margin to be to see the distribution of the take rates are generally.
Lower than BTC, but then it makes up for it in sales and marketing and all of those costs. So the EBITDA margins are the same.
But the take rates on <unk> to be slightly lower so taking into account. These puts and takes on our ticket we expect it to.
In total remained largely stable going forward.
Great. Thanks.
So one other one on the as you think about the leverage that you have guided to for 2024.
Can you talk about where you expect that to show up the key places on the income statement.
Sure sure. So first of all as you have seen in.
The fourth quarter of this year and as you've seen the results for full year 2020, we have.
Very strongly driven our adjusted EBITDA margins higher driven by operating leverage.
Gross margins improving but then also strong efficiencies that we've driven in our second content sales and marketing and G&A expenses.
And then as we mentioned during our earnings call.
As the company has a lot of very strong growth opportunities in front of US. We have also streamlined our growth strategy and which is helping us.
Not only drive operating efficiencies, but a lot of cost efficiencies in all of these line items that I just mentioned so we feel very confident in driving.
Adjusted EBITDA margin higher as you move into 2024, and a lot of those steps to drive that adjusted EBITDA margin, we have already taken.
As we discussed in the prepared remarks, we drove a lot of cost efficiencies in fourth quarter and the results of it you will see in the coming quarters.
Great and then one last model housekeeping question.
How should we think about the the net financial results line, yes.
Yes.
What's what are the what's the driver there and what should we be looking for is 2024 goes on thanks.
Sure I think as a percent of GB or as a percent of revenue. It should remain for now I would have it is largely the same as 2023, but we are actively working on driving efficiency below our EBITDA line items, two and what are those efficiencies. For example, we do some factoring in Brazil for the.
For the bookings that are installment, we are driving efficiencies and reducing that cost.
In there we had some FX expenses and we are driving efficiencies in how do we manage manage that better so.
While there are a lot of.
Programs in place within our company to drive efficiencies below adjusted EBITDA margin, but for now I would model it largely similar to the one you're going to see.
Thank you very helpful.
And we will take a question from Brett Knoblauch with Cantor Fitzgerald. Your line is open.
Hi, guys. Thanks for taking my question I know.
At least in the U S. I think towards the middle back half of December we saw a slowdown in travel and it looks like the data shows that will pick back up to start the year, but curious if you saw something similar in Lat am and maybe just some more commentary on how the beginning of the year has started for you guys and as that has played a part in there.
The current thinking for 2020 for guidance.
Hi, Brett.
Thanks for your question, we haven't seen any deep in demand into Q4.
And that's.
The beginning of the shaping up as expected keep in mind that Amit.
<unk> mentioned before.
Seasonality makes that the last two quarters had the strongest but Mazda for four months has been in line with our expectations. During this first month of the year.
Thank you and then maybe as we think about cash generation for 2004.
Hum.
I guess restructuring that you guys have already.
Conducted so we expect maybe the adjusted EBITDA free cash flow conversion to improve in 2024.
Yes, so as you have seen even in 2023 quarter over quarter, our overall cash conversion to EBITDA or cash conversion to net income became a ray you want to look at it. It has continued to improve so the trend has been improving and now especially that.
As further streamlining a lot of our costs.
And then in the previous question as I was saying a lot of efficiencies that we're driving even below the EBITDA line item all of those should help in our continuing to improve our overall cash conversion as we go into 2024.
Perfect. Thank you guys very much and congrats on the quarter.
Thank you.
Okay.
And ladies and gentlemen that concludes the audio question and answer session. We will now take the webcast questions.
And our first webcast question comes from Alexandra.
<unk> from Morgan Stanley.
He asks.
<unk> margins came well ahead of our estimates on both operating leverage and GM expansion can.
Can you provide more color on how was the margin expansion in each of the countries or at a minimum how much margins.
Example, like Argentina expanded.
Okay.
So this is this is amit. Thank you for the question, but we generally don't go into detail on margins by country, but I can broadly say that the margin expansion has been very strong across.
All the regions that we operate in and some of the things I explained in the last question. We are driving efficiencies in our cost of revenues and then in tech and content and G&A and sales and marketing expenses all of those had been showing very positive trend and we expect that trend, especially after.
Yeah.
The streamlining that we did in fourth quarter, we expect that trend to continue strongly into 2024.
And the second question from Mr. Nuomi Yoga is guidance it implies at least.
Plus 190 bps year over year.
Can you please.
Give more granularity on the areas of margin expansion to achieve it also.
Also can you provide more color on what is implied in your top line growth for 2024, how much industry growth are you expecting any M&A.
Yeah.
So.
As we were.
Discussing in the last question all the all the line items that I've mentioned.
Our operating leverage and all the other line items above EBITDA, we are actively driving.
Very strong efficiencies there.
Largely driven by our focused growth strategy, which is helping us do that right.
Right because the costs are very much aligned to our growth strategy. So we feel very good income per table about the margin expansion that we are guiding for in 2024 and even beyond as we have spoken in the past there is a ton of opportunities that are in front of us that we will continue to.
Get and execute on not just in 2024, but even beyond that.
In terms of overall industry growth as we have said in the past the industry and as has been mentioned by Euromonitor and a lot of other industry research organizations. We believe based on all of that data that the industry in Latin America is growing at that 10 ish percent rate and we.
Should grow faster than the industry as we continue to consolidate the market.
In various ways.
Our next webcast question comes from Bruno Goldstein from Echo Congratulations on the result could you give a little more detail on increasing the related party payable this quarter.
Yeah.
Sure This is Amit.
As you know we have an agreement with.
Uh huh.
One of our one of our peer.
PDF through which we source international lodging.
Inventory. So this is related to us as the demand environment remains very strong for us both within Latin America and people traveling from Latin America to outside the strong growth in bookings that is leading to that increase.
You are seeing in our balance sheet.
And our next question is from Alexander Mullen from Seigler Gov.
Hi, Congrats on the results. My question is regarding the financial services results and coins how is it expected to perform during 2024 is it generating synergies with the core business and what has changed in order to achieve breakeven during the quarter.
Hi, This is Tom yes. Thanks for the question. So we have permitted.
Not only reach breakeven by the Wassa positive EBITDA by $3 million our.
They chose for 'twenty 'twenty four is to consolidate this profitable growth trajectory into the year.
Because that was driven by positive results in Q4, our unit economics remain very strong on the more we grow the more profitable the comps.
Do not disclose specific growth targets, but it will not only positive EBITDA positive cash flow in 2024.
Yes.
Okay.
And ladies and gentlemen that is all the time, we have for questions today and I would now like to turn the floor back over to Mr spoken for closing remarks.
Just wanted to thank you all for your participation and interest in the company and we look forward to talking to you in our next earnings call. Thank you all.
<unk>.
And ladies and gentlemen, this concludes today's call and we thank you for your participation you may now disconnect.
Please wait the conference will begin shortly.
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