Despegar.com Announces 1Q21 Financial Results

Rhea-AI Summary

Despegar.com reported 1Q21 results, showing a strong pandemic impact. Gross Bookings fell 53% YoY to $369.2 million, with Revenue down 32% to $51.9 million. Adjusted EBITDA was a loss of $20.0 million. Despite challenges, the company maintained a solid cash position of $325.7 million. The CEO noted improvements in Mexico and Andean regions, and emphasized a focus on profitability amid ongoing travel demand uncertainties. The company expects continued stagnation in recovery through 2Q21 but remains optimistic about future demand growth.

Positive

• Cash and equivalents of $325.7 million.
• Improved revenue margin, achieving the highest take rate since 2016.
• Sequential growth in gross bookings in Mexico, with 11% QoQ increase.

Negative

• Gross bookings down 53% YoY and 68% vs 1Q19.
• Adjusted EBITDA loss increased from $13.9 million YoY to $20.0 million.
• Total transactions decreased 40% YoY and 54% compared to 1Q19.

Despegar.com, Corp. (NYSE: DESP), (“Despegar” or the “Company”) the leading online travel company in Latin America, today announced unaudited results for the three-months ended March 31, 2021 (1Q21). Financial results are expressed in U.S. dollars and are presented in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”).

First Quarter 2021 Key Financial and Operating Highlights
(For definitions, see page 14)

• Impacted by the quarter spike in COVID-19 pandemic, Gross Bookings declined 8% quarter-over-quarter (QoQ) to $369.2 million, 53% year-over-year (YoY) and 68% in comparison with 1Q19, a pre-pandemic period¹. Excluding Brazil and Argentina, Gross Bookings would have increased 11% QoQ.
• Transactions decreased 2% QoQ. Excluding Brazil, Transactions grew 12% sequentially. Transactions declined 40% (YoY) and 54% when compared to 1Q19.
• Room Nights decreased 9% QoQ, 49% YoY and 64% when compared to 1Q19. Mobile accounted for 50% of Transactions in 1Q21, up 584 bps YoY.
• As Reported Revenues were $51.9 million, representing declines of 3% QoQ, 32% YoY and 61% when compared to 1Q19. Excluding the impact of extraordinary cancellations, Revenues would have declined 4% sequentially to $56.1 million, and 37% YoY.
• Selling and marketing expenses decreased 52% YoY, in line with the decline in Gross Bookings in the period. Sequentially, Selling and marketing expenses increased 17% mainly due to an increase in marketing-direct expenses and personnel expenses, but was down 62% when compared to 1Q19.
• Excluding the effect of the Best Day and Koin acquisitions, Structural Costs declined 30% YoY, reflecting measures implemented throughout 2020, and increased 3% QoQ to $29.9 million reflecting primarily payroll FX impact particularly in Argentina.
• Adjusted EBITDA as reported in 1Q21 was a loss of $20.0 million reflecting the second wave of the COVID-19 pandemic, particularly in Brazil and Argentina. This compares to losses of $19.3 million in 4Q20 and of $13.9 million in 1Q20, and income of $15.2 million in 1Q19. Excluding Extraordinary Charges, Adjusted EBITDA was a loss of $14.1 million in 1Q21 compared to losses of $9.3 million in 4Q20 and $1.4 million in 1Q20, and income $15.2 million in 1Q19.
• Use of cash, cash equivalents and restricted cash of $24.7 million in 1Q21, which includes a positive contribution of $6.9 million in operating working capital. This compares to use of cash, cash equivalents and restricted cash of $35.4 million in 4Q20, $87.7 million in 1Q20 and $36.1 million in 1Q19.
• Solid balance sheet - Cash and cash equivalents of $325.7 million at quarter end, including $16.3 million in restricted cash.

¹ The Company has chosen to also include comparisons against 1Q19, a pre-pandemic period, in this press release as a means for the investment community to compare 1Q21 results to a period not affected by the COVID-19 pandemic.

Message from the CEO

Commenting on the Company’s performance, Damian Scokin, CEO stated, “As anticipated, this past quarter we observed a sequential slowdown in the recovery trend that started in 2Q20, due to the impact of the second wave of COVID-19 on overall travel, and particularly in Brazil and Argentina.

In this choppy market environment, our geographic diversification efforts are having the desired results. A healthy performance in Mexico with sequential low double digit growth in Gross Bookings partially offset the declines in Brazil and Argentina. Countries in the Andean Region including Colombia and Chile also delivered sequential improvement.

Our strategy to prioritize profitability until there is more visibility of the recovery of the travel industry, is reflected in the improvement of our revenue margin as we achieved our highest take rate since 2016. Moreover, we ended the quarter with nearly $326 million in cash and equivalents.

We expect the stagnation in the recovery trend to continue at least throughout 2Q21. However, we are confident that travel demand will pick up as observed in other geographies as we enter the South American spring/summer seasons and the COVID-19 vaccination rollout accelerates.

In the meantime, we remain focused on further strengthening our competitive advantages, including: i) making steady progress on the integration of Best Day, ii) expanding the reach of our payment platform in Brazil, and iii) broadening our relationships with our travel partners, while incorporating the product mix of the acquired companies is reflected in the higher share of non-air revenues in the quarter. We believe that our position as a leaner and more geographically diversified company and a profit maximization strategy will enable us to emerge from the COVID-19 pandemic in a solid position to meet the resultant pick-up in travel demand.”

Operating and Financial Metrics Highlights
(In millions, except as noted)
	1Q21		1Q20	% Chg		1Q19	% Chg
Operating metrics
Number of transactions	1.228		2.031	(40%)		2.652	(54%)
Gross bookings	$369.2		$790.4	(53%)		$1,157.5	(68%)
Financial metrics
Revenues	$51.9		$76.1	(32%)		$133.1	(61%)
Net income (loss)	($37.6)		($15.2)	n.m.		$1.9	n.m.
Net income (loss) attributable to Despegar.com, Corp	($37.4)		($15.2)	n.m.		$1.9	n.m.
Adjusted EBITDA	($20.0)		($13.9)	n.m.		$15.2	n.m.
EPS Basic 2	($0.54)		($0.22)	n.m.		$0.03	n.m.
EPS Diluted 2	($0.54)		($0.22)	n.m.		$0.03	n.m.
Extraordinary Charges
Adjusted EBITDA	($20.0)		($13.9)	n.m.		$15.2	n.m.
Extraordinary cancellations due to COVID-19	(4.3)		(12.5)			-
Extraordinary restructuring charges	(1.7)		-			-
Adjusted EBITDA (Excl. Extraordinary Charges)	($14.1)		($1.4)	n.m.		$15.2	n.m.
Average Shares Oustanding - Basic 1	81.175		69,668			69,294
Average Shares Oustanding - Diluted 1	81.175		69,668			70,377
EPS Basic (Excl. Extraordinary Charges) 2	(0.47)		(0.01)			0.03
EPS Diluted (Excl. Extraordinary Charges) 2	(0.47)		(0.01)			0.03
1. In thousands
2. Whole numbers
n.m.: Not Meaningful

Business Update on COVID-19

Governmental Flight Restrictions on Mobility

Government restrictions to mobility across LatAm, resulted in uneven travel levels and volatility throughout the region.

The level of government restrictions in Latam was mixed throughout the region. Given the spike in COVID-19 cases in Brazil, restrictions have been in place since mid-February 2021, including curfews and lockdown of non-essential activities. As a result of these new restrictions, total industry air passenger traffic in Brazil dropped to 22% of 2019 levels in March, 2021, from 42% in November, 2020.

By contrast, in Mexico mobility restrictions were eased and non-essential activities in Mexico City reopened as of mid-February. In light of these improvements in mobility, total industry air passenger traffic reached 62% of 2019 levels in March 2021, from nearly 50% in the previous month.

In Argentina, in view of an increase of COVID-19 cases since March 2021, the government imposed additional travel restrictions for Argentine nationals upon arrival. Starting March 27, 2021, flights from Brazil, Chile, Mexico and the United Kingdom were banned from entering the country. Foreigners that are not residents are not allowed to enter the country. Total industry air passenger remained flat around 15% of 2019 levels from December 2020 until today.

Despite an active vaccination plan in Chile since mid-February, 2021, another strong lockdown was imposed in the metropolitan areas as of mid-March and borders remain closed since April 1, 2021 in an effort to contain the spike of COVID-19 cases. Total industry air passenger traffic decreased to 21% of 2019 levels in March 2021, from 31% in the prior month.

In Colombia, as of the first week of February 2021, localized restrictions were lifted. However, as of the end of March some restrictions were put in place without affecting civil aviation. Total industry air passenger traffic remained constant at around 38% of 2019 levels since December 2020 until March 2021 with an improvement to 43% in March 2021.

Cost Control Initiatives

Structural Costs were $29.9 million in 1Q21, 30% lower YoY as a result of a cost reduction program put in place towards the end of 2019 and expanded at the onset of COVID-19 pandemic. These cost savings included YoY declines of 28% in total payroll and 33% in non-payroll expenses, among others.

The 3% QoQ increase in structural costs from $28.9 million in 4Q20, is explained by the inclusion of costs related to specific data privacy and loyalty program projects and payroll FX impact particularly in Argentina.

Solid Financial Position

Despegar closed the quarter with a solid balance sheet with cash and cash equivalents of $325.7 million at quarter end including $16.3 million in restricted cash.

Aggregate Net Operational Short-term Obligations were $200.9 million as of quarter end, compared to Aggregate Net Operational Short-Term Obligations of $193.0 million as of December 31, 2020.

Overview of First Quarter 2021 Results

Key Operating Metrics
(In millions, except as noted)
	1Q21			1Q20			% Chg	FX Neutral % Chg		1Q19		% Chg
	$	% of total		$	% of total					$	% of total
Gross Bookings	$369.2			$790.4			(53%)	(48%)		$1,157.5		(68%)
Average selling price (ASP) (in $)	$301			$389			(23%)	(14%)		$436		(31%)
Number of Transactions by Segment & Total
Air	0.7	53%		1.2	60%		(46%)			1.5	57%	(57%)
Packages, Hotels & Other Travel Products	0.6	47%		0.8	40%		(30%)			1.1	43%	(50%)
Total Number of Transactions	1.2	100%		2.0	100%		(40%)			2.7	100%	(54%)

During 1Q21, Transactions decreased 2.3% sequentially to 1.2 million, explained by a surge in COVID-19 cases in Brazil and the subsequent restrictions put in place by the government which impacted travel. This compares with declines in transactions of 40% YoY and 54% in comparison with 1Q19, a pre-pandemic period.

The contraction in the Brazilian travel market was partially offset by an increase in the level of transactions in Mexico, Colombia and Chile, in addition to a 0.2 million contribution in transactions by Best Day.

Gross Bookings decreased 8% sequentially to $369.2 million, mainly driven by an increase in COVID-19 cases in Brazil and a decrease in average selling price (the “ASPs”) in Argentina. Excluding Brazil and Argentina, Gross Bookings would have increased sequentially by 11%.

YoY and in comparison with 1Q19, Gross Bookings decreased 53% and 68%, respectively. Excluding the contribution from Best Day, Gross Bookings would have decreased 64% YoY and 76% when compared to 1Q19.

Sequentially, the ASP in 1Q21 decreased 6% to $301 per transaction. YoY, the ASP decreased 14% on an FX neutral basis and 23% as reported. When compared to 1Q19, the ASP decreased 31%. On an as reported basis, the YoY decrease in ASP was largely driven by: i) a mix-shift to domestic travel products resulting from the COVID-19 pandemic and the restrictions on international travel imposed by different governments to contain the virus, and ii) FX depreciation across the region, mainly in Brazil and Argentina.

Geographical Breakdown

Geographical Breakdown of Select Operating and Financial Metrics
(In millions, except as noted)
1Q21 vs. 1Q20 - As Reported
	Brazil		Mexico		Rest of Latam		Total
	% Chg.		% Chg.		% Chg.		% Chg.
Transactions ('000)	(45%)		11%		(52%)		(40%)
Gross Bookings	(68%)		13%		(60%)		(53%)
ASP ($)	(43%)		2%		(16%)		(23%)
Revenues							(32%)
Gross Profit							(48%)
1Q21 vs. 1Q20 - FX Neutral Basis
	Brazil		Mexico		Rest of Latam		Total
	% Chg.		% Chg.		% Chg.		% Chg.
Transactions ('000)	(45%)		11%		(52%)		(40%)
Gross Bookings	(60%)		14%		(56%)		(48%)
ASP ($)	(29%)		2%		(8%)		(14%)
Revenues							(24%)
Gross Profit							(46%)

Brazil accounted for 38% of total Transactions for the quarter, a reduction of 8 percentage points (pp) when compared to the previous quarter. This reduction was attributable to a decline in travel triggered by restrictions to contain a new variant of COVID-19 along with the increase in the overall number of COVID-19 cases in the country and the growing relevance of Mexico in Despegar’s geographical footprint.

Gross Bookings decreased 32% QoQ, 68% YoY and 78% when compared to 1Q19. The reduction vis-a-vis 1Q19 is explained by: i) the pandemic’s significant negative impact on demand , ii) a shift to domestic travel, and iii) the depreciation of the Brazilian Real. The last two factors resulted in the ASP declining 16% QoQ, 43% YoY and 50% compared to 1Q19.

Mexico accounted for 28% of total Transactions for the quarter, up from 27% in 4Q20. Transactions and Gross Bookings, which include three-month of Best Day each quarter, improved sequentially by 1% and 7%, respectively due to seasonality and the lifting of restrictions by the authorities.

On a YoY basis, Transactions and Gross Bookings increased by 11% and 13% respectively mainly due to the acquisition of Best Day. Compared to 1Q19, transactions were down 10% and Gross Bookings down 12%.

ASPs increased 6% QoQ and 2% YoY. When compared to 1Q19, ASP declined 2%. On an FX neutral basis, Gross Bookings and ASPs posted a YoY increase of 14% and 2%, respectively.

Across the Rest of Latin America, Despegar reported sequential increases of 22% and 6% in Transactions and Gross Bookings, respectively. These increases were mainly the result of higher levels of demand in Colombia and Chile and to a lesser extent in Argentina. However, on a YoY basis, transactions and gross bookings declined 52% and 60%, respectively. When compared to 1Q19, these metrics declined 66% and 75%.

ASP decreased 13% QoQ and 16% YoY. Compared to 1Q19, ASP declined 25%. On an FX neutral basis, Gross Bookings and ASPs posted YoY decrease of 56% and 8%, respectively.

Revenue

Revenue Breakdown
	1Q21			1Q20		% Chg		1Q19		% Chg
	$	% of total		$	% of total			$	% of total
Revenue by business segment (in $Ms) (Excluding Cancellations)
Air	$16.7	32%		$36.9	49%	(55%)		$49.7	37%	(66%)
Packages, Hotels & Other Travel Products

FAQ

What were Despegar's 1Q21 financial highlights?

In 1Q21, Despegar reported gross bookings of $369.2 million, revenues of $51.9 million, and an adjusted EBITDA loss of $20.0 million.

How did COVID-19 affect Despegar's business in 1Q21?

COVID-19 caused gross bookings to decline by 53% year-over-year, severely impacting revenue and transactions.

What is Despegar's cash position after 1Q21?

Despegar ended 1Q21 with cash and cash equivalents of $325.7 million.

What guidance did Despegar provide for future quarters?

Despegar expects continued stagnation in the recovery trend through at least 2Q21 but is optimistic about a potential demand pickup.