Q3 2024 Despegar.com Corp Earnings Call
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Jamie: Good day and welcome to <unk> third quarter 2024 earnings Conference call. My name is Jamie and I will be the operator for today's call.
Jamie: At this time all participants are in a listen only mode. Please note that this call is being recorded.
Jamie: There will be an opportunity for you to ask questions at the end of todays presentation.
Speaker Change: Now I'd like to turn the call over to Mr. Luca Pfeifer Investor Relations. Please go ahead.
Speaker Change: Good afternoon, everyone and thanks for joining us today and.
Speaker Change: In addition to reporting unaudited 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.
Speaker Change: Best theaters should carefully read the definitions of these measures and metrics included in our press release to ensure that they understand that.
Speaker Change: non-GAAP financial measures and operating metrics should not be considered in isolation or substitute for or superior to GAAP financial measures and.
<unk> provided as a supplemental information only.
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 and are subject to a number of risks and uncertainties that could cause actual results to materially differ.
Speaker Change: Factors that may be beyond the company's control.
Speaker Change: These include but are not limited to expectations and assumptions related to the integration and performance of the businesses we acquire.
Speaker Change: For a description of these risks please refer to our filings with the US Securities and Exchange Commission and our press release.
Speaker Change: Joining us on today's call our CEO Damian skulking will kick things off with an overview of our performance in the third quarter and an update on key growth initiatives. Following Damian adoption Mackinnon, our chief of travel partners will share the latest on our <unk> efforts and then our CTO consolidator, Larry and I will walk you through the <unk>.
Speaker Change: The advancements we've made with Sofia, our AI travel assistant.
Speaker Change: Diving deeper into the financials, our CFO Amit Singh will provide a detailed review of the quarter's results.
Speaker Change: Finally, Damian will wrap up our prepared remarks before we open the floor for your questions.
Speaker Change: Please go ahead.
Damian Skulking: Thank you.
Damian Skulking: Welcome to the third quarter conference call.
Damian Skulking: We are pleased to report that our third quarter results were robust, reflecting a continuation of the positive trends we've seen through the year.
Damian Skulking: Even though during the quarter bookings declined slightly to one 3 billion. This was anticipated due to the foreign exchange headwind.
Damian Skulking: Currently in Brazil, and Mexico.
Damian Skulking: Constant currency, our gross bookings demonstrated industry, leading growth of 35% year over year underscoring their very strong fundamental strength of our b.
Damian Skulking: Our commercial efforts during the quarter were highly successful.
Damian Skulking: Turning to our record high take rate of 14, 6%.
Damian Skulking: This significant increase was driven by two key factors.
Damian Skulking: Our continued emphasis on package sales led to a 250 basis point increase year on year in package sales as a percentage of gross bookings reaching 33%.
Damian Skulking: Secondly, we saw a recovery in travel demand in Argentina, where bookings increased sequentially for the first time since the fourth quarter of 2023.
Damian Skulking: We achieved the success in part so where our ability to offer a comprehensive portfolio of payment options combined with product innovation like <unk>.
Damian Skulking: Margins in customers to pay for and collateral structures in local currency.
In line with this favorable trend total revenues for the quarter increased by 9% year over year, reaching $194 million.
Damian Skulking: Notably non air revenues represented 62% of our consolidated top line.
Damian Skulking: Further diversifying our revenue mix and in line with last year's result.
Importantly, when adjusting for foreign exchange headwind, our total revenues increased by increased <unk>, 3% year over year, highlighting again, the underlying strength of our business.
Damian Skulking: Our top line growth combined with a continued focus on operational efficiency enable us to deliver a gross margin of almost 74%.
Damian Skulking: Our strongest in display that IPO in 2017.
Key drivers of these premium cincy include cost savings and installment related expenses and credit card processing fees.
Damian Skulking: Additionally in line with our results throughout the year, we achieved additional savings in general and administrative and technology expenses.
Damian Skulking: As a result of our improving operational efficiency adjusted EBITDA increased 94% year over year, reaching $48 million a new record for the company.
Damian Skulking: Our adjusted EBITDA margin also approach, 25%, making another all time high for display ads.
Damian Skulking: These results reflect our ability to deliver profitable growth, while continuing to enhance operational leverage positioning us strongly for the future.
Damian Skulking: Also of note is the increase in adjusted net income, which rose an impressive 309% year over year, reaching $36 million for the quarter.
Damian Skulking: As a consequence adjusted earnings per share growth.
<unk> two <unk> during the third quarter of 2010 before.
Damian Skulking: From 110 in the year ago quarter.
Damian Skulking: In our core B to C segment, gross bookings reached $1 $1 billion for the quarter.
Damian Skulking: Decreasing eight 4% year earlier in line with the anticipated FX headwinds.
Damian Skulking: Despite these temporary trend.
Damian Skulking: We will remain focused on our commercial strategy centered around the higher margin packages and hotel site.
Damian Skulking: <unk> in Brazil, and Argentina, while we experienced notable success.
Our strategic focus in this market has been offering a compelling and comprehensive product portfolio alongside a market, leading financial solutions, which are integral to gather the seashells and court cases.
Damian Skulking: Eric.
Speaker Change: In our <unk> segment.
Continued to see strong growth trends that have remained steady throughout the year.
Speaker Change: <unk> gross bookings, which include our wide level segment and comprehensive technology solutions or <unk>.
Online and offline travel agencies grew by 3% year over year and now account for almost 19% of our total gross bookings.
Speaker Change: We are pleased with the sustained growth in <unk>, which reflects the strength of our technological platform and the successful ramp up of new partnerships with leading brands plus.
Speaker Change: Positioning us for continued growth in this segment.
Speaker Change: During the quarter, we achieved another significant milestone as we redefine our long term commercial relationship with Expedia group.
Speaker Change: We're excited to announce the signing of a new 10 year lodging outsourcing agreement with Expedia.
Speaker Change: To take effect on January 1st 2025.
Speaker Change: These partnerships not only enhances the collaboration between our companies, but also unlocks.
Speaker Change: As a growth opportunity for both parties.
Speaker Change: Under this agreement <unk> will further optimize lodging supply focusing on key initiatives such as our <unk> White label software accessories, and M&A strategies, while also expanding our directly source hotel inventory.
Speaker Change: Outside Latin America.
Speaker Change: The partnership also provides this began with.
Speaker Change: With greater prithivi, too far with new strategic alliances and pursue business in complementary segment positioning us to further strengthen our market presence across the region and beyond.
Speaker Change: This collaboration builds on our combined strength.
Speaker Change: <unk>, leading technology platform and extensive customer base and its previous vast global lodging supply.
Speaker Change: We believe this enhanced partnership reinforces our competitive mode, and we foster new growth opportunities for both companies over the next decade.
Speaker Change: Additionally, another key financial benefit of this new agreement is that the previously recorded 155 million paid to our contingent liability on the balance sheet will now be amortize over 10 years.
Speaker Change: Significantly improving our net asset position.
We are thrilled to embark on this new phase of our relationship with Expedia and the evolution of the partnership underscores our commitment to delivering innovative.
Speaker Change: Customer centric solutions.
Speaker Change: Further solidifies our position as a leading travel technology company.
Speaker Change: In our Asia remains at the heart of this asset.
Speaker Change: <unk> this year by the launch of our Adi power travel assistant Sofia.
Speaker Change: Since its debut in March Sofia capabilities have evolved significantly today the system allows customers to seamlessly browse.
Speaker Change: Both <unk> and wholesale services directly within the compensation pill.
Speaker Change: This computation on approach and <unk>.
As the user experience.
Speaker Change: Offering a more personalized and efficient way to plan and book travel.
Throughout this recent quarter, we made notable advances in Sophia after sales support capabilities as well.
Speaker Change: Customer can now easily make bus booking quite as to the Sofia, resulting in a reduction in cost we call centers resolutions.
Speaker Change: We've introduced a creature that enables customers to browse.
Speaker Change: Therefore, indexation history allows.
Speaker Change: Allowing the user to manage multiple distinct carbon conversations in pilot at all within the same tool.
Speaker Change: This not only improves customer satisfaction, but also reduces friction in the travel planning process.
Speaker Change: Further Testament of this improvement is our NPS net promoter score, which reached 71, 1% one of our highest scores for the quarter.
Speaker Change: While these advances are in breakeven narrow right. The most significant development regarding Sofia is our ability to operate as a software as a service solution to all of our business partners.
Speaker Change: As recently announced we signed our first software as a service agreement and we are incredibly excited about this new growth Avenue.
Speaker Change: This strategic move opens up opportunities for <unk> to leverage <unk>.
Speaker Change: Hi technology.
Paul: It's Paul.
Paul: Allowing our b to B, a white label partners.
It is from Sophie us cutting edge capabilities.
Our goal is to.
Paul: Integrate software into our partners' platforms effortlessly, making it pays out a resource or reaching.
Reaching data ecosystem.
Elevating the customer experience.
Paul: It will also be a growing source of recurring revenue and enable us to further diversify our revenue streams.
Later in the call shallow will provide more details on this exciting new product offering.
Paul: I would like to highlight our loyalty program.
Paul: This big data, which remains a key pillar of the value proposition, we offer our customers in the quarter. The program grew by more than.
Paul: 50% year over year, reaching a milestone of 30 million loyalty members.
Paul: The impact of our loyalty program provides customers with the ability to support the points on every transaction booked through this figure out while also accumulating loyalty points for hotel and air.
Paul: Airline programs.
Paul: Luann accumulation significantly enhances the benefits and appeal of our loyalty program, making it more attractive to frequent travelers.
Paul: An important indicator of the program's success is a continued increase in redemption rates in the third quarter, 12% of volatile sectors were completed using bus support the points demonstrating the growing value customers place on their rewards the yen through this big items in that.
Paul: Initial dollar loyalty program, our mobile lab plays a crucial role in enhancing the overall customer experience.
Paul: We continuously refine the app to improve their travel search on booking process, which in turn drives cross selling opportunities with customer engagement.
Paul: Repeat booking rates.
Paul: During the quarter, the app downloads increased 47% year over year, reaching 19 million total downloads. Furthermore, the app based on sections now account for 51% of our total bookings underscoring the growing importance of our mobile.
First approach and its ability to drive organic traffic.
Paul: Again this quarter, we have made significant progress towards being the preferred choice for travelers booking in Latin America, while also expanding our margins to drive profitable growth and create additional shareholder value.
Paul: We're also laying the groundwork for continued future industry, leading growth through several exciting new initiatives, which say selling one silo will discuss shortly.
Speaker Change: These initiatives represent significant opportunities.
Our momentum and drive long term value for both our customers.
Albert.
Albert: I will now turn the call over to John who will walk you through our latest b to b initiatives on white label partnerships.
John: Thank you Damian and good day everyone.
I'm excited to share our latest advancement in the <unk> segment, which continues to experience a remarkable growth to.
John: To recap our B to B segment includes both our white label operations.
John: <expletive> ecosystem, providing online and offline travel agencies with access to our extensive drilling inventory.
John: As outlined in previous earning calls we remain focused on our robust commercial strategy that leverage our top tier technology, our local expertise.
Approach consistently delivers exceptional value to our partners, while strengthening our leadership in the Latin American region.
Speaker Change: As Daniel noted our third quarter it will be growth.
Speaker Change: <unk> outpaced the industry with the gross booking increasingly by 23% year over year to nearly $250 million.
Speaker Change: This strong performance is in part driven by demand from more than 17000 online and offline travel agencies using our inventory.
Speaker Change: Particularly exciting trend is the rising interest among online agency bookings recommendations for international clients exploring Latin America.
Speaker Change: This trend is expanding our reach beyond our core Latin America market, allowing us to capture new demand from international markets.
Speaker Change: Currently our B to B growth is fueled mainly by hotel bookings.
Speaker Change: However, with the upcoming launch of our flight booking engine, we anticipate entering a new growth phase within the <unk> segment, southern strengthening our market position.
Speaker Change: I'd now like to update you on our white label partnerships.
Speaker Change: Here with Paradise, Onboarding, new clients and actively displacing competitors.
Speaker Change: Today, we operate over 18 white label partnerships across the region southern define our position as the leading <unk> player in that.
Speaker Change: Recent announcements highlight our success in securing major new clients.
Speaker Change: We are currently developing tailor solution and scaling up services for new partners on boarded in recent months.
Speaker Change: To give you a sense of the progress was made.
Speaker Change: Sure some specific achievements.
Speaker Change: In the banking our loyalty program space, we now operate more than 40 partnerships across Latin America.
Speaker Change: <unk> solutions for over half of the top banks and loyalty programs in that region.
Speaker Change: This past quarter alone, we added four new deals, including one of the major banks in Brazil.
Speaker Change: The new partnership set to launch in the coming months will allow customers to redeem loyalty points for travelers services directly accessing this market leading inventory.
Speaker Change: This integration will provide descriptive data available only on our partner's platform.
They can travel more accessible affordable for millions.
Speaker Change: Beyond technology in these types of partnerships display that also provides customer service both sales support for all travelers related inquiries, ensuring our expertise supports customers.
Every step from booking to post travel assistance.
Speaker Change: This combined with our ability to tailor solutions to pharma meats and support diverse payments and redemption options.
Speaker Change: Our white label solutions, the Premier choice for final.
Speaker Change: So as you do shows another partners.
Speaker Change: In the other sector. We've developed one of the most advanced packages booking engines currently work with one of Latin America's largest airline.
Speaker Change: Today, our partnership cover operations in eight different countries.
Speaker Change: I'd also packages hotel bookings, another nadella services, as well and integrations with the airlines frequent Flyer program.
Importantly, we are currently in a very advanced civilization prominent regional airline that operates flights within Latin America to U S and Europe.
Speaker Change: Our solution will be fully integrated with the airlines inventory.
Speaker Change: Featured automated after sale support.
Speaker Change: By our state of the art technology platform.
Speaker Change: Turning to our partnership with retailers, we have made great strides geos as well.
Speaker Change: During the third quarter, we signed three new deals with retail partners in major markets.
Speaker Change: Solidifying our position in the regional travel markets.
Speaker Change: Our platform enables the more than 15 retailers, we work with to monetize traffic integrate specific payment methods.
Speaker Change: Recently operated pretty close to other stores within their retail locations.
Speaker Change: We also closely with more than 20, leading global and local hotel base to support their package offerings.
Speaker Change: <unk> will say multiple new agreements that allow these hotels to provide comprehensive travel options.
Speaker Change: Leveraging our platforms best in class lead solution.
Speaker Change: Flexibility multimarket capabilities, including operations in the U S.
Speaker Change: Finally, as part of our ongoing innovation, we have developed another solutia, specifically decided for super apps.
Speaker Change: Our latest earnings calls.
Speaker Change: We mentioned that we signed quite a label partnership with a global ride hailing app.
Today, we are on perhaps three months deferral platform by the end of 2024.
Speaker Change: This partnership.
Speaker Change: Im exciting expansion into a super App space.
Speaker Change: Our fast growing sector that percent be opportunities, both in Latin America and beyond.
Speaker Change: In summary, we have built strong momentum for our <unk> segment, which sets the stage for significant top line growth in the years ahead.
Speaker Change: Our partnerships are helping us to make travel more accessible first realized and seamless integrated not only across Latin America, but those were new markets as we expand globally.
This progress in our <unk> initiatives underscores the potential to lead the travel technology innovation position us as a global leader not just a result of the world.
Speaker Change: With that I will turn the call over to our side, though who will share some exciting updates about sphere.
I guess Robert assistant.
Speaker Change: Thank you, Sir Ken and Hello, everyone.
There have been nine months into launch Sofia poverty.
Speaker Change: And we are extremely pleased with the customer engagement feedback and evolution of this cutting edge technology.
Speaker Change: Since its launch for PFS materially improved in every respect.
Speaker Change: Daily conversations continues to increase rapidly.
Speaker Change: <unk> every five weeks on a sustained basis as we incorporate merck product transparency into some knowledge base.
Speaker Change: Michigan is expanding their capabilities.
Speaker Change: Growing adoption and a sharp increase in returning users to a therapy, which is 50% higher than just one quarter ago.
Speaker Change: <unk> capabilities are helping set us apart in the travel industry opening our customers unique and tangible benefit from the moment. They begin planning that due to the booking process.
Speaker Change: During the quarter, we concentrated our efforts on three specific areas of focus.
Speaker Change: First and foremost we made significant improvements to sophie's after states capability and incorporating the chatbot as part of our customer service levels.
Speaker Change: To date of <unk> customers with various booking pattern ranging from simple answers to frequently asked questions.
Speaker Change: More complex situations like providing supporting checking process, making a special request for a meeting during the flight or type of debt peripheral designate.
Speaker Change: This request and then automatically relates to the appropriate third party significantly streamlining the process for our customers.
Speaker Change: The primary goal of these enhancements is to provide a self service tool that empowers customers to result, most of the travel related in play independently.
<unk> not only improves the customer journey, but also lead to a material reduction in call volumes at our call Center.
Speaker Change: It has been in tangible cost savings for them.
Speaker Change: And improved NPA.
Speaker Change: The second focus area has centered on enhancing therapies conversational levy.
Speaker Change: As we mentioned in our last earnings call. One of our primary goal is to replicate a natural human to human interaction and Sofia.
Speaker Change: To bring this experience to life, we are working on gaining of Bali and preparing to launch Sofia oncology, which will enable customers to engage with our guests.
Speaker Change: Human operates over the phone.
Speaker Change: Customers will be able to discuss both base and data in a manner that fills in pelican empathetic and human <unk>.
Speaker Change: Leveraging the <unk> infrastructure and current technology as we've done during the past nine months.
Speaker Change: With response times that are comparable to those in human interactions.
Speaker Change: Notably <unk> don't have to follow up we had filled it can progress at the customer's discretion.
Speaker Change: And even in threat of refunds and civil instantly adapt to the new topic.
It needed to answer the call seamlessly document operator.
Speaker Change: We are very excited about the new capability.
Speaker Change: Look forward to seeing how it will transform customer interactions in the future.
By creating a more dynamic with currency that consumer like experience, we need Sophia we not only improved customer satisfaction, but also deepened addressed and connection customers deal with our brand while driving efficiency in our fulfillment center.
We have a Lutheran marks a significant step forward in our commitment to providing exceptional service.
Speaker Change: And we can't wait to see the positive impact it will bring.
Lastly, we are focusing on developing Sophia is a software as a service product.
Speaker Change: Since we are making to our customer facing are prevalent.
Speaker Change: Also attracting many perspective customers.
Speaker Change: <unk> made some defense of the licensing agreement that we recently signed with pet Eastern hotels can result.
Sure.
Speaker Change: Breadth of service partnership.
Speaker Change: As we recently announced.
Speaker Change: It matters a significant step forward for both companies. So this collaboration <unk> will integrate <unk> into their operations to enhance digital engagement with customers and offer our guests a truly personalized travel experiences.
Speaker Change: This partnership is our first client win.
Speaker Change: Our strategy to expand our <unk> net.
Speaker Change: Through SaaS model.
Speaker Change: And the scores the growing demand, we see for the cutting edge AI technology in the global travel industry.
Speaker Change: Licensing software to treatment, we are not only deepening our collaboration with our valued travel partner.
Speaker Change: While also positioning treatment at the forefront of technological innovation in the hospitality industry.
Speaker Change: There are several standard features of this partnership.
Speaker Change: <unk> will provide enhanced travel of Houston.
Speaker Change: It must get in depth knowledge of their unique hotel openings rate and activity. It means customers will receive personal guidance throughout their career spanning both at creating a more streamlined and engaging experience.
Speaker Change: Second after the third and then in both of these complete seamless booking in the ratio will allow guests to their accommodations directly through conversations with the Sofia power.
Speaker Change: This is despite the booking journey by eliminating the need for customers to reenter detailed in a separate restoration page, making the entire process more convenient and efficient.
Speaker Change: Now, let's get vantage.
Speaker Change: Its comprehensive trials have.
Speaker Change: Beyond bookings Sophia we use natural language processing plant to your question about travel logistics local attractions and add some detail.
Speaker Change: The reason our customers with a complete seven companion.
Speaker Change: We're incredibly excited about the potential of the partnership at Nook.
Speaker Change: Not only does it highlight there are strategic incentive rate high technology. It opens the door for further expansion of our SaaS offering.
Speaker Change: We are eager to see the impact this will have on treatment customer's experience and look forward to extending the notebook solution to more partners in the near future.
Speaker Change: With that I will hand, the call Fleming, who will review more of our third quarter financial results.
Thank you Gonzalo and good day everyone.
Fleming: Third quarter results were very robust once again delivered solid revenue growth and record profitability.
By continued secular demand trends across our markets.
Fleming: For the quarter revenues increased by eight 9% year over year, reaching $194 million.
Fleming: As we focus on profitable growth, especially in our key markets, such as Brazil, and Mexico and captured some demand recovery in Argentina.
Similar to what we observed in the second quarter foreign exchange headwinds impacted our results across the region.
Despite these challenges the underlying demand remains solid as demonstrated by our FX neutral revenue growth, which was 53% year over year.
Fleming: This underscores the strength of our business fundamentals.
Fleming: Now, let's take a closer look at our regional performance, starting with Brazil, our largest and most important market.
Fleming: During the third quarter transactions grew by a healthy 14% year over year, reaching one 2 million.
Fleming: This growth was driven by a rise in domestic air transactions and stronger demand for both domestic and international hotels.
As anticipated average selling prices experienced a temporary 15% decline year over year, primarily due to the depreciation of the Brazilian reais.
Fleming: Excluding this FX impact gross bookings grew by 10% year over year, while on a reported basis showed a 3% decline.
Fleming: Turning to Mexico.
Fleming: <unk> largest market transactions declined by 22% year over year in part driven by the divestiture of our destination management company business during the quarter.
Fleming: Excluding the impact of the sale transactions declined 14% year over year, primarily due to our strong strategic focus on driving profitability FX headwinds and a significant reduction in domestic air capacity, particularly on routes to cancun.
Fleming: These factors led to a temporary contraction in gross bookings of 14% on an FX neutral basis, and 22% as reported for our Mexican operations.
As for our operations in the rest of Latin America, we began to observe a positive shift in trends, particularly in Argentina, where demand was stronger than anticipated.
Fleming: To the Taylor statements solutions, we operate in Argentina, coupled with our leading product portfolio. We have gained significant market share and achieved strong take rates.
Fleming: It is important to note that due to the various exchange rates applicable to transactions in Argentina, our ability to adapt and offer flexible payment options has proven to be a competitive advantage.
Fleming: That said I would like to emphasize that we continue to keep our exposure to the Argentinian peso to a minimum in line with our company policies in order to mitigate potential currency risk.
Fleming: This policy introduces FX hedging costs in our P&L.
Fleming: In summary, our strong commercial execution unmatched local market expertise and focus on profitability alongside implementing innovative payment solutions in Argentina enabled us to achieve the second highest ever take rate of 14, 6% a record setting take rate combined with gross.
Bookings of $1 3 billion drove revenues to $194 million.
Fleming: An increase of 53% in constant currency and 9% in Azure.
Fleming: Yes.
As we have emphasized throughout the year, we continue to prioritize operating leverage and have achieved substantial efficiencies in cost of revenues.
Fleming: Key drivers of these savings for the quarter included a decline in install in cost and credit card processing fees in Mexico reduced customer fraud expenses due to improvements in our solid prevention performance and lower interest rates in Argentina.
Fleming: As a result, we reported our strongest ever gross profit margin of 73, 8% generating a total gross profit of $143 1 million, which was $18, 7% higher than third quarter of 2020.
Fleming: In addition to cost of revenue and efficiencies. We also made significant progress in streamlining operating expenses.
Fleming: Selling and marketing expenses rose year over year, largely due to increased commission payments driven by our rapid growth in our <unk> business total operating expenses remained largely flat this.
Fleming: This stability drove operating leverage with regard to general and administrative technology and product and development expenses, allowing us to maintain a lean cost structure.
Fleming: We are pleased to announce that as a result of these efforts we achieved a record adjusted EBITDA of $48 million, representing a 94, 2% year over year increase and an adjusted EBITDA margin of 24, 8% another record for our company.
Fleming: Turning to our financial expense, which was $29 million for the quarter. This was in large part due to us moving funds into U S dollars and moving outside of Argentina as I noted earlier.
Fleming: When analyzing adjusted net income, which excludes from GAAP net income FX translation impact and other primarily nonrecurring expenses, we reported an impressive $36 $1 million and adjusted net income.
Fleming: Representing a more than a fourfold improvement versus the $8 8 million that we reported in third quarter of 2020.
Fleming: Importantly, our adjusted EPS improved year over year to 34.
Fleming: From one <unk> in the same quarter last year.
Fleming: In terms of operating cash flow, we generated $26 $6 million this quarter compared to $12 $7 million in the last quarter.
Fleming: Our robust operating cash flow has enabled us to further strengthen our solid financial position as capital expenditures remained steady at $7 $7 million for the quarter.
Fleming: Our strong commercial execution has also led to a total cash balance of $220 million, an increase of $15 2 million compared to the end of second quarter of 2024.
Fleming: Notably, we grew cash 7% quarter on quarter, despite a $7 million payment to our preferred shareholders.
Fleming: During the quarter, we also extended around $17 million and working capital benefits to cash advances to our core travel partners as part of our strategy to strengthen our supplier relationships.
Fleming: Let's turn now to our capital allocation strategy. Our approach remains centered on evaluating acquisition opportunities across Latin America and selectively beyond the region.
Fleming: When assessing any potential transaction, we rigorously apply a disciplined framework that examines the strategic benefits of new capabilities that enhance our offerings, our competitive advantages increased market penetration or geographic expansion.
Each opportunities than weight against the targets implied valuation to ensure that it meets our high standards for value creation.
Fleming: Our focus is clear we only proceed the transactions that can generate long term shareholder value by delivering both revenue and cost synergies that support and complement our strong organic growth profile.
Fleming: With a robust cash position and favorable working capital dynamics, we have the flexibility to execute transactions efficiently.
Fleming: Now looking towards the year end, we are confident in our commercial strategy for the fourth quarter's high season.
Fleming: Our extensive inventory, leading bundling capabilities and comprehensive payment solutions and a desk there.
Fleming: Preferred choice across Latin America.
However, FX is further moved against us since last quarter.
Fleming: With that in mind, we are made.
Fleming: Maintaining our full year revenue guidance of at least $760 million representing year over year top line growth of 8%.
Fleming: However, given our sustained margin expansion, we are raising our adjusted EBITDA forecast from a minimum of $160 million to at least $170 million, which equates to a year over year increase of 47%.
Fleming: In closing we remain confident in our ability to lead the consolidation of Latin American travel market and we are particularly excited about the new growth opportunities that sebastien Gonzalo outlined with regard to our strategic <unk> and SaaS initiatives.
Fleming: These strengths together with the strong secular tailwind uniquely position <unk> to set the pace for sustained market leading growth in Latin America, while also tapping into the two five trillion dollar global travel market.
Speaker Change: I'll now turn the call back over to Danielle for a few closing remarks.
Danielle: Thank you Amit to conclude we are very pleased with our made significant achievements this quarter, demonstrating a strong revenue growth and a leading margin expansion. Despite foreign exchange challenges across Latin America.
Danielle: Our results reflect the strength of our business model.
Speaker Change: With record levels of profitability in terms of adjusted EBITDA and adjusted net income and underscore.
Speaker Change: Healthiness of our growth strategy commercial approach as well as operational focus and efficiency.
Speaker Change: Our commitment to delivering outstanding value is apparent in the presence of Latin American covenant, many of whom continue to choose us as.
Speaker Change: As their preferred travel platform.
Speaker Change: Thanks to our vast inventory regional expertise and unmatched pregnant solution.
Speaker Change: This quarter, we took significant strides to strengthen our competitive edge, notably.
Speaker Change: Through our expanded partnership with Expedia, which enable us to leverage and in parallel rollout inventory for new growth initiatives.
Speaker Change: Sure our recent week to week to see agreement coupled with the significant business potential of our AI driven travelocity.
Speaker Change: Have a clear path forward, our objective is to seamlessly integrate sofia into our partners platform positioning as an essential tool in research for enhancing the ecosystem and their customer experiences.
Speaker Change: They deliver equal.
Speaker Change: Equally not only help drive sustained organic growth, but further diversify our portfolio of offerings.
Speaker Change: <unk>, our strategic mode, and reinforced our status as an industry leader.
Speaker Change: These initiatives underscore our commitment to capitalizing on global growth opportunities and solidifying our leadership in international and escape.
Speaker Change: In summary, we are poised to end the fiscal year on a strong note.
Speaker Change: Bolstered by the successful execution of our growth strategy and robust market demand.
Speaker Change: Our focus remains on continuous improvement and maximizing value for our customers and stakeholders.
Speaker Change: With that we are now ready to take your questions.
Speaker Change: At this time, we will open the floor for your questions.
In order to ask a question via audio please press star one on your telephone keypad.
Speaker Change: For those listening on the web you may submit your question online by using the Q&A function of the web SaaS platform.
Speaker Change: And your first question comes from the line of Nevada, Kang with B Riley Securities. Your line is open. Please go ahead.
Nevada, Kang: Great. Thank you very much and congrats on the strong quarter, despite the FX headwinds.
Nevada, Kang: I have a question on <unk>.
Nevada, Kang: Just take rate, which.
Yes.
Speaker Change: Very strong how should we think about your ability to kind of maintain these kind of levels.
Speaker Change: Not only in Q4, but maybe if I look at 2025 do you think this is a sustainable.
Speaker Change: Kind of level.
Speaker Change: And then the other question I have is just around the expedia.
Speaker Change: Renegotiation so.
Speaker Change: When should we think about the.
Speaker Change: The benefits that could accrue in the P&L.
Speaker Change: I know that the reset happens in January.
Speaker Change: When do you think you will prepared internally to kind of take advantage of.
Speaker Change: Okay.
Speaker Change: English entered a contract.
Speaker Change: I know.
Speaker Change: Thank you for the question, so I'll start with Dave.
Speaker Change: Great question, and then ill pass it to demand to talk about the Expedia.
Speaker Change: Okay contract so.
Speaker Change: On take rate.
Speaker Change: As you saw in the prepared remarks, the company has a very strong focus on driving profitable growth and that's something you can see across our P&L and how we are trending in all the geographies.
That boosted by obviously.
Speaker Change: Packages as a proportion of bookings continue to increase with us providing innovative payment solutions and differentiating ourselves in the market. All those are helping us to drive strong take rates, which in turn as you saw help us drive very strong EBITDA margin as well.
Speaker Change: But going forward I mean, obviously, we're not guiding to 2025 right now, but as we look over the over the long term. We continue to believe that the right take rates for us as a company given all the various strategies that we have in place for the coming years is around that 13% level as we have as we have as we have discussed.
Speaker Change: In the past so that's how I would think about it.
Speaker Change: And in the in the mid long term, but in the short term our strong focus on profitability is yielding very strong results on take rate.
Speaker Change: And <unk>.
Speaker Change: Thanks for the question as for the impact of the renegotiation of the agreement with <unk> first of all.
Speaker Change: The new agreement with a key transformational and at least a couple of ways.
Speaker Change: First of all the profitability impact of being able to source directly a larger portion of our inventory and that's going to start being reflected on our P&L.
Speaker Change: As early as the first quarter of next year, we will gradually ramp that up.
Speaker Change: Sure.
Speaker Change: Been reflective.
Speaker Change: As early as the first quarter, but more importantly, the flexibility options in terms of our growth strategy that that opens up significant because we will be able.
Speaker Change: To source in a more competitive way from different regions of the what and the <unk>.
Speaker Change: Growth of our B to B business beyond Latam rely significantly on directive.
Yes.
Speaker Change: Understood. Thank you and then.
Speaker Change: Maybe just a follow up to you to answer Amit on on the margin. So what are the what are the puts and takes that can bring the.
Speaker Change: The.
Speaker Change: The 14% plus kind of taken it down to 13% I don't mean to be even probably is lower.
Speaker Change: Just give us your thoughts there.
Speaker Change: Yes, so I think it'll be to be you mentioned, that's one of the factors, but also in our mind. We also obtained going forward, we have to take an approach that the air take rates could possibly come down from current levels. So.
Speaker Change: So we have and then for us also.
Speaker Change: Driving a lot of other strategies, which helped us gain market share in various regions and that could have some impact on take rate in the coming year. So when we combine all of those factors. That's what right now leading us to believe that in the mid long term that 13% is in is the right level for us to operate at.
Speaker Change: Okay, and then a very quick clarification, if I could.
Speaker Change: There was some impact from the storms I guess on the bookings I think we mentioned that on the previous call.
Speaker Change: Do you have any numbers to share in terms of what.
Speaker Change: That impact was in the third quarter.
I think right now the overall impact as we discussed is pretty much the same.
Speaker Change: From from those storms, it's around that 10 ish million impact.
Speaker Change: The only incremental impact that we had to our revenues.
Speaker Change: Mulder from FX since last quarter to this quarter I think none of those other factors had any other incremental impact, but FX has got further.
Speaker Change: Victor for us since last quarter and that is having an incremental around 10 ish million impact to our full year revenue.
Speaker Change: Expectations so.
Speaker Change: And we highlighted that in the.
Speaker Change: In our script.
Speaker Change: Understood. Thank you guys.
Speaker Change: Thank you.
Speaker Change: Okay.
Your next question comes from the line of Andrew Ruben with Morgan Stanley. Your line is now open. Please go ahead.
Yes.
Andrew Ruben: Okay. Thanks, very much for the question congratulations on all the developments during the quarter.
Speaker Change: Hoping to dig in a bit more on Argentina, you mentioned, a few times, but it seems like there was really an inflection in the quarter. So hoping if you could breakdown what changed from from a top down perspective versus company initiative, I think kind of within your company initiatives.
Speaker Change: You mentioned that FX arrangement, so trying to understand how impactful that was really just a bridge to understand what changed top down bottom up in Argentina. This quarter can be very helpful.
Speaker Change: Hi, This is Damien on Argentina.
Speaker Change: Start with the market the market in the third quarter evolve on a positive trend, although still well below 2023 levels within that market were particularly effective gaining market share.
Speaker Change: Meet explained by offering payment methods of payment that alternative that help our customers.
Pay less for their travel through them.
Speaker Change: Implementing a what we call the money that your strategy with this has to do with the different effects.
Speaker Change: Regulations that are in Argentina, So we were able to provide.
Speaker Change: Our customers really unique payment value proposition that will help us gain significant market share.
Speaker Change: As we.
Speaker Change: We expect that to continue in Q4, both the.
Underlying market positive evolution and our share gains.
Speaker Change: As you know Argentina is growing through a very positive momentum and we're very excited also regarding what's going what the market is going to look like in 2025.
Speaker Change: Yes.
Speaker Change: No that's fair and it's very encouraging and.
Speaker Change: I know you spoke about the take rate overall, but I think in the presentation, Argentina was called out as one of the positive drivers for take.
Speaker Change: Take rate at similarly, do you see that market being a sustained higher take rate or anything that we should consider reverting there I know you're talking about the company's overall drivers, but just understanding if there was any argentina nuance to the take rate to consider.
Speaker Change: Hi, Andrew This is Amit so yes in Argentina, I would say given.
What <unk> was describing we have we are being able to differentiate ourselves materially and also the products and all that we are offering is helping us drive strong take rates in the market in the near mid term, we do expect that that differentiation to remain.
But as I am talking about our longer term expectation and take rate coming down our longer term expectation of that 13 ish percent take rate. We are also taking that into account that potentially some of that.
Speaker Change: <unk>.
Speaker Change: A higher take rate trend and the change in the other direction, but all of that is built into our.
Speaker Change: <unk> long term.
Speaker Change: Expectations for take rate.
Speaker Change: To <unk> point right now.
Speaker Change: The solutions that we are providing is helping us cement our leadership position in Argentina, and take very strong market shares more than just the take rate in all take take very strong.
Speaker Change: Gain significant market share in the region.
And it makes a lot of sense. Thank you both.
Speaker Change: Your next question comes from the line of Kevin Kopelman with TD Cowen. Your line is now open. Please go ahead.
Kevin Kopelman: Alright, Thanks, a lot.
Kevin Kopelman: Could you give us can you start off by talking about the Q4 trends a little bit.
In particular, what are you seeing quarter to date.
Kevin Kopelman: And transaction growth it looks like that was about in Q3 that was about 2%.
Kevin Kopelman: Ex the divestiture and.
Speaker Change: And you mentioned some of the Mexico pressure. So I was just wondering how that was kind of trending this quarter.
Speaker Change: I mean look.
Speaker Change: Our guidance sort of we don't specifically guide to transactions, but our guidance.
Speaker Change: Revenue for the full year.
Speaker Change: And for EBITDA, It does imply sort of year over year growth in both of those metrics.
Speaker Change: Q4 is important for us and especially that it is our generally the strongest quarter in the in the region and generally the second half of November and first part of December is.
Speaker Change: The high season, when it comes to travel, but we feel very.
Speaker Change: What I can tell you is very confident about the guidance that we have provided.
Speaker Change: Obviously.
Speaker Change: The trends.
Speaker Change: Bolt on topline despite.
Speaker Change: Unusually strong FX headwinds this year the trends in top line remained remain solid.
Speaker Change: Solid and our overall progress towards on the margin side also continues to be extremely extremely solid.
Speaker Change: Thanks, and maybe just to drill into the Mexico trends.
Speaker Change: The kind of some of the temporary pressures. There is that is that like temporary Q3 or do you see it more of like maybe like a four quarter thing on the air capacity and then.
Speaker Change: Once we anniversary it will start looking better.
Speaker Change: Yes, I mean, some of the air capacity impact could go in is.
Speaker Change: It will go in in <unk> as well and then the FX headwinds that have happened in <unk>.
Speaker Change: Including Mexico and in other regions as well.
Speaker Change: That in fact it.
Speaker Change: It should happen in Q4, as well and Thats included in the guidance that we're providing but to your point as you move into into the following years 2025 and beyond.
Speaker Change: This year is exceptional when it.
Speaker Change: When it comes to the FX headwinds that are that are there. So.
Speaker Change: At least at this point, we don't expect these type of.
Speaker Change: Material headwinds to happen in the coming year, so that should be that should be positive for the company. As we are looking at sort of the following years, especially when it comes to booking and booking then.
Speaker Change: Revenue growth in dollar terms.
Yes.
Speaker Change: And then could you give your.
Speaker Change: Kind of a I mean, you kind of touched on it there, but just how youre thinking about growth versus margins next year.
Speaker Change: Actually.
Speaker Change: Yes, so I mean, there to be very open we are currently in the middle of our budgeting process.
Speaker Change: At this point, obviously, we don't guide to next year as we have been as we have discussed in the past our goal.
Speaker Change: Is.
Speaker Change: Drive.
Speaker Change: We have talked about a lot of strategic growth initiatives for our company in the past quarters. We did talk about for US starting investing in for example in our SaaS solutions and then now has gone as I mentioned in.
Speaker Change: And as Dave was mentioning we have already started winning clients in that area, we've talked about investments in technology and to the SaaS solutions now we're actually licensing our technology. So we have a lot of.
Speaker Change: Along with that we have a lot of growth initiatives, which we believe should help us draw.
Speaker Change: Drive industry, leading growth for the for the foreseeable future and as we are going through our budgeting process. We will evaluate what type of investments will be required in the near mid term for those type of initiatives. We also need to evaluate what type what type of fee strategy, we need to drive in various geographies.
Speaker Change: So all of that will help us help us determine.
Speaker Change: How should the margins and I'll look for floor for sort of next year, but what I can tell you is that the business as usual if we operate business as usual.
Without going into any initiated in all the trend remains positive, but but as.
It should be for any company. Our goal is to how do we position. This company not just for for growth next year, but but how do we position. This company for a sustained industry leading growth over the mid long term. So our investment decisions will be will be very much based on that mid long term industry leading growth.
Speaker Change: Yes.
Speaker Change: Creation.
Speaker Change: Standpoint.
Speaker Change: Alright, Thank you and then.
Just on.
Speaker Change: With me to be accelerating.
Speaker Change: Or is there anything to call out on the take rate or EBITDA margin side, as we think about that mix shift over the next next.
Speaker Change: Next year.
Speaker Change: Yeah, I mean, I wouldn't I mean on EBITDA level, largely similar less some of the white labels have depending on the clients you would have different different margin profiles, but EBITDA margin profile, but broadly I would say.
Speaker Change: Similarly, adjusted EBITDA margin profile for <unk> side were to the <unk> side I would say if you look at the beat to be growth, which is above 20% and maybe <unk> can add more to it. We're very excited about where that business is going not just in the type of.
Speaker Change: White label solutions, we are we are.
Speaker Change: We are winning and hopefully we can announce more and more.
Speaker Change: Theres always some restrictions on how much we can announce as well, but hopefully we can announce more and more in the coming quarters to give everyone. An idea of the strong scale, we are achieving there but also on the <unk>.
Speaker Change: Other side, what we are doing with agencies and tapping into the.
Speaker Change: The offline market, which is almost 50% of Latin American market too.
Speaker Change: <unk> solutions.
Speaker Change: I don't know if you want to add anything over there, but but very excited about where b to b will grow for us in the coming years.
Speaker Change: Yes totally agree.
Speaker Change: I am sure we are building a strong momentum in our <unk> segment, we are setting the stage for us to keep your guidance Youre, hoping.
Speaker Change: I'm sorry.
Speaker Change: Motivated by three main initiatives.
Speaker Change: First one we have incorporated more than 3500 offline and online agency. So we are nowadays total Iot outcome.
Speaker Change: Outcome HCP.
Speaker Change: I can see we have on boarded.
Speaker Change: 19, Neocart Yeager's Barnard.
Speaker Change: So we are now operating with more than 80 partners.
Speaker Change: And finally, we got about lunch hour flight booking engines.
Speaker Change: So up to now we were only a few of our growth.
Speaker Change: In hotel bookings, so it's coming.
Speaker Change: I'm sure that will help a lot.
Speaker Change: Well at the moment until now we are expanding our b globally somewhat.
Speaker Change: And we're very confident of the strong momentum we are building on the big three segments.
Speaker Change: Great. Thank you.
Speaker Change: Our final question is via the webcast from Walter <unk> of Santander, what is the real impact of FX in Mexico and Brazil.
Speaker Change: Only a SPR travelers are retracting consumption due to higher cost of traveling mainly abroad affecting numbers of transactions to do you expect this to improve in the short term.
Damian Skulking: Hi, Walter this is Damian.
Speaker Change: Yes.
Speaker Change: Mexico market, we see both a decline at the market level of transactions capital on compounded with the FX decline.
What we see is obviously the foreign intelligence, becoming more expensive and there is also the challenge of.
Speaker Change: Reduce air capacity, we expect some of these factors to be temporary particularly air capacity.
Although the FX is more of a question Mark how are you.
Said that Mexico remains a very large market for us and we are striving to to regain.
Speaker Change: <unk> growth momentum there.
Speaker Change: And we're very optimistic about the next few months and been able to.
Speaker Change: For the market to recover.
Speaker Change: Yes.
Speaker Change: There are no further questions at this time I will now turn the call it over to Mr. Scott <unk> for any closing remarks.
Speaker Change: Just wanted to thank you all for your interest in this regard your participation.
Speaker Change: We look forward to seeing you again in our next call in which we share with you our fourth quarter results. Thank you all and take care.
This concludes today's conference call you may now disconnect.
Please wait the conference will begin shortly.
Speaker Change: Sure.
Speaker Change: Yes.
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