Q1 2024 Despegar.com Corp Earnings Call
Christa: Good morning, and welcome to Despargar's first quarter 2024 earnings call. My name is Christa, and I will be your 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 today's presentation. Now, I would like to turn the call over to Mr. Luca Pfeifer, Investor Relations. Please go ahead.
Good morning, and welcome to just Burgers first quarter 2024 earnings call. My name is Krista and I'll be your 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.
Speaker Change: 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 you Mr. Luca Pfeifer Investor Relations. Please go ahead.
Good morning, everyone and thanks for joining us today.
Luca Pfeifer: Good morning, everyone. And thanks for joining us today.
Luca Pfeifer: Addition to reporting unaudited financial results in accordance with U S. Generally accepted accounting principles, we will discuss certain non-GAAP financial measures.
Luca Pfeifer: And operating metrics.
Luca Pfeifer: Foreign exchange neutral calculations.
Luca Pfeifer: In addition to reporting on audited financial results in accordance with U.S. generally accepted accounting principles, we will discuss certain non-GAAP financial measures and operating metrics, including foreign exchange neutral calculations. Investors should carefully read the definitions of these measures and 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, substitutes for or superior to GAAP financial measures, and are provided as supplemental information only.
Luca Pfeifer: Investors should carefully read the definitions of these measures and metrics included in our press release to ensure that they understand them.
Luca Pfeifer: GAAP financial measures and operating metrics should not be considered in isolation substitutes for or superior to GAAP financial measures and are provided as supplemental information.
Speaker Change: Before 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.
Luca Pfeifer: Before 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 may be beyond the company's control. These include, but are not limited to, expectations and assumptions related to the integration and performance of the businesses we acquire.
Speaker Change: And are subject to a number of risks and uncertainties that could cause actual results to materially differ including factors that may be beyond the company's control.
Include but are not limited to expectations assumptions related to the integration and performance of the businesses we acquire.
Luca Pfeifer: For a description of these risks, please refer to our filings with the U.S. Securities and Exchange Commission and our press releases. Speaking on today's call is our CEO, Damian Scokin, who will provide an overview of Despegar's first quarter performance, as well as an update on our many strategic growth initiatives. Next, our CTO, Gonzalo Estebarena, will provide you with an update on recent developments in our AI-powered traveler And finally, Amit Singh, our CFO. We'll follow with a more detailed review of the quarter's financial results. After that, Damian will end our prepared remarks with a wrap-up before we open the call to your questions. Damian, please go ahead.
Speaker Change: A description of these risks please refer to our filings with the U S Securities and Exchange Commission and our press release.
Damian Scokin: Speaking on today's call is our CEO Damian scoping, who will provide an overview of <unk> first quarter performance as well as an update on our many strategic growth initiatives.
Damian Scokin: Next our CTO of them salary stay about Anna will provide you with an update on recent developments of our AI powered travel assistant Sofia and finally <unk> our CFO.
Speaker Change: I'll follow with a more detailed review of the quarter's financial results.
Speaker Change: After that.
CFO: And our prepared remarks with a wrap up before we open the call for your questions.
Speaker Change: Please go ahead.
Luca Pfeifer: Thank you Luca and good day everyone.
Damian Scokin: Thank you, Luca, and good day, everyone. Building on our strong finish last year, Despegar delivered another robust quarter. We achieved significant top-line growth, with gross bookings increasing 12% year-over-year to $1.3 billion. Meanwhile, constant currency bookings grew a strong 42% year-on-year. Notably, our focus markets, Brazil and Mexico, perform well. With year-over-year growth bookings, they are increasing 27% and 26%, respectively. These strong results reflect growing demand for package deals and hotel bookings in these regions, enabling us to leverage our leadership position through effective commercial execution.
Speaker Change: Building on our strong finish last year began to deliver another robust quarter.
We achieved significant top line growth with gross bookings, increasing 12% year over year to $1 3 billion.
Speaker Change: In constant currency bookings grew a strong 42% year O'neill.
Speaker Change: Notably our focus markets, Brazil, and Mexico performed well with year over year gross bookings, they're increasing 27% and 26% respectively.
Speaker Change: Strong results reflect growing demand for package deals on hotels bookings in these regions, enabling us to leverage our leadership position through effective commercial execution.
Speaker Change: Our commercial efforts continue to drive impressive results as we further expand in the travel package segment, which says in this category, reaching an all time high of 35, 9% of our gross bookings.
Damian Scokin: Our commercial efforts continue to drive impressive results as we further expand in the travel package segment, which sells in this category, reaching an all-time high of 35.9% of our gross bookings. We also maintained a strong take rate of 13.4%, leading to a 9.2% year-on-year increase in revenues, which reached $174 million for the quarter. However, largely, as expected, foreign exchange had a significant negative impact on our revenue growth in Q1.
Speaker Change: We also maintained a strong take rate of 13, 4% leading to a nine 2% year on year increase in revenues, which reached $174 million for the quarter.
Speaker Change: Largely as expected foreign exchange had a significant negative impact in our revenue growth in <unk>.
Speaker Change: Q1 <unk>.
Damian Scokin: But in constant currency, revenues increased a very robust 36% year on year. An improving revenue mix with more profitable non-air revenue now accounting for around 65% of our sales, combined with our relentless focus on cost efficiencies, continue to drive operating leverage. Adjusted EBITDA in the quarter increased 126% year-on-year to $39 million.
Speaker Change: Constant currency revenues increased a very robust 36% year on year.
Speaker Change: An improving revenue mix with more profitable non air revenue now accounting for around 65% of our sales combined with our relentless focus on cost efficiencies.
Speaker Change: Turning to drive operating leverage.
Speaker Change: Adjusted EBITDA in the quarter increased 836% year on year to $39 million.
Damian Scokin: And our adjusted EBITDA margin expanded to 22.4%, the highest ever in Despegar's history from 10.9% in the same quarter last year. Additionally, for the first quarter of 2024, our adjusted net income was $22.4 million, representing a substantial 68% year-on-year increase compared to the $13.3 million adjusted net income in the first quarter of 2020. Turning to our business segment, B2C bookings grew 10% year-on-year during the first quarter, reaching $1.1 billion. This growth was primarily driven by the robust hotel and package sales I've highlighted, particularly in Brazil and Mexico.
Speaker Change: And our adjusted EBITDA margin expanded to 22, 4% the highest ever in this.
Speaker Change: Study from 10, 9% in the same quarter last year.
Speaker Change: Additionally for the first quarter of 2024, our adjusted net income was $22 4 million.
Speaker Change: Representing every substantial 68% year on year increase compared to the $13 $3 million adjusted net income in the first quarter of 2023.
Speaker Change: Turning to our business segment B to C bookings grew 10% year on year during the first quarter, reaching one 1 billion.
Speaker Change: This growth was primarily driven by the robust hotel and package sales highlighted particularly in Brazil and Mexico.
Damian Scokin: This performance also reinforces our position as a brand leader in the region. We continue to offer a compelling product portfolio at highly competitive prices, while also offering a comprehensive array of payment options, which are essential for most Latin Americans who purchase Trump.
This performance also reinforces our position as a brand leader in the region.
Speaker Change: We continue to offer a compelling product portfolio at highly competitive prices, while also offering a comprehensive array of payment options, which are essential for most of the Athene Americans her purchase travel.
Speaker Change: This strategic approach caters to the diverse needs and preferences of this big customer base.
Damian Scokin: This strategic approach caters to the diverse needs and preferences of Despegar's customer base and reflects our commitment to and reputation for quality, affordability, and financial flexibility. By maintaining a laser focus on our key markets and relentlessly pursuing a competitive edge, we will remain well positioned to drive sustained growth and higher levels of profitability for the foreseeable future, in addition to successfully expanding our online presence. We are pleased with the performance of our recently launched offline sales challenge in Brazil and Argentina, an asset-light business model to penetrate the offline segment, which accounts for roughly 50% of travel sales in Latin America.
Speaker Change: Flex, our commitment to and reputation for quality affordability and financial flexibility.
Speaker Change: By maintaining a laser focus on our key markets and relentlessly pursuing our competitive edge, we remain well positioned to drive to.
Speaker Change: Sustained growth and higher levels of profitability for the foreseeable future.
Speaker Change: In addition to successfully expanding our online presence. We are pleased with the performance of our recently launched offline sales talent in Brazil, and Argentina, and asset light business model to penetrate the offline segment, which accounts for roughly 50% of travel sales in Latin.
Speaker Change: America.
Damian Scokin: As we've discussed in the past, our goal is to penetrate the region's massive offline market and to be the key enabler of accelerating the transition from offline purchases to online ones. The B2B and wide-label markets continued to be significant growth drivers in the first quarter. Highlighting the strategic, Gross bookings in our B2B segment grew by an impressive 47% year-on-year, while our white label operation saw an 11% year-on-year increase. A key highlight on this front was the expansion of our wide-level partnerships with Livelo, Brazil's largest loyalty program. The program is operated by Banco do Brasil Ambradesco, Brazil's second and third largest bank.
Speaker Change: As we've discussed in the past our goal is to penetrate the regionals massive offline market and to be the key enablers of accelerating the transition from offline purchases to online ones.
Speaker Change: David <unk> and White label markets continue to be significant growth drivers in the first quarter.
Speaker Change: Highlighting the strategic relevance gross.
David: Gross bookings in our <unk> segment grew at an impressive 47% year on year, while our white label operations saw an 11% year on year increase.
A key highlight on this front was the expansions of our white label partnerships, we'd leave Ao Brasil largest loyalty program.
Speaker Change: The program is operated by Banco do Brasil umbrella, Israel, Brazil, cycled, our third largest banks.
Damian Scokin: Through Despegar's wide-label platform, their customers can not only accumulate a level of points through purchases made on the platform but can now redeem these points for any travel product, including packages. They also have the option now to purchase travel products with cash directly on the White Label site. These new features have been highly successful and resulted in the Livelo partnership becoming our largest wide-level operation in Brazil. For perspective, Libello's over 45 million members now have exclusive access to redeem their collective 100 million accumulated reward points for travel services offered by Despegar.
With regards to white label platform that customers can not only accumulate level appoint to purchases made in the platform, but can now redeem these points for didn't travel products, including packages.
They also have the option.
Speaker Change: To purchase travel products with cash directly on the white label site.
Speaker Change: These new features have been highly successful and resulted in the developed partnership becoming our largest white label operation in Brazil.
Speaker Change: For perspective developed over 45 million members now have exclusive access to redeem their collective 100 billion accumulated reward points for travel services offered by this big items.
Damian Scokin: Our collaboration with Livello marks a significant step in consolidating Despegar's position as the partner of choice for Latin America's other leading brands. It underscores the strength of our best-in-class technology platform, which enables us to provide highly customized solutions to our wide-label partners, regardless of their size, as well as the best possible travel promotions and experiences for their guests. Livelo is one of many other loyalty programs, as well as banks, such as Beverly Hills, Argentina, Colombia, and Peru, that will provide travel solutions.
Speaker Change: Our collaboration with Libre low marks a significant step in consolidating the <unk> position as the partner of choice for Latin Americas other leading brands.
Speaker Change: It underscores the strength of our best in class technology platform, which enable us to provide highly customized solutions to our white label partners, regardless of their size as well as they are with possible travel promoters and experiences for their customers.
Speaker Change: <unk> is one of many other loyalty programs as well as banks, such as baby in Argentina, Colombia, and Peru that we provide travel solutions for.
Damian Scokin: We eagerly look forward to deepening our relationships with Livelo as well as other significant partners in the coming months and quarters. As we have previously communicated, our vision for wide-label solutions, we aim to leverage the scalability and proven strength of our platform to strategically penetrate targeted segments of the vast 2.2 trillion global travel market. This strategy reflects our commitment to broadening our impact and delivering exceptional value across the globe. Next, I would like to discuss some of the ways that our continued focus on innovation is driving improvements in our operating and financial performance. At Despegar, we leverage our industry-leading technology platform, along with our extensive customer database, to maintain a deep understanding of emerging customer preferences across diverse markets.
Speaker Change: We eagerly look forward to deepening our relationship with <unk> as well as other significant partners in the coming months and quarters.
Speaker Change: As we have previously communicated our vision for White label solutions is not confined to Latin America.
Speaker Change: We aim to leverage the scalability and proven strength of our platform to strategically penetrate targeted segments of the past two to three year rollout travel market.
Speaker Change: This strategy reflects our commitment to broadening our impact and delivering exceptional value across the globe.
Speaker Change: Next I would like to discuss some of the ways that our continued focus on innovation are driving improvement in our operating and financial results.
Speaker Change: At this regard with leverage our industry, leading technology platform, along with our extensive customer database to maintain a deep understanding of emerging customer preferences across diverse markets.
Damian Scokin: This enables us to deliver unique and highly-tailored travel offerings that resonate with our customer base, as evidenced by the increase in packaging size, which, as already mentioned, reached an all-time high of 36% of our gross bookings for the world. Our focus on innovation includes our mobile apps, which serve, Thank you. The first quarter marked a significant achievement in terms of app engagement. Year-on-year downloads of our app increased 30%, bringing our total installed base to nearly 17 million devices.
Speaker Change: This enabled us to deliver unique and highly tailored travel offerings that resonate with our customer base.
Speaker Change: Evidence by the increase in packaging sales.
Speaker Change: As already mentioned reached an all time high of 36% of our gross bookings for the quarter.
Speaker Change: Our focus on innovation includes our mobile apps, which serve as an effective tool for driving gasoline engagement and cultivating long term customer loyalty.
Speaker Change: The first quarter, Mark a significant achievement in terms of engagement.
Speaker Change: Year on year downloads of our App increased 30%.
Speaker Change: Bringing our total installed base to nearly 17 million devices. Furthermore, a record 49% of all our transactions were processed through our apps during the quarter driving additional organic growth.
Damian Scokin: Furthermore, a record 49% of all our transactions were processed through our apps during the quarter, driving additional organic growth. Our app-first strategy is delivering demonstrably positive results in many other ways, from increased customer engagement and retention to lower customer acquisition costs, as well as improved cross-selling opportunities. As discussed on our last earnings call, we are particularly proud of our most recent innovation, SOFIA. Our generative AI travel platform is the culmination of many months of dedicated development work.
Speaker Change: Our first strategy is delivering the most strongly positive results in many other ways from increased customer engagement and retention to lower customer acquisition cost as well as improved cross selling opportunities.
As discussed on our last earnings call, we're particularly proud of our most recent innovation Sophia our generative AI travel assistance is a culmination of many months of dedicated development work.
Damian Scokin: After launching Sophia about two months ago, we are thrilled to see how customers are engaging with her, which includes. We continue discussing topics that extend beyond travel reservations. We continue refining SOFIA and enhancing her capabilities, such as incorporating customer feedback into its operation. As a reminder, SOFIA is trained on Despegar's extensive customer data, our comprehensive product inventory, and a vast array of web-based information. All of which make her a truly powerful digital traveller.
Speaker Change: After launching Sofia about two months ago, we're thrilled to see how customers are engaging with her which includes this.
Speaker Change: Discussing topics that extend beyond travel reservations, we continue refining Sofia and enhancing capabilities such as incorporating customer feedback into operating features.
A reminder, Sofia is trained on the spigots extensive customer data our comprehensive product inventory.
Past array of web based information.
Speaker Change: All of which make her a truly powerful digital travel assistant.
Damian Scokin: Later in the call, Gonzalo will discuss our latest updates to SOFIA as we continue to set the pace in this exciting area of travel. Next, I want to discuss how our customer-centric approach also enables us to maintain brand leadership across the region. Our industry-leading loyalty program, Pasaporte Despegar, remains integral to our brand identity and is another key driver of customer retention. Square, Inc. Maintains Its Impressive Growth Project
Shallow: Later in the call on shallow will discuss our latest updates to Sofia as we continued to set the pace on this exciting area of travel.
Speaker Change: Next I will discuss how our customer centric approach also enables us to maintain brand leadership across the region.
Speaker Change: Our industry, leading loyalty program.
Speaker Change: The other remains integral to our brand identity and is another key driver of customer retention.
Speaker Change: Score by supporters regatta maintained its impressive growth trajectory.
Damian Scokin: By the close of the first quarter, Total Loyalty Program membership had reached 26 million customers, representing a significant 83% year-on-year increase. Furthermore, points redemption activity continued to steadily increase. With redemptions during the quarter now exceeding 12.7% of total transactions, an increase of 5.2 percentage points versus 7.5% in the first quarter of 2023. In addition to raising loyalty, membership, and growing points of redemption, we substantially strengthened our customer loyalty, evidenced by a significant improvement in our Net Promoter Score, NPS, which rose four percentage points year-on-year to 71%.
Speaker Change: By the close of the first quarter total loyalty program membership has reached 26 million customers, representing a significant 83% year on year increase.
Speaker Change: Furthermore, once redemption activity continues to steadily increase.
Speaker Change: With redemptions during the quarter now exceeding 12, 7% of total transactions an increase of five two percentage points versus seven 5% in the first quarter of 2023.
Speaker Change: In addition to rising loyalty membership and growing point's redemption, we substantially strengthened our customer loyalty as evidenced by a significant improvement in our net promoter score NPS.
Speaker Change: Which rose four percentage points year on year to 71%.
Damian Scokin: This improvement also underscores our dedication to delivering exceptional travel experiences. Furthermore, we have been improving on this important front while simultaneously making our service model more efficient and scalable. For example, the model leverages our robust technology platform to empower customers to resolve travel-related inquiries efficiently through self-service options in a majority of cases. Innovation, as well as customer satisfaction and retention, continue to be the core to strengthening our competitive advantage and maintaining brand leadership in the region. Further evidence of our improving customer relationships is our unaided brand awareness, which consistently positions Despegar as the leading travel brand across all our operating markets, higher than both local and international competitors.
Speaker Change: This improvement also underscores our dedication to delivering exceptional experiences.
Speaker Change: Sure we have been improving on this important front, while simultaneously, making our service model more efficient and scalable.
Speaker Change: For example, the model Leverages, our robust technology platform to them.
Speaker Change: Power customers to result travel related inquiries efficiently through self service options for the majority of cases.
Speaker Change: Innovation as well as customer satisfaction and retention continues to be the core to strengthening our competitive advantage and maintaining brand leadership in the region.
Speaker Change: Further evidence of our improving customer relationships is our aided brand awareness, which consistently positions <unk> as the leading travel brand across all our operating markets.
Speaker Change: Higher than both local and international competitors industry, leading brand recognition translate into not only organic traffic, but also makes us a preferred partner to travel products suppliers.
Damian Scokin: Industry-leading brand recognition translates into not only organic traffic but also makes us a preferred partner to travel product suppliers, who also benefit from our brand strategy. In summary, the key drivers of our solid performance this quarter were our consistent focus on sharp commercial execution and further improvements in operational efficiency, coupled with our ongoing focus toward a more profitable product. Additionally, we continue to drive growth in organic trucks and further penetrate the large and high-potential B2B and wide-labeled market. As we look ahead,
Speaker Change: Also benefit from our brand strategy.
Speaker Change: In summary, the key drivers of our solid performance this quarter, where our consistent focus on sharp commercial execution and.
Speaker Change: And further improvements in operational efficiency cost.
Speaker Change: Coupled with our ongoing focus.
Speaker Change: A more profitable product mix.
Speaker Change: Additionally, we continue to drive growth in organic traffic fell.
Speaker Change: Further penetrate the large and high potential b to B and white label market segments.
Speaker Change: As we look ahead.
Damian Scokin: So for the rest of the year and beyond, we are very excited about the many growth opportunities that lie ahead. We remain firmly committed to maintaining our position as the travel technology industry's leader in profitable growth and to relentlessly pursuing excellence in all our endeavors. Continuous innovation is paramount to staying ahead of industry trends and being able to effectively navigate emerging challenges.
The rest of the year and beyond we are very excited about the many growth opportunities that lie ahead.
Speaker Change: We remain firmly committed to maintaining our position as a travel technology industry's leader in profitable growth and to relentlessly pursuing excellence in all our endeavors.
Continuous innovation is paramount to staying ahead of industry trends have been able to effectively navigate emerging challenges.
Speaker Change: Always embracing innovation, we expect to sustain our current momentum are further consolidate this market leadership.
Damian Scokin: Always embracing innovation, we expect to sustain our current momentum and further consolidate Despegar's market. I will now turn the call over to Gonzalo, who will walk you through our most recent advancements with our AI trip planner. Thank you, Damian.
Speaker Change: I will now turn the call over to <unk>, who will walk you through our most recent advancements with our AI trip planner Sofia.
Lillian: Thank you Lillian.
Gonzalo Garcia Estebarena: Before delving into our latest product update, I'd like to reflect on the valuable insights we've gained since launching SOFIA. During the past two months, SOFIA has had thousands of customer interactions, successfully providing appropriate responses in over 80% of cases. This feedback has been crucial, as it not only enhances our understanding of the most pressing travel-related issues but also identifies additional features our clients desire, ones that will make Sophia an even more indispensable travel companion. We made several significant enhancements to SOFIA during the quarter. First, we integrated Despegar's complete hotel inventory, along with related customer feedback and pricing systems.
Speaker Change: Delving into our latest product update I'd like to reflect on the valuable insights we gained in launching Sofia.
Speaker Change: During the past two months Sofia had thousands of customer interactions access fully providing appropriate responses in over 80% of cases.
Speaker Change: This feedback has been crucial as it not only enhances our understanding of the most pressing problems related issues.
Speaker Change: Also identified additional cheesecake, our client desires.
Speaker Change: <unk> will make Sofia and even more in the ethanol plant companion.
We made several significant enhancements to Sofia during the quarter first we integrated display ads complete hotel inventory, along with related customer feedback and pricing history.
Gonzalo Garcia Estebarena: This integration enables our clients to effortless research, compare, and book hotel stays in an innovative way. For example, a customer can ask Sophia about accommodations in Paris and receive more tailored suggestions based on their preferences, as well as past interactions with her. Second, we've redesigned the landing page to offer initial travel suggestions based on the user's location, coupled with inspired destinations and personalized offers derived from previous interactions with the Despegar platform.
Speaker Change: This integration enables our clients to effortlessly research compare and book hotel stay in an innovative way.
Speaker Change: For example, a customer can Noah Sofia about recommendations and Barry and receive suggestions based on their preferences as well as interactions with her.
Speaker Change: Second we redesigned the landing page to offer initial travel suggestions based on the user's location, coupled we pay destinations.
Speaker Change: Personalized offer derived from previous interactions with display ad platform.
Gonzalo Garcia Estebarena: We've also upgraded Sofia's filtering capabilities, enabling her to offer more personalized travel solutions that consider the customer's specific needs, as well as available promotions. A particularly exciting update is the enhancement of Sophia's memory. Sophia can now retain information from the interaction that she can recall later as needed to improve the conversational quality of interactions with customers and to reduce repetitive input from them. Looking ahead, we will continue enhancing SOFIA's capabilities as well as integrate comprehensive after-sales services.
Speaker Change: We've also upgraded to fees filtering capabilities, enabling inherent to offer more personalized travel solutions that consider the customer's specific needs as well as salary level promotions.
Speaker Change: Particularly exciting update is the enhancement of Sofia memory.
Speaker Change: Sophia can now retain information from the interaction that chicken recall late there as needed to improve their conversational quality of interactions.
Speaker Change: With customers and to reduce repetitive input from them.
Speaker Change: Looking ahead, we will continue enhancing these capabilities as well as integrate comprehensive after say services, we believe that our AI power solution is revolutionizing how customers interact with our platform.
Gonzalo Garcia Estebarena: We believe that our AI-powered solution is revolutionizing how customers interact with our platform. SOFIA consistently exceeds expectations by generating bespoke travel solutions rapidly. This capability not only enriches the customer experience by facilitating personalized travel planning across multiple communication modes but also integrates various travel components quite smoothly.
Speaker Change: <unk> consistently exceeded expectations by generating bespoke travel solutions rapidly.
Speaker Change: This capability not only enriches the customer experience by facilitating personalized travel planning across multiple communication modes.
Speaker Change: It also integrates various travel component quite smoothly.
Gonzalo Garcia Estebarena: The insights gained from implementing and operating SOFIA, which we intend to share in future communications, are central to continuously refining and enhancing its features going forward. Beyond SOFIA, we are utilizing AI throughout our organization to drive operational efficiency and customer service. This effort includes equipping our service agents with advanced AI tools to handle inquiries more effectively, accessing accurate information faster, summarizing customer interactions automatically, and analyzing the effectiveness of our agents, allowing us to tailor our services to better meet customer needs.
Speaker Change: The insights gained from implementing and operating Sofia, which we intend to share in future communications are central to continuously refining and enhancing her features going forward.
Speaker Change: Beyond Sophia we are utilizing AI throughout our organization to drive operational efficiency and customer service.
This effort includes equipping our service patient with advanced AI tools to Hampden inquiries more effectively.
Speaker Change: And accurate information faster.
Speaker Change: Summarizing customer interactions automatically.
Speaker Change: Licensing the effectiveness operations, allowing us to tailor our services to better meet customer needs.
Speaker Change: These initiatives have already shown promising results.
Gonzalo Garcia Estebarena: These initiatives have already shown promising results, with a significant decrease in the cost per order compared to pre-pandemic levels, while achieving higher customer satisfaction. Through our continued focus on innovation and leveraging AI technologies, we are poised to deliver unparalleled customer experiences and drive sustained business growth. Now, to provide a detailed review of our first quarter financial performance, I will pass the call to Amit.
Speaker Change: We had a significant decrease in the cost per order compared to pre pandemic levels.
Speaker Change: Cheating higher customer satisfaction.
Speaker Change: Through our continued focus on innovation and leveraging AI technology, we are poised to deliver unparalleled customer experiences and drive sustained business growth.
Speaker Change: Now to provide a detailed review of our first quarter financial performance I will pass the call to Amit.
Amit: Thank you Gonzalo.
Amit Singh: Our first quarter results are very robust and continue to demonstrate very positive growth as a result of the momentum that we gained last year. As Damian discussed, through excellent commercial execution, we effectively capitalized on the strong travel demand, especially in our key markets, Brazil and Mexico. They drove total gross bookings to $1.3 billion in the quarter.
Amit: Our first quarter results are very robust and continue to demonstrate a very positive growth trend as we invest in the momentum that we gained last year.
Anthony: Anthony discussed two excellent commercial execution, the effectively capitalize on the strong travel demand, especially in our key markets, Brazil and Mexico.
Anthony: They drove total gross bookings to one 3 billion in the quarter. This represented a solid 12% increase year over year.
Amit Singh: This represents a solid 12% increase year over year. In constant currency, this growth was much more impressive at 42% year-over-year. With that in mind, let's take a closer look at our regional performance, starting with our main market, Brazil. As Damian noted on our previous call, there has been a clear trend toward consumers prioritizing spending on services and experiences.
Anthony: In constant currency. This growth was much more impressive at 42% year over year.
Anthony: With that backdrop, let's take a closer look at our regional performance starting with our main market Brazil.
Speaker Change: As Daniel noted on our previous earnings call. There has been a clear trend towards continuous prioritizing spending on services and experiences.
Amit Singh: The shift in spending, along with our focus on delivering value to affordable package offerings and attractive financing options that continue resonating with our customers, is creating robust growth opportunities across our focus groups. Capitalizing on this favorable trend, we achieved impressive year-over-year growth and growth bookings in Brazil. During the quarter, our bookings there climbed 27% year-over-year, or a 21% year-over-year increase on an FX-neutral basis, reaching $580 million.
Speaker Change: Shifting spending along with our focus on delivering value to affordable package offerings and attractive financing option that continues resonating with our customers is creating robust growth opportunities across our focus market.
Speaker Change: Capitalizing on this favorable trend, we achieved impressive year over year growth in gross bookings in Brazil.
Speaker Change: During the quarter, our bookings declined 27% year on year or 21% year over year increase on an FX neutral basis, reaching $580 million.
Speaker Change: This outstanding performance was primarily driven by ongoing strength in package and hotel sales.
Amit Singh: This outstanding performance was primarily driven by ongoing strength in package and hotel, a direct result of our strategic commercial initiative. Additionally, as we gain more market share, we further solidify our industry-leading position in the world. Now, we turn our attention to Mexico.
Speaker Change: As a result of our strategic commercial initiatives.
Speaker Change: Additionally, as you gain more market share, we further solidify our industry leading position in Brazil.
Speaker Change: Shifting our attention to Mexico. This was our second largest market.
Amit Singh: This is our second largest market, and we are also pleased with our strong first quarter performance there, nearly replicating our growth in Brazil. Gross bookings in Mexico grew a significant 26% year-on-year on a reported basis, or 15% year-over-year on a constant currency basis, reaching $275 million for the quarter. This robust growth trajectory can be primarily attributed to the continuous increase in international package and hotel transactions and strengthening air travel. Mirroring the success achieved in Brazil, Mexico's robust non-air growth underscores the continued efficacy of our core commercial strategies, which are driving more diversified and profitable revenues. Looking at the rest of Latin America, our gross booking experienced a year-over-year decrease of 8% to $436 million for the quarter, mainly due to the FX pressures that affected ASPs, primarily in Argentina and Chile.
Speaker Change: Also pleased with our strong first quarter performance, there nearly replicating our growth in Brazil.
Speaker Change: Gross bookings in Mexico grew a significant 26% year on year on a reported basis or 15% year over year on a constant currency basis, reaching $275 million for the quarter.
Speaker Change: This robust growth trajectory can be primarily attributed to the continuous increase in international package and hotel transactions and strengthening the air travel tips.
Speaker Change: Mirroring the success achieved in Brazil, Mexico robust non air growth underscores the continued efficacy of our core commercial strategies, which are driving more diversified and profitable revenue stream.
Speaker Change: Looking at the rest of Latin America, our gross bookings experienced a year over year decrease of 8% to $436 million for the quarter, mainly due to the FX pressures that affected esp's, primarily in Argentina and Chile.
Amit Singh: But on an FX-neutral basis, growth bookings increased 74% year-on-year in this area of our business. To better capitalize on strong secular tailwinds, particularly in Brazil and Mexico, we continue prioritizing non-air sales with our commercial offerings and customer value propositions. This focus is particularly reflected in travel packages, which reached a significant 36% share of gross bookings versus 34% in the same quarter last year. As a result, non-air revenue surged past air ticket sales to reach 65% of our revenue mix.
Speaker Change: But on an FX neutral basis gross bookings increased 74% year on year in this area of our business.
Speaker Change: To better capitalize on strong secular tailwind, particularly in Brazil, and Mexico, We continue prioritizing non air sales with our commercial offerings and customer value proposition.
This focus is particularly reflected in travel packages, which reached a significant 36% share of gross bookings versus 34% in the same quarter last year.
As a result, not only of revenue surged past air ticket sales to reach 65% of our revenue mix.
Speaker Change: Analyzing our distribution channels, we observed that robust travel demand translated into a 10% year over year increase in gross bookings at our core DTC business, reaching $1 1 billion in the quarter.
Amit Singh: Analyzing our distribution channels, we observe that robust travel demand translated into a 10% year-over-year increase in gross bookings at our core B2C business, reaching $1.1 billion in the quarter. Our above-market growth is evidence that we continue gaining market share throughout the region. Moreover, our ongoing efforts to drive growth in the adjacent B2B and white labor segments have further solidified our position. These segments delivered year-over-year increases of 47% and 11% in gross bookings, respectively.
Speaker Change: Our above market growth is evidence that we continue gaining market share throughout the region.
Speaker Change: Moreover, our ongoing efforts to drive growth in the adjacent <unk> and White label segments has further solidified acquisition.
Speaker Change: These segments delivered year over year increase of 47% and 11% in gross bookings respectively.
Speaker Change: Our commitment to improving the revenue mix, while delivering unmatched value to our customers continues to pay off with the first quarter, yielding a strong 13, 4% take rate and a solid $174 million in revenue.
Amit Singh: Our commitment to improving Despegar's revenue mix while delivering unmatched value to our customers continues to pay off, with the first quarter yielding a strong 13.4% take rate and a solid $174 million in revenue. This translates to a 9% growth rate in revenue and a remarkable 36% increase in constant currency. We firmly believe that our 36 percent FX-neutral top-line growth reinforces Despegar's position as a leader in the region and one of the fastest-growing travel technology companies globally.
Speaker Change: This translates to a 9% growth rate in revenue and a remarkable 36% increase in constant currency.
Speaker Change: We firmly believe that our 36% FX neutral topline growth.
Speaker Change: <unk> position as a leader in the region and one of the fastest growing challenge technology companies globally.
Speaker Change: In line with our efforts to optimize financial performance, we remain focused on capturing efficiencies with a particular focus on <unk> growth strategy, particularly with respect to our G&A and technology expenses.
Amit Singh: In line with our efforts to optimize financial performance, we remain focused on capturing efficiencies, with a particular focus on streamlining growth strategies, particularly with respect to our GNA and technology. As a result of our improving operating leverage, we were able to deliver an adjusted EBITDA of $39 million, up 126% year-over-year, and implying an adjusted EBITDA margin of 22.4% for the quarter, versus 10.9% in the same As Damian noted, it was our highest adjusted EBITDA margin since the company's IPO in 2007.
Speaker Change: Two our improving operating leverage we were able to deliver an adjusted EBITDA of $39 million up 126% year over year and implying an adjusted EBITDA margin of 22, 4% for the quarter versus 10, 9% in the same quarter last year.
Speaker Change: As Daniel noted it was our highest adjusted EBITDA margin since the Companys IPO in 2017.
Amit Singh: As an additional point of reference, I'd like to highlight Adjusted Net Income, which we started reporting in the previous quarter. This metric aims to give our investors a clearer picture of our underlying profitability on a normalized basis by excluding largely non-recurring expenses and to help facilitate comparing our results with Despegar's. The specific adjustments made to calculate this metric are detailed in the reconciliation table of our earnings.
Daniel: As an additional point of reference I would like to highlight adjusted net income, which we started reporting in the previous quarter.
Daniel: This metric aims to give our investors a clear picture of our underlying profitability on a normalized basis by excluding largely nonrecurring expenses and to help us and Tate comparing our results with peers.
Daniel: The specific adjustments made to calculate this metric are detailed in a reconciliation table of our earnings release.
Amit Singh: For the first quarter of 2024, our adjusted net income was $22.4 million, representing a very substantial 68% year-on-year increase compared to the $13.3 million adjusted net income in the first quarter of 2023. Looking at our operating cash flow, we used $2.6 million during the quarter, which compares to $5.2 million of cash generated during the first quarter of 2023. More specifically, while capital during the quarter was approximately $8 million and roughly in line with our expenditure in 2023, we used a portion of our cash balance during the quarter to factor less of our accounts receivable in Brazil with the objective of reducing our factoring expenses.
Daniel: For the first quarter of 2024, our adjusted net income was $22 4 million.
Daniel: Representing a very substantial 68% year on year increase compared to the $13 3 million adjusted net income in the first quarter of 2023.
Daniel: Looking at our operating cash flow, we used $2 6 million during the quarter, which compares to $5 2 million of cash generated during the first quarter of 2023.
Daniel: More specifically, while capex during the quarter was approximately $8 million and roughly in line with our expenditure in 2023.
Daniel: Use a portion of our cash balance during the quarter two factor less of our accounts receivable in Brazil with the objective of reducing our factoring expenses.
Daniel: This is in line with our strategy of accretive uses of our cash on the balance sheet as we have discussed previously in our earnings call.
Amit Singh: This is in line with our strategy of accretive uses of our cash on the balance sheet, as we have discussed previously in our earnings call. For the quarter, we reported total cash and cash equivalents of $213 million, reflecting a decline of $15 million year-over-year.
Daniel: For the quarter, we reported total cash and cash equivalents of $213 million, reflecting a decline of $15 million year over year.
Amit Singh: This decrease was expected as we paid $15 billion of dividends to holders of our preferred-edge shares, almost half of which was a catch-up payment on interest that peaked in 2021. In addition, as discussed earlier, we used cash on our balance sheet to reduce factoring expenses. We anticipate rebuilding our cash balance in the second half of the year in line with cash trends observed in prior years. Our commitment to a prudent approach to capital allocation remains steadfast.
Daniel: This decrease was expected as we paid $15 million of dividends to waters off our preferred shares.
Daniel: Most half of which was a catch up payment on interest peaked in 2021.
Daniel: In addition, as discussed earlier, we used cash on our balance sheet to reduce factoring expenses.
Daniel: We anticipate rebuilding our cash balance in the second half of the year in line with cash trends observed in prior years.
Daniel: Our commitment to a prudent approach to capital allocation remains steadfast.
Amit Singh: We continue to prioritize investments in organic growth initiatives, with a particular emphasis on bolstering our B2B initiatives. A strategic focus on this new growth avenue will help fulfill our long-term vision for Latin America while positioning us for potential expansion into new markets beyond the region. Although we evaluate potential M&A targets with a specific focus on deepening Despegar's market penetration or enhancing our travel ecosystem, we remain disciplined in our approach. Any acquisition must deliver clear synergies and significantly enhance our organic growth trajectory. Lastly, a strong cash position also allows us to reduce debt and financing costs, which we also examine regularly.
Daniel: Continuing to prioritize investments in organic growth initiatives with a particular emphasis on bolstering our D to be initiated.
Daniel: Our strategic focus on this new growth Avenue will help fulfill our long term vision for Latin America.
Daniel: While positioning us for potential expansion into new markets beyond the region.
Daniel: Although we evaluate potential M&A targets with a specific focus on deepening desperate guys market penetration or enhancing our travel ecosystem, we remain disciplined in our approach.
Daniel: Any acquisition must deliver clear synergies and significantly enhance our organic growth trajectory.
Daniel: Lastly, our strong cash position also allows us to reduce debt and financing costs, which we also examine regularly.
Daniel: Looking ahead, we still have a bullish outlook on our business.
Amit Singh: Looking ahead, we still have a bullish outlook on our business. Our confidence stems from the positive trends that we continue to observe in the online travel market, as well as the success of our various strategic initiatives that are consistently driving strong revenue and profitability. We therefore maintain a revenue guidance of at least $820 million for 2024, which equates to robust annual growth of at least 16 percent. However, while our constant currency revenue growth remains far ahead of other industry players, Essex has created some headwinds for our reported revenue growth.
Daniel: Our confidence stems from the positive trends that we continue to observe in the online travel market.
Daniel: As well as the success of our various strategic initiatives that are consistently driving strong revenue and profitability.
Daniel: We therefore maintain our revenue guidance of at least $820 million for 2024, which equates to a robust annual growth of at least 16%.
Daniel: While our constant currency revenue growth remains far ahead of other industry players FX has created some headwinds for our reported revenue growth this year.
Amit Singh: That said, we still expect to be a global industry leader in reported revenue growth. Moreover, in the second quarter of 2024, we expect our reported revenue growth to accelerate from the 1Q level. Additionally, our focus on profitable growth, efficiency, and increasing operational leverage is now allowing us to raise our 2024 Adjusted EBITDA guidance from at least $150 million to now at least $155 million, which implies year-over-year growth of at least 34%. Building on our growth and revenue and exceptional adjusted EBITDA expansion, we remain firmly committed to maintaining Despegar's position as the world's fastest growing travel technology company.
Daniel: That said, we still expect to be global industry leader in reported revenue growth.
Daniel: Moreover, in the second quarter of 2024, we expect our reported revenue growth to accelerate from <unk> levels.
Daniel: Additionally, our focus on profitable growth efficiency and increasing operational leverage is now, allowing us to raise our 2020 adjusted EBITDA guidance from at least $150 million.
Daniel: Now at least Hungered $55 million.
Daniel: Which implies year over year growth of at least 34%.
Building on our growth in revenue and exceptional adjusted EBITDA expansion, we remain firmly committed to maintaining <unk> position as the world's fastest growing travel technology company.
Amit Singh: Our continued success is driven by a powerful combination of market-leading brands, proven commercial strategies, unparalleled local market expertise and supply relationships, and a relentless focus on cost. Combined with our leading technology platform and a culture of innovation, we remain well-positioned to unlock future operating leverage, maintain industry-leading revenue growth and further expand our margins for the foreseeable. Also, as anticipated, the global online travel market is experiencing solid growth, further bolstering our optimism about the long-term potential we see in Latin America and in entry markets outside Latin America. Now, I'll turn the floor over to Damian, who will provide a brief summary of today's review before we open the floor to your questions.
Daniel: Our continued success is driven by a powerful combination of market leading brands proven commercial strategy.
Daniel: Parallel local market expertise and supplier relationships and a relentless focus on cost efficiency.
Daniel: Combined with our leading technology platform and a culture of innovation, we remain well positioned to unlock future operating leverage maintain industry, leading revenue growth and further expand our margins for the foreseeable future.
Daniel: Also as anticipated the global online travel market is experiencing solid growth further bolstering our optimism about the long term potential we see in Latam and in engine markets outside Latin America.
Daniel: Now I'll turn the floor over to Daniel who will provide a brief summary of today's review before we open the floor for your questions. Thank you.
Daniel: Thank you Amit to conclude it is evident that our first quarter results were solid and aligned to our long term goals representing significant progress for this big are once again.
Damian Scokin: Thank you, Amit. To conclude... It is evident that our first quarter results were solid and aligned to our long-term goals, representing significant progress for Despegar once again. Our continued success is the result of discipline and rigorous execution of our well-defined growth strategy. Our deep local market knowledge, coupled with commercial excellence, strong brand presence, and leading-edge technology platforms, were instrumental in driving exceptional performance against this quarter. Discourse Trends.
Daniel: Our continued success is the result of discipline and rigorous execution of our well defined growth strategies.
Daniel: Our deep local market knowledge, coupled with commercial excellence strong brand presence and the leading edge technology platforms.
Daniel: Tremendously in driving exceptional performance again this quarter.
Daniel: These core strengths continue to bolster our competitive advantage as we strategically leverage our brand across the region to expand our b to C as well as b to B and white label offerings.
Damian Scokin: We continue to bolster our competitive advantage as we strategically leverage our brand across the region to expand our B2C as well as B2B and wide-ranging offers. Our key strategic objectives continue to be expanding package revenue, driving direct traffic through our established portfolio of high-performing apps, and nurturing the continued success of our loyalty program. All of this will be achieved while maintaining a highly competitive cost structure. Accordingly, we are firmly committed to delivering sustained top-line growth while further increasing operating leverage.
Daniel: Our key strategic objectives continue to be expanding package revenue driving direct traffic through our established portfolio of high performing apps.
Daniel: Three the continued success of our loyalty program.
Daniel: This will be achieved while maintaining a highly competitive cost structure.
Daniel: Accordingly, we are firmly committed to delivering sustained top line growth, while further increasing operating leverage.
Damian Scokin: It is important to also reiterate our excitement about SOFIA and our intention to build on the early success of our innovative digital travel platform. Sofia represents a paradigm shift in the travel booking experience, a future characterized by efficiency, personalization, adaptability, and a highly interactive user experience. We look forward to keeping you apprised of Sophia's latest innovations and functionalities as they are introduced to the market. With that, let's open the floor for questions.
Daniel: It is important to also reiterate our excitement our Sofia and our intention to build on the early success of our innovative digital travel assistance.
Sofia represents a paradigm shift in the travel booking experience.
Daniel: Future characterized by efficiency personalization adaptability and a highly interactive user experience. We look forward to keeping you apprised of Sofia latest innovations and functionality as they are introduced to the market.
Daniel: With that let's open the floor for questions.
Speaker Change: Thank you at this time, we will open the floor for your questions. As a reminder, you can also submit your questions online by using the Q&A function of the webcast platform. Your first question comes from Andrew Ruben with Morgan Stanley.
Operator: At this time, we will open the floor to your questions. As a reminder, you can also submit your questions online by using the Q&A function of the webcast platform. Your first question comes from Andrew Ruben of Morgan Stanley. Your line is live. Please state your question.
Speaker Change: Your line is live please state your question.
Hi, Thanks, very much further question and congrats on the results two items, if I may maybe the first on the revenue side.
Andrew R. Ruben: Maybe the first on the revenue side. I made you mentioned in 2Q you expect to see a revenue acceleration looking at the guidance. It implies there's going to be a pickup as we get through the year. So I'm curious if you could help us break down some of the drivers, how you're thinking about what countries can contribute to the pickup, whether it's whether it's consumer facing or anything on B2C, anything on FX, just anything to really help us bridge the acceleration.
Andrew R. Ruben: I mean, you mentioned in <unk>, you expect to see a revenue acceleration looking at the guidance. It implies there's going to be a pick up as we get through the year. So I'm curious if you could help us break down some.
Andrew R. Ruben: Some of the drivers how youre thinking about what countries can contribute to the pick up whether it's <unk>.
Andrew R. Ruben: Whether its consumer facing or anything on b to C. Anything on FX, just anything to really help us bridge to the acceleration and then the second point would be more on the business. We see the apps penetration continues to tick up increasing I think it was.
Andrew R. Ruben: And then the second point would be more on business. We see the app penetration continues to pick up, increasing I think it was 13% year on year. So it's sizable gains, and just trying to get an understanding of what you're doing on the commercial side or marketing or what you attribute to
Speaker Change: At 13% year on year, so sizable gains there just trying to get an understanding of what you're doing on the commercial side or marketing or what you attribute.
Speaker Change: This significant step up in the App to that'd be very helpful. Thank you.
Damian Scokin: Hi Andrew, this is Damian. Thank you very much.
John: Hi, Andrew This is John Thank you very much.
Speaker Change: In terms of the revenue pickup.
Damian Scokin: In terms of the revenue pickup, that's, as you recall, very consistent with what we said last We not only see an increasing growth trend in the B2B business with the pipeline of deals that we're very close to announcing, but we also see a trend of the market remaining strong and even increasing very solidly in Brazil and Mexico. That's the basis of our budget. And we see that reflected in the current market conditions and the perspectives we see going forward.
Speaker Change: As you recall very consistent with what we said last time, we not only see.
John: An increasing growth trend in the <unk> business with the pipeline of deals that were very close to announce but we also see a trend of the market.
John: <unk> strong I mean, we're increasing very solidly in Brazil and Mexico.
John: The bases of our budget and we see that reflected on the current market conditions and the perspectives, we see going forward.
Damian Scokin: As for the app, as you know, there's a lot going on. We're really excited about how the app is performing in many dimensions. And it's the result of many actions taken. Obviously, how user-friendly our app has become has a lot to do with the type of offers and the push notifications we are able to tailor to each consumer. And we expect much more news on that front, too. The important thing about that is not only the increased loyalty interactions with customers, but obviously, you see that reflected in our customer acquisition costs, which will come further down as long as the app continues to gain penetration.
John: As you know there is a lot of things going on we're really excited about how the app is performing in many dimensions.
John: Sales of many actions taken.
John: Obviously.
John: Ooh user friendly our App has become this.
John: A lot due of the type of all florist and push notifications, we're able to tailor to each consumer.
John: And we expect much more news on the upfront to the important think although that is not only the increase loyalty interactions with customers are those you will see that.
John: Reflecting on our customer acquisition cost that will come further down as long as the App continues to gain penetration.
John: Yes.
Damian Scokin: Great. And maybe just even a quick follow-up in terms of Sophia, how are you seeing the consumer engage between the app and the desktop? And any early indication of what type of queries, interactions, searches, anything that you've noted or has surprised you in terms of that uptake?
Speaker Change: Great and maybe just even a quick follow up in terms of Sofia. How are you seeing the consumer engage between the app and desktop and any early indication on what type of queries interaction searches anything that you've noted are as surprised you in terms of that uptick.
Speaker Change: Yes.
Gonzalo Garcia Estebarena: Yes, this is Gonzalo. So, uh, many people tend to use Sophia in the app. So, I would say it's very consistent with what Damian was saying before, in terms of the preference by groups and channels, let's say for users in general, they prefer to do much of the browsing and the understanding of where they want to go in the app, even when some of them tend to then move to the desktop to convert in the normal flow. So FIIA is much more exploratory.
Speaker Change: Hello So.
Speaker Change: Mainly people tend to use the Sofia in the App.
Two I would say, it's very consistent with what <unk> was saying before.
Speaker Change: In terms of the preference.
Speaker Change: Bye bye.
Let's say Fortunately the user seeing generally prefer to do much of the browsing and their understanding of why do they want to go in the App, even when some of them tend to then move to the rest of combating the normal flow Sofia is much more exploratory.
Gonzalo Garcia Estebarena: In most cases, people prefer to use it in the app, and what we have seen and that has surprised us is that our users constantly surprise us in terms of trying to use features that have not yet been developed. For example, at the beginning, when we initially launched SOFIA only for flights and some initial recommendations on destinations, people would ask about hotels. Now that hotels are available, people ask a lot about after sales. We have only a very small beta version and after sales service, and people always try to use the next thing that is not yet available. It's amazing how users are getting used to or accepting this technology as being a given, and they normalize the fact that they expect the assistant to be able to do the next amazing thing very soon.
Speaker Change: In most cases people decide to use it.
In the App and <unk>.
Speaker Change: We have seen and that surprised us is that.
Speaker Change: They constantly our user surprised us in terms of trying to use features that have not yet been developed at the beginning when we launched Sofia only for flight.
Speaker Change: And some initial recommendations from destinations people with us come out with hotels now that hotels are available.
Speaker Change: Ask a lot about and after sales.
Speaker Change: We have only one very small bit of Arizona and after sales service and people always try to use the next thing that is not yet.
Speaker Change: They are making how are you.
Speaker Change: Users are getting used.
Speaker Change: Or accepting this technology is being uneven.
Speaker Change: They normalized the fact that they expect the system to be able to do that the next amazing thing very soon.
Operator: That's interesting, Collar. Thank you both.
Speaker Change: That's interesting color. Thank you both.
Speaker Change: Yeah.
Operator: Your next question comes from Naved Khan with B. Reilly Securities. Please proceed with your question.
Speaker Change: Your next question comes from <unk> Khan with B Riley Securities. Please proceed with your questions.
Speaker Change: Yes, Thanks a lot.
Naved Ahmad Khan: Yeah, thanks a lot. Maybe just on the guidance, what are you assuming in terms of exchange rates or currencies when you give this guidance? And what are you assuming in terms of organic growth rates or the underlying growth rates? That's one.
Maybe just on the on the guidance.
Speaker Change: What are you assuming in terms of exchange rates on currencies. When you gave the guidance.
Speaker Change: And what are you assuming in terms of the organic growth rates.
Speaker Change: Are the underlying brokerage that's one.
Speaker Change: The second question I had was just on the cost side. So.
Amit Singh: The second question I have is just on the cost side. So seeing really nice improvement in or leverage in technology, DNA, is that a baseline we should be working off of as we model out? And about the factoring, sort of. This is a question for you.
Speaker Change: Seeing really nice improvement in.
Speaker Change: Our low resin technology.
Speaker Change: DNA.
Speaker Change: Is that a baseline we should be working off of as we model out.
Speaker Change: And about the factoring.
Speaker Change: Turning to expenses you are trying to reduce.
Naved Ahmad Khan: What is the cost of the factory? What is the expense that you are trying to reduce? Are the savings going to continue to kind of build from here, or give us your thoughts in terms of how we should think about the factory next year?
Speaker Change: The savings are going to continue to kind of build.
Speaker Change: From here or.
Speaker Change: Can you give us your thoughts in terms of how we should think about the factoring expense.
Amit Singh: Sure. Anyways, how are you?
Speaker Change: Sure.
Amit: How are you this is amit.
Speaker Change: So let me first start with the.
FX part as you had discussed in the last earnings call.
Amit Singh: This is Amit. So let me first start with, you know, the effects part. As we discussed in the last earnings call, especially this year, and we discussed this during our prepared remarks as well, this year we do have significant FX headwinds, but it's as expected, you know. We don't specifically lay out in our guidance our FX expectation for the full year. But you should see, you know, our overall reported revenue growth trend, as we discussed last time, starting below that 16% mark in the first quarter and then picking up Some of that is helped with as FX headwinds tamper down a little bit, plus a lot of B2B initiatives start kicking in, as Damian mentioned. So that's on the FX.
Speaker Change: Especially this year and we discussed this during our prepared remarks as well this year.
Speaker Change: We do have.
Speaker Change: Significant FX headwinds.
Speaker Change: But it's as expected.
Speaker Change: Specifically laid out in our guidance on FX expectation for the full year.
Speaker Change: But you should see our.
Speaker Change: Overall reported revenue growth trend as we had discussed last time, starting below that 16% Mark in the first quarter and then picking up in the second half some of that has helped as FX headwinds.
Speaker Change: Tampered down a little bit plus a lot of b to be initiated start kicking in as <unk> had mentioned.
Amit Singh: On organic and inorganic growth, as you know, right now, our growth is 100% organic. You know, the last acquisition we did was a while ago. So, overall, you know, our growth trajectory until now and year on has been, and the guidance and all have been very much focused on that. In terms of cost, we continue to drive very strong cost leverage. As you have seen in our first quarter, now our adjusted EBITDA margin is the highest since our IPO.
Speaker Change: So that's on the FX on organic inorganic as you know right now our growth is 100% organic in the last acquisition. We did was a while ago. So so overall.
Our growth trajectory.
Speaker Change: Until now <unk> has been and the guidance and all has been very much focused on that.
Speaker Change: In terms of in terms of cost.
Speaker Change: We continue to drive very strong cost leverage.
Speaker Change: You have seen in our first quarter now our adjusted EBITDA margin is the highest.
Speaker Change: Since our IPO.
Speaker Change: Obviously.
Speaker Change: No.
Amit Singh: Obviously, if you look at our guidance, our overall guidance for the full year is below, in terms of adjusted EBITDA margin. It's below what we reported in the first quarter because what we are doing is, while we are driving very strong adjusted EBITDA margins, we also have plans to invest. So we still feel very comfortable getting to a very normalized adjusted EBITDA margin of that, you know, 20% and then eventually getting to that mid 20%. But until then, we plan to do this gradually while investing in our business to drive very strong long-term organic growth. And then came the coming.
Speaker Change: If you look at our guidance our overall guidance for the full year is below our and just in terms of adjusted EBITDA margin is below what we reported in the first quarter because what we are doing is while we are driving very strong adjusted EBITDA margin. We also have plans to invest in the business. So we still feel very comfortable.
Speaker Change: All in getting to a very normalized adjusted EBITDA margin of that 20% and then eventually getting to that mid 20%, but until then we plan to do this gradually while investing in our business to drive very strong long term.
Organic growth.
Speaker Change: And then coming.
Speaker Change: Coming to the.
Speaker Change: Hello, Im sorry on your factoring question.
Amit Singh: Sorry, on your factoring question. As we discussed in the past earnings call, we have strong cash on the balance sheet. Obviously, you know, we remain active in evaluating any M&A targets, but one of the very accretive uses of our cash is, as you know, we factor our receivables in, you know, especially in Brazil. And so for us, what we are doing is moving some cash to Brazil. And what that does is you'll see an increase in our account receivable, but it shows a decrease in cash, but net net, you know, in terms of total assets, there's no change.
Speaker Change: So we discussed in the past earnings call, we have strong cash and balance sheet obviously.
Amit Singh: You just see an increase in account receivable for the same amount of a decrease in cash, but it reduces our factoring expense. So even in this quarter, we don't specify an exact amount, but even in this quarter, we had a small amount of net income benefit from that strategy. And going forward, that will be our strategy going forward as well, that whenever it makes sense for us, we utilize the cash on our balance sheet to move it to Brazil, reducing our overall factoring, in turn, reducing our factoring expense and helping our net income.
Speaker Change: Main active on evaluating M&A targets, but one of the very accretive uses of our cash is.
Speaker Change: As you know the factor our receivables in.
Speaker Change: Especially in Brazil, and so for US what we are doing is moving some cash to Brazil, and what that does is you see an increase in our accounts receivable, but but it shows a decrease in cash but net net in terms of total assets. There is no change you just see an increase in accounts receivable.
Speaker Change: Yes.
Speaker Change: For the same amount of decrease in cash, but it reduces our factoring expense so even in this quarter we don't.
Speaker Change: We don't specify exact amount, but even in this quarter, we had a small amount of net income benefit from that that strategy and going forward that will be our strategy going forward as well that whenever it makes sense for us we utilize the cash on our balance sheet to move into Brazil reduce.
Speaker Change: Overall factoring in turn reducing our factoring expense and helping our net income.
Amit Singh: That's very helpful. Just to clarify something you just said in answering my question. So, you know, you talked about investments kind of affecting margins from here on. So what are the areas you're investing in? And did you, you kind of talked about the top line. Grooving in the second quarter, but what should we think about David Dahl?
Speaker Change: That's very helpful. Just to clarify something you just said in answering my question. So.
Speaker Change: You're talking about investments.
Speaker Change: Fair enough.
Speaker Change: <unk> margins from here on.
Speaker Change: What are the areas of.
Speaker Change: Interesting and did you I mean, you've kind of talked about top line.
Speaker Change: Improving in the second quarter, but how should we think about EBITDA.
Amit Singh: Yeah, so investments, you know, of course, we are investing across the board, you know, but the main areas of investment remain B2B. And a lot of these investments are also to position ourselves for long-term growth, establishing our basis where we can drive B2B at a very strong rate over the very long term. But at the same time, investments in our B2C capabilities as well, like how do we further solidify our position in the markets that we are already in? Then investments in our loyalty program. All of these are investments right now, but they will eventually help us solidify our long-term growth rate.
Speaker Change: Yes, so investments.
Speaker Change: Of course, we are investing across the board.
Speaker Change: But the main areas of investment remain b to B.
Speaker Change: And a lot of these investments are also to position ourselves for.
Speaker Change: Long term growth, establishing a basis, where we can drive to be at a very strong rate over the very long term.
Speaker Change: But at the same time investments in our <unk> capabilities as well like how do we further solidify our position in the markets that we are already in.
Speaker Change: And then investments towards our loyalty program. All of these are investments right now, but they eventually help us solidify our long term.
Speaker Change: Growth rate.
Amit Singh: And then EBITDA for the second quarter, what should we think about that? We don't specifically, as you know, guide to guide to EBITDA or margin on a quarter to quarter basis. But what I can say is we feel very confident about the full year EBITDA guidance that we just raised this quarter.
Speaker Change: And then EBITDA for second quarter, how should we think about that.
Speaker Change: We don't specifically as you know guide to guide to EBITDAR margin for quarter to quarter basis, but what I can say is we feel very confident about the full year EBITDA guidance that we just raised in this quarter.
Speaker Change: Yes.
Amit: Thank you Amit.
Operator: Your next question comes from the line of Kevin Kopelman from TD Cowen. Please proceed with your question.
Speaker Change: Thank you.
Speaker Change: Your next question comes from the line of Kevin Kevin Kopelman from TD Cowen. Please proceed with your questions.
Operator: This is Jacob. Can you share what the principle of well-partnership comprises of your overall business? I made a comment on how large the customers are, and then you had mentioned the expanding markets. What markets are you looking into, and any progress there?
Speaker Change: Jacob.
Thanks for taking my question can you share what percent of global partnership with.
Speaker Change: Prices overall.
Speaker Change: Sure.
Speaker Change: Customers are in.
Speaker Change: Mentioned expanding markets what markets are you looking into any progress there.
Speaker Change: Jacob you're breaking up quite a bit would you mind repeating that question.
Speaker Change: Yeah.
Operator: Jacob, you're breaking up quite a bit. Would you mind repeating that question? Yes, yes. Can you hear me? Yeah, this is better. This is Brett.
Speaker Change: Yes, Yes can you hear me alright.
Speaker Change: Yes, this is better.
Operator: I was asking what percent of the Lavella partnership of the overall B2B business and how big your customers are, and then expanding the market. But that looks at markets, maybe what markets you're looking into in any part of the sector that you do.
Speaker Change: Okay.
Jacob: I was asking.
Jacob: Percent Labella partnership.
Overall.
Jacob: The business and how big.
Jacob: Our customers are and that.
Speaker Change: Oh expanding market.
Speaker Change: Some markets, maybe what markets youre looking into that.
Speaker Change: Thank you.
Damian Scokin: Yeah, Livelo, it's not only a great partner, but it's a very big revenue opportunity for Despegar, given that it's the largest loyalty program in Brazil and we are the leading travel agency. So there's a lot of room for joint cooperation at a wide level in the business, even exploring options for the exchanging points between their loyalty programs and pasaportes. So there's ample growth opportunity there. We're just scratching the surface As for B2B, as we mentioned in the past, we are surprised by the traction the business is gaining in all different geographies.
Yeah.
Speaker Change: <unk>.
Speaker Change: It not only good partner body.
Speaker Change: Very big.
Speaker Change: Revenue opportunity for this big item given that <unk> is the largest loyalty program in Brazil, and we are the leading travel agencies.
Speaker Change: Laura room for.
Speaker Change: Joining corporation.
Speaker Change: Yes.
Speaker Change: White label business, you've been exploring options on.
Speaker Change: Exchanging points, you're meeting their loyalty programs on behalf of all of this all of this ample growth opportunities that we're just scratching the surface as do we as we mentioned in the past.
Speaker Change: We are surprised by the traction there because you gave me all different geographies. Obviously, we are focusing on the largest markets, Brazil, and Mexico and started to respond to some equally from people beyond Latin America into exploring partnership models in other geographies.
Damian Scokin: Obviously, we are focusing on the largest markets, Brazil and Mexico, and have started to respond to some inquiries from people beyond Latin America about exploring partnership models in other geographies. So I would say that the geographic footprint of our world is well diversified and we have started to look at opportunities beyond Latin America.
Speaker Change: So I would say that the geographic footprint of our work is well diversified and started to look to opportunities beyond Latam.
Speaker Change: Okay.
Speaker Change: Yeah.
Operator: Your next question comes from Joao Soares with Citi. Please go ahead with your questions.
Speaker Change: Your next question comes from Joe Al Suarez with Citi.
Please go ahead with your questions.
Speaker Change: Yeah.
Joo Pedro Ribeiro Soares: Thanks, thanks so much. Guys, I just wanted to dive a little bit deeper into the short-term plan. You're clearly gaining a large share when you compare the gross bookings trends versus the largest peers in the sector. So I'm just wondering, I mean, what level of market share you are at currently in Brazil? And I'm trying to understand a little bit of what's happening in terms of the supplier side with the airline companies. If I could get an update there, we understand there's some consolidation happening. And yeah, those are all things.
Speaker Change: Thanks, so much.
Speaker Change: Guys I just wanted to check.
Speaker Change: Little bit deeper into the church in France.
Speaker Change: We're clearly gaining share when you compare your results.
Speaker Change: Ross bookings trends.
Speaker Change: Versus the largest peers in this sector. So I'm just wondering I mean, what happens.
Speaker Change: What level of market share.
Speaker Change: Are you at currently in Brazil.
Speaker Change: And trying to understand a little bit of what's happening in terms of the supplier side.
Speaker Change: With the airline companies if I could get an update there we understand there is some consolidation happening.
Speaker Change: Yes.
Speaker Change: Thanks.
Damian Scokin: Jacob, thanks a lot. This is Damian.
Speaker Change #100: Jacob Thanks, a lot. This is <unk> I want to highlight a few things first of all as you said, we're growing much more rapidly than our competitors, but the important thing is we are growing profitability and in terms of potential.
Speaker Change #101: Even as you know, we do not disclose our market share by country, but if you look at our overall size visa.
Speaker Change #101: The total Latin American travel market, we are still really small so in comparing.
Damian Scokin: I would highlight a few things. First of all, as you said, we're growing much more rapidly than our competitors. But the important thing is we're growing profitably. And in terms of potential, even as you know, we do not disclose market share by country. But if you look at our overall size, vis-a-vis the total Latin American travel market, we're still really small. So in comparing our growth potential, our profitable growth potential, what still lies out there for us to grow in Latin America, it's not an issue of market share. We can be 10 times larger and still have ample room for growth. And I will.
Speaker Change #101: Our growth potential in our profitable growth potential what still is out there for us to grow in Latin America.
Speaker Change #101: It's not an issue.
Chad: Market Chad.
Chad: We can be 10 times larger and still are.
Chad: We have ample room for growth.
Amit Singh: And I will add to that, you know, if you look at, let's say, you know, just Brazil, our top market, not just our top line growth but also, we don't go into individual profitability by region, but our profitability in Brazil is also improving. So while we are growing much faster than peers, we're also doing that while materially improving our profitability. So we feel very good about how the company is moving from here, you know, not just in Brazil but other regions as well, as we are organically consolidating the market.
Speaker Change #103: And I'll add to that if you look at let's say just Brazil, our top market. If you look at not just our top line growth, but also we don't Greg going to individual profitability of the region, but our profitability in Brazil is also improving so while we are growing much faster than peers. We're also do.
Speaker Change #103: That while materially improving our profitability. So we feel very good about how the company is moving from here not just in Brazil, but other regions as well as we are organically consolidating the market right.
Amit Singh: Right, you know, with our scale and our commercial strategies, we are giving us the opportunity to be, you know, the number one market player in all the regions. And we expect this trend to continue in the coming quarters and years.
Speaker Change #103: Our scale and our commercial strategies.
Speaker Change #103: This is giving us the opportunity to be the.
Speaker Change #103: The number one market player in all the regions.
Speaker Change #103: And then we expect this trend to continue in the coming quarters and years.
Speaker Change #103: Yeah.
Joo Pedro Ribeiro Soares: Okay, just a quick follow up. One thing that you commented on, Amit, that's based on the factory side, right? You're utilizing cash from other geographies and placing it in Brazil to reduce the factory expense. I'm just wondering about the relationship with financial partners, both to reduce that factor and to pass that receivables to a financial partner and also function as possibly a sales enabler, given how dependent on credit the consumers are in Brazil. So I'm just wondering how you guys are seeing those opportunities, right, and to potentially reduce those factor expenses as well.
Speaker Change #104: Okay, just a quick follow up.
Speaker Change #105: One thing to do.
Speaker Change #106: You commented on.
Speaker Change #107: And touch base on the on the factory side right you're utilizing.
Speaker Change #107: Cash from other geographies and placing in Brazil to reduce the factoring expenses.
Speaker Change #108: Just wondering.
Speaker Change #108: About that relationship with with financial partners, both too I think.
Speaker Change #108: Reduce that factory to past that those receivables to a financial partner and also function as possibly a sales enabler.
Speaker Change #109: Given how definitive credit the consumers aren't in Brazil. So I'm just wondering how you guys are seeing those opportunities.
Speaker Change #110: Right and to reduce potentially those two spectrum instances as well.
Amit Singh: So we have a very, call it, you know, and again, we don't provide specific targets for it, but internally, we have a very strong path laid out or strategic path laid out on how to reduce our overall cost of installment and even credit card processing fees. And there are a lot of things that go into it.
Speaker Change #111: So we have a very good call it and again, we don't provide specific targets for it but internally we have a very strong bath laid out our strategic path laid out how to reduce our overall cost of installment and even credit card processing fees and Theres a lot of things that go into it.
Speaker Change #111: Individual country leaders managing the relationship with these financial partners in each countries, but we also have a global strategy, where we are working as we're gaining scale. For example, it is helping us or it will help us even more going forward, where we can direct more and more volume towards specific.
Amit Singh: You know, we have individual country leaders managing the relationship with these financial partners in each country. But we also have a global strategy where we are working. As we gain scale, for example, it is helping us, or it will help us even more going forward, where we can direct more and more volume towards specific partners, which in turn will help us drive lower rates. So our growth and market share gain in the future will potentially also help us reduce, you know, the overall factoring expense rate, so to speak.
Speaker Change #111: Partners, which in turn will help us drive lower rates, so our growth in market share gain in the future will potentially also help us reduce.
Speaker Change #111: The overall factoring expense rate so to speak and at the same time, while we are while we have a strong.
Amit Singh: And at the same time, while we have a strong position of cash on the balance sheet, we'll utilize that cash to reduce our factoring expense wherever it makes sense to, in the end, help or improve our overall net income.
Speaker Change #111: Position of cash on balance sheet will utilize that cash to reduce our factoring expense.
Speaker Change #111: Wherever it makes sense to India.
Speaker Change #111: Our or improve our overall net income.
Amit Singh: Right, and just to finalize, sorry to make just one last point. I mean, as you go into B2B, Shreyok, you should also naturally expect that it doesn't require that much factoring as well, right?
Speaker Change #112: Right and just to finalize sort of searching to.
Speaker Change #113: Just one last point I mean as you go into <unk>.
Speaker Change #112: Sure.
Speaker Change #112: Should also naturally expect.
It doesn't require that much factoring as well right.
Speaker Change #112: Okay.
Amit Singh: That's true. It does not require as much factoring expense. And the other thing also is, as you know, the interest rates are trending downwards, and we'll see where they go, but the trend is more positive. So that should help us reduce factoring expense going forward as well.
Speaker Change #114: That is true it does not require as much factory in Spain and the other thing also is as you know the interest rates are trending.
Speaker Change #114: Downward and we'll see where they go but the trend is more positive so that should help us reduce factoring expense going forward as well.
Speaker Change #115: Perfect. Thank you.
Operator: Your next question comes from the line of Thomas Shinsky with Cantor Fitzgerald. Please proceed with your questions.
Your next question comes from the line of Thomas Shinskie with Cantor Fitzgerald. Please proceed with your questions.
Thomas Shinsky: Hi guys, thanks for taking my question. I guess just on Sophia a little bit. Good to see all the momentum there and the new memory storage. You know, more customer retention data should be great for the generative AI model. I guess, is there any thought to, you know, within the model, train it to recommend customers towards more of your, you know, higher-margin packages versus, you know, single accommodations? I guess, any thoughts there?
Speaker Change #116: Hi, guys. Thanks for taking my question.
Thomas Shinskie: I guess just on Sofia, a little bit good to see all the momentum there and the new memory storage.
Speaker Change #118: More customer retention data should be great for the generative AI.
Speaker Change #119: Or I.
Speaker Change #119: I guess is there any thought to.
Within the model train it to recommend customers towards more of your higher margin packages versus single accommodations I guess any thoughts there.
Gonzalo Garcia Estebarena: Yes, hi. So thanks for the question. Basically, the answer is yes, of course.
Speaker Change #119: Yes.
Speaker Change #119: Hi.
Speaker Change #120: Thanks for the question.
Speaker Change #121: Basically the answer is yes.
Speaker Change #121: Of course.
Speaker Change #121: We haven't yet launched packages because in the way we have.
Gonzalo Garcia Estebarena: We haven't yet launched packages because, basically, we have been, so SOFIA basically is trained to be able to use all of the features of our backend technology that we have already developed over many, many years and make it available in a simpler, more humane way, let's say. And the fact that our packaging solution is built on the combination of our flight and accommodation solutions means that, in terms of how we develop it, it's basically necessary in a way to explain to SOFIA how to book a flight and how to book accommodation in order for SOFIA to be ready to book a package.
Speaker Change #121: Implemented the solution basically we have been.
Speaker Change #121: So SAPHIRA basically trained to be able to use all of the features of our back end technology that we have already developed over.
Speaker Change #121: Many many years and make it available in a.
Speaker Change #121: Simpler more humane way, let's say and the fact that our packaging solution is built on the combination of our flights and acclimation solutions means that in terms of how we develop it.
Speaker Change #121: Basically.
Speaker Change #122: <unk> in a way to explain Sofia, how to book a flight and how to put kind of a combination of the north for.
Speaker Change #123: Okay to be ready to book.
Speaker Change #122: Package.
Gonzalo Garcia Estebarena: But the logic, once that is done, is exactly that one, to try to steer demand towards the more valuable products, which are definitely packages, in the same way that we currently do it within each product category. Today, when Sofia recommends any of the products within one of the categories, It does it with the same logic that our website does it, that it's basically a combination of what is potentially most attractive to the client but also that it's most profitable to us.
Speaker Change #122: And the logic once that is done.
Speaker Change #122: It is exactly that went to go to to try to steer demand towards the more by level.
Speaker Change #122: <unk>, which is definitely the packages.
In the same way that we currently do it within each product category today, when Sofia recommend any of the products they need whenever they got they already invested.
Speaker Change #122: With the same logic that our west had does is that it.
Speaker Change #122: Basically.
Speaker Change #122: A combination of what is potentially the most attractive client but also.
Most profitable to us.
Amit Singh: And then one more, if I may. Just a bit of an increase in accounts receivable, kind of a headwind to cash flow from operations. Just wondering the seasonality on that and, you know, how we should be thinking about accounts receivable throughout the rest of the year. Thank you.
Speaker Change #124: Awesome. Thanks, and then one more if I may just a bit of an increase in accounts receivable kind of kind of a headwind to cash flow from operations.
Speaker Change #125: Just wondering the seasonality on that.
Speaker Change #126: How we should be thinking about accounts receivable throughout the rest of the year. Thank you.
Amit Singh: Yeah, like we mentioned, account receivables do go up as we factor less and move cash. So that's sort of a strategy, as we were discussing earlier. Account receivable overall should trend in the same direction as bookings are trending throughout the whole year. So I wouldn't see, I wouldn't expect. Outside of our specific strategies to reduce factoring, the normalized account receivable growth should trend similar to the bookings growth trend.
Speaker Change #127: Yes, like we mentioned a calendar vehicles do go up as the VR.
Speaker Change #128: We are factoring less and move cash.
Speaker Change #128: So thats.
Speaker Change #129: Our strategy as you were discussing earlier and the calendar is usable overall should trend in the same direction as bookings are trending throughout the throughout the whole year. So I wouldn't see I wouldn't expect.
Outside of our specific strategies to reduce factoring the normalized accounts receivable growth should trend similar to the bookings growth trend.
Operator: Awesome. Thanks again, and congrats on the quarter.
Awesome, Thanks, again, and congrats on the quarter.
Tom Champion: Your next question comes from the line of Tom Champion with Piper Sandler. Please proceed with your question.
Speaker Change #130: Your next question comes from the line of Tom Champion with Piper Sandler. Please proceed with your questions.
Speaker Change #129: Yeah.
Damian Scokin: Hi, good afternoon. Thanks for taking the questions. Maybe two for Damian or Amit. First, I'm wondering if you could just flush out a little bit more of the Brazil offline sales. You referenced that in your script, and it seems like you have, [inaudible] All right, thank you very much.
Speaker Change #131: Hi, good afternoon, thanks for taking the questions maybe two.
Speaker Change #132: Q4 dominant or Amit.
Speaker Change #133: First I'm wondering if you could just.
Speaker Change #134: Flush out a little bit more of the the.
Speaker Change #133: Brazil offline sales strategy you referenced that in your script.
Speaker Change #133: It seems like you have a ton of momentum on direct traffic and with your App in your App downloads and I'm just wondering what would take you on an offline strategy I'm sure there is.
Speaker Change #133: So valid reasons behind it and then secondly.
Speaker Change #135: Just curious if you could talk about the macro and your results seem very strong.
Speaker Change #136: I'm, just trying to parse the execution versus improving market dynamics, how do you feel about the market relative to 90 days ago. Thank you.
Damian Scokin: Hi Tom, thank you very much. Two things: on the Brazilian offline initiatives, remember that we only have 11 stores at the moment. And the main strategy there is to capture a portion of what still is 50% of the market transacting offline and to accelerate the conversion of those customers into online customers. I think we mentioned on our last call, the previous one, the fact that roughly 69% of the customers who bought in our stores were customers that had not bought from Despegar before.
Speaker Change #137: Alright, Thank you very much.
Speaker Change #139: Two things on Brazilian offline initiatives remember that we have.
Speaker Change #138: Only 11 of <unk>.
Speaker Change #140: Starts at the moment.
And the main strategy there is to capture a portion of the steel is 50% of the market transacting offline and to accelerate the conversion of those customers into online customers I think we mentioned on our last call. The previous one the fact.
Speaker Change #140: Roughly 69% of the customers, who bought on our stores where customers that had not bought from this regard before so we are tapping into a new market and converting those new clients into online clients.
Damian Scokin: So we are tapping into a new market and converting those new clients into online clients. As for the macro... What we've seen so far along this is very much in line with what we plan for and our expectations is that, based on our current outlook, the performance of the business will accelerate not only on the top line, but we'll be able to capture even more operational leverage as we grow. So Outlook remains positive, perhaps a little bit more positive than 90 days ago. Thanks a lot. Our last question comes from Jed Kelly with Oppenheimer. Please proceed with your question.
Speaker Change #140: As per the macro at all.
Speaker Change #140: What.
Speaker Change #140: We have seen so far alone is very much in language.
Speaker Change #140: We planned for and our expectations ease.
Speaker Change #140: That doesn't know our current outlook the performance of the business will accelerate not only on the top line side, but we'd be able to do to capture even more operational leverage.
Speaker Change #140: Yes.
Speaker Change #140: As we grow so outlook.
Outlook remains positive.
Speaker Change #140: Positive.
Speaker Change #141: Is it even more positive that 90 days ago.
Speaker Change #142: Okay. Thanks, a lot.
Speaker Change #141: Yeah.
Speaker Change #143: Our last question comes from Jed Kelly with Oppenheimer. Please proceed with your question.
Operator: Our last question comes from Jed Kelly with Oppenheimer. Please proceed with your question.
Operator: Hey, great. Great. Thanks. Thanks.
Jed Kelly: Hey, good great. Thanks, Thanks for taking my questions. Just a couple of more just just on the investments you mentioned early earlier can you talk about how its helping you on the customer service and then just into in the Brazil market.
Jed Kelly: Realized thats one of the key markets for Airbnb can you just talk about if youre seeing any competition from them.
Jed Kelly: Just the competitive dynamics in that market. Thank you.
Gonzalo Garcia Estebarena: Yes, okay, hi. So I'll take the question on, if I answer correctly, AI in customer service. So basically, we use AI not only in the visible Sophia travel assistant but also a lot in our back office. We have several initiatives; just to mention a few of those. One, for example, has to do with the fact that, up until now, in order to be able to offer some, let's say, continuity in the conversation, when a customer called again on a follow-up call, we would have our agent create a small summary of the interaction so that the next agent would be able to pick up on the conversation easily, and that is now automatically done with an AI tool that creates the summary on the slide.
Speaker Change #145: Yes, hi.
Speaker Change #146: So I'll take the question on the parents, who correctly on customer service.
Gonzalo Garcia Estebarena: And that is currently saving us approximately 17% of the time that our nation dedicates to a specific call. So it's a very significant saving for us. And another of the opportunities that we are already capturing is the fact that we are able to use the same AI tool that understands not only the transcript of the conversation but also the tone of the client and is able to relate that to a lot of other data points that we have on that client's specific needs.
Speaker Change #147: So basically we use AI in not only in the B, if you will the Sophia.
Speaker Change #147: In our system, but also a lot in our.
Speaker Change #147: Our back office and we have several initiatives.
Speaker Change #147: Just to mention a few of those one for example has to do with the fact that.
Speaker Change #147: And up until now in order.
Speaker Change #147: To be able to offer some let's say continuity of the conversation when a customer called again.
And a follow up call.
Speaker Change #147: We would have our agent and create a small summary of the interaction so that the next stage in the world and be able to.
Speaker Change #147: Pick up on the conversation in Italy, and that is now automatically then.
Speaker Change #147: With an AI tool that creates the summary on the fly and that is currently saving us.
Speaker Change #147: Approximately 17% of the time that our nation dedicate substitute because with a very few Michigan saving prep.
Speaker Change #147: Another one of the opportunities that we are already also.
Speaker Change #147: Capturing is the fact that we are able to use also the same AI tool that understand not only the transcript of the commerce.
Gonzalo Garcia Estebarena: Like, for example, whether he has suffered a disruption in his trip; what is the current situation in terms of, for example, how many days are still before the trip and things like that to predict what the chance that this person will have a major complication.
<unk> opened a conversation, but also the tone.
Speaker Change #147: The client and it's able to relate that to a lot of other data points that we have on that client specific needs. Like for example, whether he has that further disruption in Q3.
Speaker Change #147: Yeah.
Speaker Change #148: What is the current situation in terms of how many days.
Speaker Change #148: They are still before the three of them things like that to predict what is the chance that this person will have a major obligation and especially for Brazil that is a very.
Gonzalo Garcia Estebarena: And especially for Brazil, that is a market in which lawsuits are very, very common from customers to businesses, so if there is a chance that this person will make a legal claim and it will eventually cost us significantly, we use that model that predicts all data analyzing the conversation and all the other data points to be able to, for example, prioritize that call on our waiting list of calls to be answered or emails to be responded to and even to tweak our Another one is, for example, we use that also to understand how much [inaudible] our customer agents are following our recommended, let's say, script of how to conduct the conversation during a call.
Speaker Change #148: Our marketing reach.
Speaker Change #148: Lawsuits are very very common from customers to weaknesses and if there is a chance that this person will create a legal claim and it will eventually costa finishes.
Speaker Change #148: Significantly and we use that that model I.
Speaker Change #148: I think saw that analyzing the conversation on all the other data points.
Speaker Change #148: To be able to for example, prioritize that call in our newer waiting at least of course to be answered already made to eat we responded and even to week, our commercial policies win win.
Speaker Change #148: Okay.
Speaker Change #148: And another one is for example, we used that also too.
Speaker Change #148: Understand how much.
Speaker Change #149: Uh huh.
Speaker Change #149: Our.
Speaker Change #149: Customer agents are following our.
Speaker Change #149: And recommended.
Speaker Change #150: It's a script of how to to take the conversation doing.
Gonzalo Garcia Estebarena: So the adherence to the processes that we have, what we are doing is that we are currently using our AI, let's say, supervisor to create a score on the different interactions that can then be used by human supervisors to select which calls to, let's say, create a sample of which calls they will hear and give feedback to their agents based on what the AI supervisor recommends.
Speaker Change #150: Our goal for the adherence to the processes that we have.
Speaker Change #150: What we are doing is that we are currently using our <unk>.
Speaker Change #150: Yeah.
Speaker Change #151: Let's say supervisor.
Speaker Change #151: Two.
Speaker Change #151: Create a score on the different interactions.
Speaker Change #151: That can then be used.
By humans supervisors to select which calls.
Speaker Change #151: <unk> tools.
Speaker Change #151: And then.
Speaker Change #151: Create a sample of which cause they will here.
Speaker Change #151: Back to the to their agents based on what the AI and <unk>.
Speaker Change #151: Recommended okay. So these are just some examples of what we're doing at this not only creates a much better productivity for asking the coffee side also.
Gonzalo Garcia Estebarena: So these are just some examples of what we are doing. And this not only creates much better productivity for us in the back office but also enhanced customer service where we dedicate and direct our resources to the more complicated cases. And Jack, this is Damian.
Speaker Change #151: And enhanced customer service.
We dedicate on.
Speaker Change #151: And Spiro, where our our risk.
Speaker Change #151: Our resources to the more complicated cases.
Speaker Change #151: Okay.
Damian Scokin: On the vacation rental side, first, keep in mind that this is a category that in Latin America represents today less than 15% of all searches. So it's a category that is relevant, but it's not as relevant as others.
Speaker Change #152: And Doug This is <unk> on the on the vacation rental side first keep in mind that this is a category that in Latin America represents today less than 15% of all searches so.
Speaker Change #152: The.
Speaker Change #152: Battery that is relevant.
Speaker Change #153: But as you know Thats really one that's Adams.
Damian Scokin: Even though that what I just mentioned, we're growing very strongly on vacation rentals. And that's part of the reflection of our growth on non-air bookings, which we reached an all-time high. So in the overall scheme of things, we are doing very well in vacation rentals. But more importantly, we're doing very well in the overall hotel category, which is much larger.
Speaker Change #153: Even though that is the major we're growing very strongly.
Speaker Change #153: Vacation rentals and Thats part a reflection of our growth on non air bookings, which we reached an all time high so in the overall.
Speaker Change #153: Scheme of things, we are doing very well in vacation rentals, but more importantly, we're doing very well in the overall.
Speaker Change #154: As Pat already that is much larger in Latin America.
Speaker Change #153: Yeah.
Speaker Change #155: Thank you.
Speaker Change #155: Yeah.
Damian Scokin: Ladies and gentlemen, I would now like to turn the floor back over to Mr. Scokin for any closing remarks.
Speaker Change #156: Ladies and gentlemen, I would now like to turn the floor back over to Mr. <unk> for any closing remarks.
Damian Scokin: We would just like to thank you all for your interest in Despegar and for joining our call today, and we are really looking forward to getting in touch with you again when we release our second quarter results. Thanks a lot, and take care.
Speaker Change #157: I would just like to thank you all for your interest in this pig iron for joining our call today and we are really looking forward to getting that with you Ken.
Speaker Change #158: When we release, our second quarter results, Thanks, a lot and take care.
Operator: This concludes today's conference call. You may now disconnect.
Speaker Change #159: This concludes today's conference call you may now disconnect.
Damian Scokin: I will get in touch with you again when we release our second quarter results. Thanks a lot and take care.
Speaker Change #159: Getting that with you again.
When we release, our second quarter results, Thanks, a lot and take care.
Operator: This concludes today's conference call.
Speaker Change #159: This concludes today's conference call.