Despegar.com Corp

Good afternoon and welcome to Desvegar's fourth quarter 2023 earnings conference call. My name is Abby and I will be the 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 Pfeiffer of Investor Relations. Please go ahead.

Good morning, everyone, and thanks for joining us today. In addition to reporting unaudited financial results in accordance with US generally accepted accounting principles, we will be discussing certain non-GAAP financial measures and operating metrics, including foreign exchange neutral calculations. Investors should carefully read the definitions of these numbers 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 as substitutes for or superior to GAAP financial measures and are provided as supplemental information only. 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. 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 Skokin, who will provide an overview of Dispigar's fourth quarter and four-year performance, as well as an update on our many strategic growth initiatives. Next. Our CTO, Gonzalo Estevarena, will introduce you to a new innovative technology feature that we recently launched and explain why we are excited about its potential. Amit Singh, our CFO, will follow with a more detailed review of the quarter's financial results, as well as a discussion of our 2024 annual guidance. After that, Damian will end our prepared remarks with a wrap-up before we open the call for questions. Damian, please go ahead.

Thank you, Luca, and thank you, everyone, for joining our earnings call. The fourth quarter of 2023 was a remarkable period for Despegada, as we achieved several major strategic milestones. Our consistent and robust commercial execution, coupled with strong demand trends across the region, resulted in our highest gross bookings since the company's IPO, growing an impressive 44% year-on-year to $1.5 billion, or 78% year-on-year in constant currency. Moreover, this was the fastest year-on-year growth in gross bookings since our IPO when excluding COVID-related recovery. Notably, our Brazil and Mexico businesses continue to experience strong demand, with Brazil in particular benefiting from our commercial execution, competitive strength, and positive secular tailwinds, as we believe more and more customers allocate a higher proportion of their spending towards travel and experiences. For the full year 2023, we reported $5.3 billion in total gross bookings, an increase of 31% year-on-year, or 52% FX Adjusted. As we reach the end of the year, it was clear that our industry has made a remarkable recovery from the pandemic. We believe the impacts of the pandemic are now largely behind us, and we are operating in an almost normal growth environment. According to Euromonitor projections, the overall travel market in Latin America is approximately $150 billion in size, and we anticipate they will continue growing at a low double-digit rate for the foreseeable future. In other words, we believe that we have a lot of runway for growth in our market. It is important to note that the recovery in trouble has not just been limited to air capacity, as we are noticing a significant shift in overall consumer behavior. We believe Latin Americans are now increasingly focusing more on experiences and services. A similar trend was also cited by SCIFT in its 2024 Travel Outlook Report. Its surveys reveal that consumers across all ages and regions state that travel remains a top priority. This suggests a fundamental shift towards a more experiential and service-oriented economy. which is presenting new opportunities for our industry. In line with this positive secular trend, travel packages continue to be an integral part of our commercial strategy and value proposition to our clients. Such, the proportion of packages as a percentage of our gross bookings came in at 32%. Our package sales in addition to our increasing non-air sales, drove our average take rate to 13.4% and generated record-breaking revenues of $204 million for the quarter, a 40% year-on-year increase in U.S. dollars and 82% in constant currency. For the full year 2023, our revenues, of $706 million grew 31% year-over-year in U.S. dollars and 55% in constant currency. In addition to our focus on improving our revenue mix, we further streamlined our cost structure during the quarter. We implemented several cost reduction measures, building in more operating leverage and facilitating additional margin expansion. The combination of increasing operational leverage and top-line growth resulted in our highest adjusted EBITDA since the company's inception at $43.6 million. Adjusted EBITDA for 2023 was $116 million, highest full-year EBITDA ever, with a margin expanding 8.6 percentage points year over year. to 16.4%. Desplegar also generated very strong operating cash flows in the quarter, with total $26 million. Later in the call, Amit will provide more details on our financial performance. Now to provide a little color on our business segments. Our B2C segment experienced robust growth of 41% during the quarter. reaching $1.3 billion in gross bookings. This achievement was largely due to our effective commercial strategies across all our search channels and platforms, which enabled us to increase non-year revenues by an impressive 49% year over year, reaching a total of $126 million for the quarter. Our growth was primarily driven by robust sales in hotels and packages, particularly in Brazil and Mexico, as we continue to uphold our leadership position by providing attractive product offerings at the most competitive prices and offering a wide range of payment options. This strategic approach has allowed us to meet diverse customer needs and preferences, reinforcing our market leadership through a combination of quality, affordability, and financial flexibility. By focusing on these key markets and maintaining our competitive edge, we ensure sustained growth and customer satisfaction. Moreover, our air segment also demonstrated solid growth trends, with revenues increasing 25% year-on-year to $75 million during the same period. During the quarter, our B2B and White Label businesses continued to be significant growth drivers. Specifically, B2B saw a remarkable expansion of 63% in gross bookings, while our White Label operations grew an impressive 69% year-on-year. A notable and recent development under our White Label growth strategy is a partnership that we recently forged with Banco Da Vivienda, one of Colombia's largest banks and a prominent brand in the country's financial services sector. We're very excited about the potential of this partnership and we have already begun the onboarding process. This most recent collaboration has particular promise as Da Vivienda's more than 16 million clients will gain access to exclusive travel experiences through Despegar's platform. Given the success of similar partnerships, we anticipate that our leading technology product will foster greater customer loyalty for Da Vivienda, as well as generate additional revenue streams for them and us. Our wide labor partnerships have grown to 80 in number, with several significant ones in the pipeline. which will be onboarded in the coming months and quarters. These partnerships underscore the strength of our best-in-class technology platform, which enables us to provide customized solutions to our partners regardless of their size. We eagerly look forward to working with La Vivienda and we continue actively seeking additional opportunities to expand our wide-label operations throughout Latin America. Also, as we noted during our previous earnings calls, we intend to further leverage the strength and scalability of our platform by penetrating targeted areas of the 2.2 trillion global travel market as a next phase of our long-term growth strategy. One of our most critical strategic advantages lies in our commitment to continuous innovation and utilization of our technology platform alongside our extensive customer database to keep the pulse of our various markets and deliver unique travel offerings to our customers. This focus extends to our mobile app, which serves as a pivotal tool for driving customer engagement and increasing customer retention. The fourth quarter also marked a significant achievement in terms of app engagement. Not only did our app downloads increase by 28% year over year, reaching a total installed base of almost 15 million devices, but we also processed a record 45% of transactions through our apps. Crucially, our app-first approach boosts organic traffic to our own channels, which currently stand at approximately 75% of transactions. It also enhances customer retention, with 49% of customers who make a trip purchase on our app typically making another transaction within 12 months of their initial purchase. Next, I'd like to discuss a core project we've been diligently working on over several months and have recently unveiled and has an exciting new product feature available in the travel market. On March 4th, we launched our AI Trip Planner. Through large language models, it is trained on our vast customer data, the SPGAS product inventory, and web-wide information. The result is our digital travel assistant, branded as SOFIA. SOFIA is powered by artificial intelligence and is literally transforming customer interactions with our platform, rapidly offering truly tailored travel solutions and doing so in a way that exceeds customer expectations. SOFIA puts searches and bookings of personalized travel experience at their fingertips, operating in a multimodal fashion. Later on our presentation, our CTO, Gonzalo, will elaborate on SOFIA, including our vision for and the tremendous possibilities of this new technology. Throughout the year, we have made great progress on our three key focus areas, which are already discussed as revenue diversification and multi-channel capabilities. But importantly, our strong brand identity and customer focus remain one of Despegar's key competitive strengths, with unaided brand awareness consistently ranking highest across all markets we operate in, and surpassing both global and local competitors. Brand leadership not only affords us visibility across the region, but also position us as the preferred partner for travel product suppliers, as it drives substantial customer traffic for them. Additionally, we made significant strides, improving our net promoter score, which now stands at 69%, 41 basis points higher than the pre-pandemic level. This score reflects our unwavering commitment to delivering the best travel experiences to our customers. We achieved this result while developing an efficient and scalable service model that effectively leverages our technology platform, enabling our customers to quickly and easily resolve travel-related inquiries through self-service in most of the cases. This model, combined with our ongoing focus on cost reductions, have lowered our cost per order by almost 30% since 2018. Recently, we have expanded our exploration into how artificial intelligence can enhance customer interactions and create additional operational efficiency, especially in the context of training and providing tools to our service agents, as well as synthesizing customer interactions. By integrating AI into our processes going to further improve customer satisfaction while also enhancing our overall business performance. Another corner store of our brand identity and a key driver of customer stickiness is our loyalty program, Pasaporte Despegar, which has maintained its impressive growth trajectory. At the end of the quarter, total loyalty members reached 23 million. making it a 90% year-over-year increase. Furthermore, points redemptions increased by over 4.5 percentage points, reaching 10.4% of total transactions. Now, a brief word about payments, another unique aspect of the Latin American market and where we also have a significant competitive advantage. Our long-established local presence sets Despegar apart from competitors by enabling us to not only procure inventory at competitive prices, but also offer customers an extensive range of payment options and installment plans. Financing is crucial and integral to travel purchases in Latin America, a need that we can effectively meet as a local player in the region. Among the many financing options available to our clients through our partnerships with local financial institutions is our buy-now-pay-later product, Coin. As part of the Spegar's travel ecosystem, Coin extends our reach to customers who may not possess a credit card or have limited credit balances. As many of you may recall, in 2022, we committed to COIN achieving an EBITDA break-even point by the second half of 2023. Therefore, I am particularly pleased to announce today that COIN did more than that, contributed $3 million to the SPGAS consolidated adjusted EBITDA during the fourth quarter, while also being cash flow accredited. 2023 was not just a year in which we made substantial progress financially, operationally, and technologically. We also worked hard to foster a more positive work environment within Desperado. During the year, attrition levels fell to historic lows, reflecting a high level of employee satisfaction and retention of key talent. In summary, our sharp focus on strong commercial execution and improving operational efficiencies Combined with a more profitable product mix, growing organic traffic and further penetration of adjacent B2B market segments resulted in yet another record quarter for the company. With $706 million of full-year revenues, we exceeded the top end of the range of our updated revenue guidance, which was $680 to $700 million. And at $116 million in adjusted EBITDA, we also exceeded the upper end of our hourly revised EBITDA guidance by $6 million. As a result, we believe Despegar remains the world's fastest growing travel technology company in terms of both revenue and profitability. I would like to end here by noting that our unprecedented results would not have been possible without the hard work and dedication of the employees across our organization. So congratulations to the entire team at the SPGAP. Looking ahead, we are very enthusiastic about the growth opportunities that await us. Our commitment to maintaining our strong position as industry leaders in growth is unwavering and we are dedicated to continuously pursuing excellence. Through continuous innovation, we aim to stay ahead of industry trends and challenges in order to sustain our momentum and further solidify our leading positions in the market. I will now turn the call over to Gonzalo, who will walk you through our exciting AI innovation. Sofía.