4Q19 Earnings Conference Call · DESPEGAR - Q4 EARNINGS RELEASE Despegar, A Partner of Choice among...

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4Q19 EarningsConference Call

DATE _

March 5, 2020

This presentation includes forward-looking statements. We have based these forward-looking statements largely on our current beliefs, expectations and projections aboutfuture events and financial trends affecting our business and our market. Many important factors could cause our actual results to differ substantially from thoseanticipated in our forward-looking statements, including: political, social and macroeconomic conditions in Latin America; currency exchange rates and inflation; currentcompetition and the emergence of new market participants in our industry; government regulation; our expectations regarding the continued growth of internet usage ande-commerce in Latin America; failure to maintain and enhance our brand recognition; our ability to maintain and expand our supplier relationships; our reliance ontechnology; the growth in the usage of mobile devices and our ability to successfully monetize this usage; our ability to attract, train and retain executives and otherqualified employees; and our ability to successfully implement our growth strategies. We operate in a competitive and rapidly changing environment. New risks anduncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statementscontained in this presentation. The words “believe,” “may,” “should,” “aim,” “estimate,” “continue,” “anticipate,” “intend,” “will,” “expect” and similar words are intended toidentify forward-looking statements. Forward-looking statements include information concerning our possible or assumed future results of operations, business strategies,capital expenditures, financing plans, competitive position, industry environment, potential growth opportunities, the effects of future regulation and the effects ofcompetition. Forward-looking statements speak only as of the date they are made, and we undertake no obligation to update publicly or to revise any forward-lookingstatements after the date of this presentation because of new information, future events or other factors, except as required by law. In light of the risks and uncertaintiesdescribed above, the future events and circumstances discussed in this presentation might not occur or come into existence and forward-looking statements are thus notguarantees of future performance. Considering these limitations, you should not make any investment decision in reliance on forward-looking statements contained in thispresentation. This presentation includes industry, market and competitive position data and forecasts that we have derived from independent consultant reports, publiclyavailable information, industry publications, official government information, other third-party sources and our internal data and estimates. Independent consultant reports,industry publications and other published sources generally indicate that the information contained therein was obtained from sources believed to be reliable. The inclusionof market estimations in this presentation is based upon information obtained from third-party sources and our understanding of industry conditions. Although we believethat this information is reliable, the information has not been independently verified by us. Trademarks and service marks appearing in this presentation are the property oftheir respective holders. This presentation includes data from Euromonitor. Information sourced to Euromonitor is from independent market research carried out byEuromonitor International Limited as part of its annual Passport research. Euromonitor makes no warranties about the fitness of this intelligence for investment decisions.This presentation is strictly confidential, is for informational purposes only and may not be relied upon in connection with the purchase or sale of any security. You may notdisclose any of the information contained herein to any other parties without the company’s prior express written permission. This presentation is made pursuant to Section5(d) of the Securities Act of 1933, as amended, and is intended solely for investors that are either qualified institutional buyers or institutions that are accredited investors(as such terms are defined under Securities and Exchange Commission (“SEC”) rules) solely for the purpose of determining whether such investors might have an interest ina securities offering contemplated by Despegar.com, Corp. Any such offering of securities will only be made by means of a registration statement (including a prospectus)filed with the SEC, after such registration statement is declared effective. No such registration statement has been declared effective as of the date of this presentation.This presentation shall not constitute an offer to sell or the solicitation of an offer to buy these securities, nor shall there be any sale of these securities in any state orjurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction.

DISCLAIMER

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● Successfully navigate adverse macro● Approach M&A in a savvy fashion● Opportunistic share buyback

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WIN-WIN VALUE PROPOSITION FOR CUSTOMERS AND PARTNERS

EFFICIENT CUSTOMER ACQUISITION & RETENTION

BEST-IN-CLASS DIGITAL PRODUCT

RAPID ADAPTION TO LOCAL MARKETS

LOW-COST DELIVERY MODEL UNIQUELY SUITED FOR LATAM

STRONG FINANCIAL POSITION TO LEAD INDUSTRY CONSOLIDATION

CUSTOMERS● Strong Portfolio of Negotiated Fares● Customer centric company ● Alternative Payment Methods

BRAND● Highest Brand Awareness in Latam● Most Downloaded OTA App in the region

● Focused on our value proposition:+4,300 initiatives were deployed on 2019

● Rapid reaction to opportunities ● Understanding of local market dynamics

● Tailored made processes with Partners● Centers of operational excellence● Deep customer knowledge

● Strong Balance Sheet

2019 Closes with a Strong Competitive Position

TRAFFIC● 69% Non Paid Traffic (1)

● 42% Mobile App Transactions in 4Q19

PARTNERS● Partner of choice in the region, preferred

by leading companies

● Cutting edge capabilities added : (i) Cross channel interfaces, (ii) bundling abilities and (iii) differentiated shopping experience

● Creation of local commercial events● Loyalty Program tailored to the Brazilian

market

● Best in class fraud & errors strategy● Leader in payment methods● Low cost delivery model

(1) Non Paid Traffic includes paid branded keywords

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Best Day Acquisition, a Leading Player in Mexico

Commercial Agreement with Tarjeta Naranja in Argentina

High-margin Packages, Hotels & Other Products Increasing Share of SalesBusiness Levers Helping to Drive Growth in Gross Bookings and Maximize Profitability

Leading Mobile App in the Region, Increasing 466 bps as % of Sales

Launch of Loyalty Program in Brazil and co-branded credit card with Santanderin Brazil

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4Q19 - Further Strengthening Our Competitive Levers

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4

DRIVE HIGHER MARGIN

PACKAGES

BUILDING ON LEADING

MOBILE APP POSITION

ENHANCE CUSTOMER

LOYALTY

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EXPAND REACH

ACROSS PLATFORMS

DESPEGAR - Q4 EARNINGS RELEASE

1.6 1.7

5.9 6.2 1.1 1.2

4.4 4.5

2.7 2.9

10.4 10.7

4Q18 4Q19 2018 2019

Air Hotels, Packages & Other Travel Products Total

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Total Transactions by SegmentIn millions

+6%

+7%

+0%

+5%

Gross BookingsIn US$ Bn

+26% FX Neutral

FX Neutral Gross Bookings +26% Growth (6% As Reported) in Challenging Context

+7%

+3%

+6%

+23% FX Neutral

0%

● Transactions up 7% YoY while stand alone package transactions up 18% YoY

1.2 1.3

4.7 4.7

4Q18 4Q19 2018 2019


Despegar Agrees to Acquire Best Day, a Leading Player in Mexico

● Strong BrandHigh Brand Recognition inMexico

● Deep Local Understanding35 years of Experience withunique insight into Mexicoas destination

● Significant ScaleConsolidates over 6mcustomers annually

● Win-Win Value PropositionIncreases inventory inhigher value add products,while introducing InDestination Servicesbusiness

In-destination services for Best Day and other customers ● Presence in Mexico & Dominican Republic● Absolut leaders in selling activities in Cancun / Riviera Maya● Partnerships with more than 140 travel companies (USA & CAN mainly)

B2C Focus

2/3 of revenues

Source: Estimated 2019 figures

Cross-platform Travel Agency

● Online channel in Mexico, Argentina, USA, Colombia, Brazil and Chile● Call Center own operated● Asset Light Offline channel with approx. 200 Kiosks in MX

Hotel Wholesaler Aggregator

● Leader in Mexico, Top 3 in Latam● +20 years experience

White labels for major travel vendors and Strategic Partnership

● Customizes and manages the online platform and booking systems of its partners

● More than 70 partnerships with key players in the market (airlines, hotels, retails stores, banks)

B2B1/3 of

revenues

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Despegar, A Partner of Choice among Leading Well-Known Companies in the Region

Launched Co-branded Credit Card inBrazil in Partnership with Santanderand Visa to Complement LoyaltyProgram

● Top notch technology that allows the user to get the card approved online in one click

● Points are accumulated with the first purchase

● Points accumulated with the card could be used to purchase any product at Decolar

Announced Commercial PartnershipAgreement with Tarjeta Naranja toprovide a white label onlinemarketplace to sell Despegar’s travelproducts

Link to video

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https://investor.despegar.com/ir-services/Investor-Education/default.aspx


5%

61%

4%

18%

-2%

1% 1%

-1%

Brazil Argentina Other Total

FX Neutral As Reported

7%

81%

12%26%

-1%

13% 9% 6%


FX Neutral As Reported

2%

13%

8%7%


Solid Growth in Transactions and Gross Bookings while Mixed Performance in ASPs Reflects FX Volatility in Brazil and Chile

Transactions +2%, Gross bookings +7% FX Neutral (-1% as reported) while FX neutral ASPs +5% (-2% asreported). Results reflect: i) Package transactions +8% shifting however from international to domestic due to acapacity reduction in international air travel; ii) Brazilian real depreciation leading to a slight contraction in GrossBookings as reported.

Brazil

Remains impacted by adverse macro. However, advancement of purchases lead to a 13% increase intransactions. On an FX neutral basis, gross bookings +81% YoY and ASPs +61%, while as reported grossbookings grow 13% and ASPs 1% YoY.

Argentina

Good overall performance in Mexico more than offset a significant industry contraction in Chile due to thesocial unrest events that took place towards the end of 2019.

Rest ofLatAm

Gross Bookings (% growth) (1)Transactions (% growth) (1) Average Selling Price (% growth) (1)

(1) Note: figures reflect YoY increases in 4Q19

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● Revenue margin up 39 basis points YoY, to 11.4% in 4Q19 driven by growth in transactions of higher-marginPackages, the positive impact from Viajes Falabella and increased customer fees in Argentina

● Packages, Hotels & Other Travel Products segment revenue increased 12% in 4Q19 YoY

32.3 32.2

36.1

32.4

4Q18 4Q19 2018 2019

73.5 77.1

71.0 72.5

4Q18 4Q19 2018 2019

FX Neutral Revenues +34% (As Reported 10%); Take Rate up to 11.4%

Total Revenue* (In US$ millions) Revenue Mix (% of total revenue)

+34% FX Neutral +19% FX Neutral

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+10%

-1%

+5%+2%

0%

Air

Non - Air

Revenue Mix per Transaction (In U$S)

132.5 145.6

530.6 524.9

4Q18 4Q19 2018 2019

38% 37% 40% 38%

62% 63% 60% 62%

4Q18 4Q19 2018 2019

Hotels, Packages & Other Travel Products

Air


82.8 94.2

4Q18 4Q19

Strategic Levers Drive +34% FX Neutral Gross Profit (+14% Reported)

Gross Profit & MarginIn US$ millions and % of revenues

64.7%

Selling & Marketing (S&M) Expenses In US$ millions, % of revenues and US$ per transaction

Gross Margin

% of Revenues 62.5% 65.8%67.6% 32.4% 32.9% 35.8%

FX Neutral 4Q19 Gross Profit of $111.3 million, 34% YoY

Per Transac

tion

$16.0 $16.8 $17.6

34.1%

$17.4

66.1% 33.7%

$17.2

34.1%

$16.7

-3%

● Cost of Revenue +3% driven by: i) increased availability of installments in Argentina; and ii) higher credit cardmerchant fee expense

● S&M expenses +16% due to: i) costs of operating stores within stores at Viajes Falabella; and ii) a $0.5 millionone-time severance charge. Comparable Despegar standalone expenses +5% YoY reflecting launch of LoyaltyProgram in Brazil, partially offset by efficiencies gained in Direct Marketing

+14%

-4%

+14%

+3%+8%

+16%

42.9 49.6 49.1

174.4 187.9 178.8

4Q18 4Q19 4Q19 Comp 2018 2019 2019 Comp

358.5 345.3 346.5

2018 2019 2019 Comp 10


67.6 68.4

25.640.0

2018 2018 - Comp 2019 2019 - Comp

13.9

8.3

12.5

4Q18 4Q19 4Q19 - Comp

Adjusted EBITDA and margin (%)

In US$ millions and % of revenues

AdjustedEBITDA Margin

10.5% 12.7% 4.9%5.7% 8.6% 12.9% 7.6%

-40%-10%

-62% -42%

● Adjusted EBITDA down 40%, while comparable Adjusted EBITDA (excluding $4.2 million in one-time items) declined 10%

● Comparable EBITDA margin down 190 bps reflecting: i) challenging macro in Argentina and to a lesser extent in Brazil resulting in higher YoY price discounts in packages to drive growth, and lower fees from lodging and car rental transactions; ii) higher installment expenses and credit card processing fees; and iii) higher G&A costs

EBITDA Reflects Company Response to Challenging Environment

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● Cash flow generation of $15.3M compared to use of cash of $5.4M in 4Q18 mainly due to higher credit cardcollections, a decrease in incentives & commissions receivables and in advances to suppliers. Partially offset bylower Tourist Payables due to slower sales growth compared with 4Q18.

● $313.6 M in cash and cash equivalents, including restricted cash

Operating Cash Flow (In US$ millions) 4Q19 Operating Cash Flow Bridge (in US$ millions)

In US$ millions

Strong Balance Sheet and Healthy Cash Flow Generation Support Growth Initiatives

.

-24.2-43.3

61.2

-17.6

51.2

-5.4

15.3

2015 2016 2017 2018 2019 4Q18 4Q19 12


(1) Measured in number of passenger air tickets sold by Despegar over total industry. Source: Company estimates based on GDS and OAG information.

NPS-50 bps

Transactions +7%; +5% Ex-Argentina

Non-Air Mix + 130 bps to 63% of Revenues

Top 100 Latam Hotelsof LatAm Hotel GB flat at 24%

Share of Mobile Transactions+466 bps to 41% of Total

Estimated Air Market Share (1)

+20 bps

Gross Bookings

+26% FX Neutral(+6% as reported)

ASPs

+18% FX Neutral

(-1% as reported)

Room Nights+3%

INCREASE REPEAT PURCHASE RATE

INCREASE CONSUMER ENGAGEMENT & SATISFACTION

ATTRACT NEW CUSTOMERS

EXPAND REACH IN THE REGION

CONTINUE TO GROW HIGH MARGIN NON-AIR BUSINESS

ENHANCE PRODUCT OFFERING & CROSS-SELL

INCREASE & OPTIMIZE INVENTORYDEEPEN RELATIONSHIPS

WITH SUPPLIERS

IMPROVE CUSTOMER EXPERIENCEFURTHER INVESTMENT IN MOBILE PRODUCTS

DRIVE SHARE GAINS IN CHALLENGING MACRO

REINVEST OPERATING LEVERAGE IN CUSTOMER ACQUISITION

BROADEN PLATFORM & MARKET SHARE GAIN

PURSUE STRATEGIC ACQUISITIONS

Advancing on Long-Term Strategy Despite Current Challenging Macro Environment

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● Two consecutive quarters of improving performance

● Immediate (1Q20) challenges driven by Coronavirus and its related effects - Industry and macro consequences

● Our strategy and five year guidance discussed at the Investor Day remains intact

LOOKING AHEAD

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Q&A4Q19 EarningsConference Call

Appendix


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Trends in Key Financial & Operating Metrics (in thousands U.S. dollars, unless otherwise stated)


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Trends in Key Financial & Operating Metrics(in thousands U.S. dollars and thousand transactions, unless otherwise stated)


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Unaudited Consolidated Balance Sheets (in thousands U.S. dollars)

THANK YOU!

CONTACT_INVESTOR RELATIONSNatalia Nirenberg

+54 911 2665 [email protected]

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