Despegar.com Corp

Good afternoon, and welcome to the Despigar third quarter 2017 earnings call. A slide presentation is accompanying today's webcast, which is available in 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. If you would like to ask a question at that time, please press star, then the number 1 on your telephone keypad. Today's conference call is being recorded. And as a reminder, all participants will be in listen-only mode. Now I would like to turn the call over to Ms. Ines Lenuce, Investor Relations and External Communications Manager. Please go ahead.

Thank you. Good afternoon, everyone, and thank you for joining us today. If you have not seen the press release, a copy is posted on our corporate website in the investor relations section. With me on today's calls are Danielle Skocking, Chief Executive Officer, and Mike Doyle, our Chief Financial Officer. We will make forward-looking statements during this call, so I will repeat our usual safe Harvard statement. Today's call may contain forward-looking statements, and I refer you to the forward-looking statement section of our earnings release and recent filing with the SEC. We assume no obligation to update or revise any forward-looking statements to reflect new or changed events or circumstances. In addition to reporting financial results in accordance with U.S. generally accepted accounting principles , we discuss certain no-gap financial measures. Investors are encouraged to review the reconciliation of this non-GAAP financial result, which can be found in the press release. I would now like to turn the call over to our CEO, Damian Skokin.

Thank you, Nish, and thank you all for joining us today for our first earnings call as a public company. As many of you know, we completed our initial public offering on September the 20th, We are pleased today to be discussing a very solid quarter with improvements in all key metrics. As this is our first earnings call, and many of you may be new to the story, I am going to take a few minutes to discuss the company and our strategy. I will then discuss the highlights of the quarter, and later Mike will take you through our financial results. We will then open the call to your questions. Turning to slide three, a little bit about our IPO. We issued approximately 50 million shares at an IPO price of $26 per share. Our shares trade only in the U.S. on the New York Stock Exchange. Next proceeds to the company were 254 million, providing financial flexibility and resources to continue our growth strategy. Moving now to slide four. We have been around a while, close to two decades. Over that period, we have grown into the leading OTA, online travel agency, in Latin America, with a customer base in excess of 16 million. We have leading brand recognition in online travel in key markets, including Brazil and Argentina, as well as in the expanding markets of Mexico, Colombia, and Chile, where we are growing and gaining market share as well. In total, we operate across 20 different markets. We provide our customers with a broad product selection from air only to complete travel packages, which includes air, hotel, tours, etc. Importantly, our customers can access the Despegar travel site via whatever device they want, including mobile. I'll come back and discuss this a little bit later in my presentation as it is a key part of our growth strategy. Let's move to slide five. Let me put some context around the size and growth of the marketplace and why we are excited about the growth opportunities ahead of us. With a population approximately twice the size of the United States, an expanded middle class, and increasing adoption of internet and mobile internet, the Latin American online travel market is expected to grow at a rapid pace, about 12% per year for the next few years, increasing from $30 billion today to around $48 billion in 2020. Additionally, compared to other markets, Latin America is underpenetrated in terms of online travel. Around 30% of total travel bookings as compared to about 50% in the US and Western Europe. Moving to slide six. Now, let me talk about some of our unique competitive advantages. To begin, our long history has provided us with the highest brand awareness in the region. Additionally, we have acquired a significant amount of local market expertise with respect to different consumer preferences, tax regimes, macroeconomic drivers, including currency volatility and various regulatory environments. Lastly, navigating all these complexities has made us very nimble and responsive to meeting our customers' diverse needs. And nowhere is this more apparent than the value-adding options we offer to our customers. All of these are key competitive advantages for us, and our expertise with managing the complexity of doing businesses in the region also provides significant barriers to entry. Next, moving to slide 7, let me discuss a little bit about our product offering. We have a differentiated platform, as shown on this slide. Over time, we have been able to build relationships with many of the world's leading travel suppliers, providing our customers with one of the broadest product selections. Our initial product offering was focused on flights, and it is still an important customer acquisition vehicle for us. As we expanded our network of hotel packages and other travel products, we began to cross-hire marketing packages to our customers. In the first nine months of 2017, hotels, packages, and other travel products accounted for 54% of our total revenue, an increase from the 50% that was the portion of revenues coming from these products in 2016. We believe there's still significant room to grow our packages and hotels and other products through targeted marketing and cross-selling initiatives. We will talk more about this as we discuss the quarter's results. On slide 8, we have outlined our key priorities that are driving our growth. We have shown seven key priorities which we can group into four large categories. Customers, suppliers, financial, and gross vehicles. And as we get into a discussion of our quarterly results, you will hear how we are working in each of them. Moving to slide nine. Now let me talk to you about the third quarter results. Our performance during the quarter highlights our leadership team's commitment to the execution of our long-term strategy. Additionally, our initiatives to drive cross-selling and capture a higher share of wallets to improve customer financial options, improvements at checkout, and targeted customer fee reductions are allowing us to improve conversion rates. Now let me walk you through some of the highlights for the quarter, which you can see on the slide. We are in a customer service business, and we need to consistently capture new clients, as well as drive repeat business from existing ones. Customer growth up to 20% in the most recent quarter was due to our award-winning mobile platform and comprehensive product offering. We have very loyal customers as evidenced by over 65% of total clients made repeat purchases in the first nine months of 2017. Next is mobile. A key strategic pillar for us as we focus on driving more business to our mobile platform. We recently added new functionalities, which Mike will talk about, in order to further improve the customer experience. This strategy is working as mobile transactions were up 55% in the quarter, and as a percentage of our total transactions increased almost 600 basis points year on year, to 29%. Successful execution of our strategy and steady macroeconomic conditions in the region allowed us to report a 32% increase in gross bookings. This increase was achieved despite an overall softer travel market when compared with the first half of the year, which benefits from stronger than expected currencies in our largest market. and pent-up demand after a slow 2016. Other market factors in the quarter include the earthquakes in Mexico and a severe hurricane in the US and the Caribbean, which caused some customers to delay or change their plans to book travel in the quarter. Revenues, in turn, expanded 24% year on year with growth mainly driven by strong performance in packages, hotels, and other travel products. This includes the impact from cancellations tied to the natural disasters in the quarter. As I mentioned at the start of my presentation, offering a broad product selection is a key competitive advantage for us, particularly as the Latin customers typically prefer to purchase packages versus air alone. We are running the unbeatable packages marketing campaign across our different countries of operation. This consists in offering the most convenient flight plus a spectacular hotel at an unbeatable price. Other promotions include offering exclusive financing alternatives when purchasing through the app, and that has worked quite well. This strategy is yielding good results, allowing us to drive increased sales of higher-margin packages to international destinations, resulting in a 10% year-on-year increase in revenues per transaction for packages, hotels, and other travel products. Let me also highlight the 15% year-on-year increase in adjusted EBITDA when excluding one-time gains in both quarters that Mike will discuss in more detail. We reported also strong cash flow generated from operations of almost 11 million during the third quarter of 2017, compared with the use of cash of over $30 million in the year-ago quarter. One of our management responsibilities is to evaluate market conditions and strike the optimal balance between growth and profitability. Given how early we are in the development of the online travel industry in Latin America, we believe our focus must be on driving growth and taking market share. We are pleased with the balanced track during the quarter. Finally, before turning the call over to Mike, let me briefly touch on a metric that is really important to all of us. Getting recognized for providing exceptional customer service is not easy. You have to work hard at this every day. I am very proud that our team is consistently able to service our customer needs, and they have responded in kind as we saw further improvements in customer net promoting scores. At the end of the day, that is what it is all about. We need to exceed our customers' expectations each and every day. I will now turn the call over to Mike to discuss our financial results.