Despegar.com Corp

Good day and welcome to Despigar's third quarter 2024 earnings conference call. My name is Jeannie and I will be the operator for today's call. At this time, all participants are in a listen-only mode. 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, Investor Relations. Please go ahead.

Good afternoon, everyone, and thanks for joining us today. In addition to reporting on audited financial results in accordance with US generally accepted accounting principles, we will discuss certain non-GAAP financial measures and operating metrics, including foreign exchange neutral calculations. Investors should carefully read the definitions of these measures 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 a 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. Joining us on today's call, our CEO, Damian Skokin, will kick things off with an overview of Despegar's performance in the third quarter and an update on key growth issues. Following Damian, Sebastian McKinnon, our chief of travel partners, will share the latest on our B2B efforts. And then our CTO, Gonzalo Esteverena, will walk you through the recent advancements we have made with Sofia, our AI travel assistant. Diving deeper into the financials, our CFO, Amit Singh, will provide a detailed review of the quarter's results. Finally, Damian will wrap up our prepared remarks before we open the floor for your questions. Damian, please go ahead.

Thank you, Luca, and welcome to the SPGAS third quarter conference call. 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. Even though during the quarter, gross bookings declined slightly to $1.3 billion, this was anticipated due to the foreign exchange headwind, particularly in Brazil and Mexico. In constant currency, our gross bookings demonstrated an industry-leading growth of 35% year over year, underscoring the very strong fundamental trends of our business. Our commercial efforts during the quarter were highly successful, leading to a record high take rate of 14.6%. This significant increase was driven by two key factors. First, our continued emphasis on package sales led to a 253 basis points increase year on year in package sales as a percentage of gross bookings, reaching 33%. Second, we saw a recovery in travel demand in Argentina, where bookings increased sequentially for the first time since the fourth quarter of 2023. We achieved this success in part through our ability to offer a comprehensive portfolio of payment options, combined with product innovation, like allowing Argentine customers to pay for international transactions in local currency. In line with this favorable trend, total revenues for the quarter increased by 9% year over year, reaching $194 million. Notably, non-air revenues represented 62% of our consolidated top line, further diversifying our revenue mix and in line with last year's results. Importantly, when adjusting for foreign exchange headwinds, our total revenues increased by 53% year over year. highlighting again the underlying strength of our business. Our top-line growth, combined with a continued focus on operational efficiency, enabled us to deliver a gross margin of almost 74%, our strongest in the Sprigard's IPO in 2017. Key drivers of this efficiency include cost savings in installment-related expenses, and credit card processing fees. Additionally, in line with our results throughout the year, we achieved additional savings in general and administrative and technology expenses. As a result of our improving operational efficiency, adjusted EBITDA increased 94% year-over-year, reaching $48 million, a new record for the company. Our adjusted EBITDA margin also approached 25%, making another all-time high for Despegado. These results reflect our ability to deliver profitable growth while continuing to enhance operational leverage, positioning us strongly for the future. Also of note is the increase in adjusted net income, which rose an impressive 309% year over year. reaching $36 million for the quarter. As a consequence, adjusted earnings per share rose to 34 cents during the third quarter of 2024, up from 1 cent in the year-ago quarter. In our core B2C segment, gross bookings reached $1.1 billion for the quarter, decreasing 8.4% year-on-year, in line with the anticipated FX heading. Despite this temporary trend, we remain focused on our commercial strategy centered around higher margin packages and hotel sales, particularly in Brazil and Argentina, where we experienced notable success. Our strategic focus in these markets has been on offering a compelling and comprehensive product portfolio alongside a market-leading financial solutions, which are integral to travel decisions and purchases in Latin America. In our B2B segment, we continue to see strong growth trends that have remained steady throughout the year. B2B growth bookings, which include our wide-level segments, and comprehensive technology solutions for online and offline travel agencies grew by 23% year over year and now account for almost 19% of our total gross bookings. We are pleased with the sustained growth in B2B, which reflects the strength of our technological platform and the successful ramp up of new partnerships with leading brands positioning us for continued growth in this segment. During the quarter, we achieved another significant milestone as we redefined our long-term commercial relationship with Expedia Group. We're excited to announce the signing of a new 10-year lodging outsourcing agreement with Expedia, set to take effect on January 1st, 2025. This partnership not only enhances the collaboration between our companies, but also unlocks substantial growth opportunities for both parties. Under this agreement, Despregar will further optimize its lodging supply, focusing on key initiatives such as our B2B, white label, software as a service, and M&A strategies, while also expanding our directly sourced hotel inventory outside Latin America. The partnership also provides Despegar with greater flexibility to form new strategic alliances and pursue business in complementary segments, positioning us to further strengthen our market presence across the region and beyond. This collaboration builds on our combined strengths. Despegar's leading technology platform and extensive customer base and Expedia Bass Global Launching Supply. We believe this enhanced partnership reinforces our competitive mode and will foster new growth opportunities for both companies over the next decade. Additionally, another key financial benefit of this new agreement is that the previously recorded 135 million perpetual contingent liability on the SPREGAS balance sheet will now be amortized over 10 years 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, customer-centric solutions, and will further solidify our position as a leading travel technology company. Innovation remains at the heart of the SPGAL success, exemplified this year by the launch of our AI-powered travel assistant, Sophia. Since its debut in March, Sophia's capabilities have evolved significantly. Today, the assistant allows customers to seamlessly search, browse, and book both air and hotel services directly within the conversation flow. This conversational approach has enhanced the user experience by offering a more personalized and efficient way to plan and book travel. Throughout this recent quarter, we made notable advances in SOFIA's after-sales support capabilities as well. Customers can now easily make post-booking inquiries through SOFIA, resulting in a notable reduction in costly call center resolutions. Furthermore, we've introduced a feature that enables customers to browse their conversation history allowing the user to manage multiple distinct travel conversations in parallel, all within the same tool. This not only improves customer satisfaction, but also reduces friction in the travel planning process. A further testament of this improvement is our NPS score, which reached 71.1%, one of our highest scores for a quarter. While these advances are impressive in their own right, the most significant development we got in SOFIA is our ability to offer it as a Software-as-a-Service solution to our business partners. As recently announced, we signed our first Software-as-a-Service agreement and we are incredibly excited about this new growth avenue. This strategic move opens up opportunities for SPGAR to leverage AI technology beyond its own platform, allowing our B2B and wide-label partners to benefit from SOFIA's cutting-edge capabilities. Our goal is to integrate SOFIA into our partners' platforms effortlessly, making it a vital resource for enriching their ecosystem and elevating the customer experiences they offer. it will also be a growing source of recurring revenue and enable us to further diversify our revenue streams. Later in the call, Gonzalo will provide more details on this exciting new product offering. I would like to highlight our loyalty program, Pasaporte Despegar, which remains a key pillar of the value proposition we offer our customers. In the quarter, the program grew by more than 50% year-over-year, reaching a milestone of 30 million loyalty members. Being part of our loyalty program provides customers with the ability to earn passaporte points on every transaction booked through Despegar, while also accumulating loyalty points from hotels and airline programs. This dual accumulation significantly enhances the benefits and appeals of our loyalty program, making it more attractive to frequent travelers. An important indicator of the program's success is a continued increase in redemption rates. In the third quarter, 12% of all transactions were completed using Pasaporte points, demonstrating the growing value customers placed on the rewards they earned through Despegada. In addition to our loyalty program, Our mobile app plays a crucial role in enhancing the overall customer experience. We continuously refine the app to improve the travel, search, and booking process, which in turn drives cross-selling opportunities, boosts customer engagement, and repeats booking rights. During the quarter, the app's downloads increased 47% year-over-year, reaching 19 million total downloads. Furthermore, the app-based transactions now account for almost 51% of our total booking, underscoring the growing importance of our mobile first approach and its ability to drive organic traffic. Once again, this quarter we have made significant progress towards being the preferred choice for travel booking in Latin America. while also expanding our margins to drive profitable growth and create additional shareholder value. We are also laying the groundwork for continued future industry-leading growth through several exciting new initiatives, which Sebastián and Gonzalo will discuss shortly. These initiatives will present significant opportunities to fuel our momentum and drive long-term value for both our customers and shareholders. I will now turn the call over to Sebastian, who will walk you through our latest B2B initiative and wide-level partnership. Thank you, Damian, and good day, everyone.