Despegar.com Corp

Good morning and welcome to Despigar's fourth quarter 2021 earnings call. A slide presentation is accompanying today's webcast and is available at the investor section of the company's website www.investor.despigar.com. There will be an opportunity for you to ask questions at the end of today's presentation. This conference call is being recorded. As a reminder, all participants will be on listen-only mode. Now, I would like to turn the call over to Ms. Natalia Nirenberg, Investor Relations. Please go ahead.

Good morning, everyone, and thanks for joining us today for a discussion of the SPAC Arts for Quarter 2021 results. In addition to reporting financial results in accordance with U.S. generally accepted accounting principles, we discussed certain non-GAAP financial measures and operating metrics, including foreign exchange neutral calculations. Investors should read the definitions of these measures and metrics included in our press release carefully to ensure that they understand them. Non-GAAP financial measures and operating metrics should not be considered in isolation as substitute for or superior to GAAP financial measures, and I provided a supplemental information on this. Before we begin our prepared remarks, allow me to remind you that certain statements made during the course of the discussion may constitute forward-looking statements which are based on management's current expectations and beliefs 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 impact of the COVID-19 pandemic and the integration and performance of the businesses we acquire, including best pay and coins. For a description of these risks, please refer to our filings with the U.S. Securities and Exchange Commission and our press release. Speaking on today's call is our CEO, Damian Skokie, who will provide an overview of the fourth quarter and update you on our strategic priorities. Alberto Lopez-Haffney, our CFO, will then discuss the quarter's financial results in more detail. After that, we'll open the call for your questions. Damian, please go ahead.

Thanks, Natalia, and good day, everyone. Thank you for joining our results call and for your interest in this program. The spread of underlying earnings power became even more evident this past quarter as consistent execution of our strategy enabled us to capture the growth coming from still recovering travel demand across our geographic footprint. That growth flows through our income statement as we will explain. To start, we achieved the highest levels of gross bookings, transactions, and ASPs since the beginning of the pandemic. Further, greater demand for more profitable products, such as travel packages and hotels, significantly upset currency depreciation in the region. Although bookings were only 75% of fourth quarter 2018 levels, we grew adjusted EBITDA by 30% to $16 million when excluding extraordinary charges, and COIN, our merchant paying solution in Brazil where we're investing to scale the business. Taking a step back, multiple levers are driving our performance. First, the more efficient cost structure that is now in place. Second, the synergies that we are now able to realize from past acquisitions, which together with our cost-cutting efforts resulted in a 37% reduction in operating expenses when compared to the fourth quarter of 2018 levels, and excluding extraordinary charges and the impact from Bitcoin and Coin in both quarters. Third, more diverse sources of revenue in terms of geography and products. Fourth, a take rate of 13.4% when excluding extraordinary cancellations. And lastly, we are seeing a good result from our marketing efforts, with the share of non-paid traffic increasing 2 percentage points, while the share of gross bookings captured through the app was up 4 percentage points, both when compared to the fourth quarter of 2019. Looking ahead, as Omicron received and more pent-up travel demand materializes, we expect the operating leverage that we have built into the business to accelerate and generate additional earnings. Moreover, we have maintained a solid balance sheet with cash and equivalent of nearly $280 million, giving us the flexibility to invest in technology and in market consolidation, among other growth initiatives. Let's move to slide four for a closer look at the improving demand conditions in our key markets. Our markets gained additional momentum in October and November. As more pandemic restrictions were lifted and travel activity picked up. Although there has been a pause in travel demand since December, impacted by seasonality and the emergence of Omicron, We expect industry travel should resume to its close trajectory in the second quarter. Our performance was strongest in Brazil, generating a third of transactions. Gross bookings rose 50% sequentially and reached 56% of the fourth quarter of 2019. As domestic air travel improved and international transactions increased. Turning to other relevant markets, Colombia and Chile benefited from pent-up demand, which drove bookings above fourth quarter 2018 levels by 43% and 39% respectively. Growth in gross bookings was triggered not only by an increase in transactions, but also by an improvement in ASPs, which rose 19% sequentially. to $410 per transaction, at just 9% below fourth quarter of 2018 level. Returning to our growth strategy, on slide five, we show how our loyalty program, Pasaporte de Espegal, has been gaining significant momentum in Mexico. Particularly in this market, we made adjustments to our website, which make the program more visible to visitors. And we simplify the registration process. All these measures have resulted in a tripling of members and have also increased the level of customer engagement, critical in the context of changes in IDFI. With these features, 75% of total purchases were done by loyalty program members. Let's move to slide six. With the goal of further enhancing our alternative accommodation proposition, we have just entered into an agreement to acquire 51% ownership stake in states. Brazil's leading vacation rental channel manager for a total price of approximately 15.7 million reais. Founded in 2016, states offer a comprehensive solution to vacation property managers and owners in Brazil. The state is also a preferred integration partner of alternative accommodations for living international booking platforms. In the near term, this latest acquisition will allow us to add new inventory of over 17,000 properties, mainly throughout Brazil, expanding our 400,000-plus total vacation rental inventory. Today also brings us new digital capabilities and significant segment expertise to expand our vacation rental offerings within Brazil. Longer term, today we leverage Despegar's leading position in other key geographies in Latin America to accelerate its expansion. Note that as only 10% of Latin American vacation property owners use digital channel management compared to 90% in Europe, there is ample growth potential for our partnership with states. Turning to slide seven. The heart of our strategy for COIN, another key component in our growth plan, is established in a presence wherever the consumer makes purchases. As a means to effectively scale Coin's platform, we continue expanding its merchant ecosystem, mainly consisting of direct merchants, e-commerce platforms, and payment gateway, among other distribution channels. As you can see on this slide, some of these merchants and platforms are leading brands in Latin America. We are encouraged by the strong adoption of coins payment solutions for merchants today. It is now available as a payment option to some 100,000 merchants from a range of businesses and from small to large. The current rate of adoption is setting the stage for coin to become another key growth driver for our company. By the way of example, Coin's fourth quarter 2021 total purchase volume increased 73% sequentially to nearly $18 million in the fourth quarter of last year. In January, 23% of volume came from new merchants, reflecting expansion in the customer base. At Decolar, the penetration of Coin's BNPL solution accounts for 6% of gross bookings. Reflecting intensive investments to scale up this business, standalone adjusted EBITDA for coins resulted in a loss of just over $3 million. I would like to point out that 100% of the solutions engine and risk model are in-house. Other coin payment solutions we offer merchants are fraud prevention and payment via PIX. The very attractive potential for COIN, as it's buy now, pay later, and fraud prevention services have a total addressable market of between 15 and $20 billion in Latin America. That concludes my portion of the presentation. Alberto, please go ahead.