Despegar.com Corp. (NYSE: DESP) reported Q3 EPS of ($0.60), $0.19 worse than the analyst estimate of ($0.41). Revenue for the quarter came in at $11.7 million versus the consensus estimate of $14.11 million.

Third Quarter 2020 Key Financial and Operating Highlights

(For definitions, see page 12)

• Sequential monthly improvement in transactions and gross bookings during the quarter with CAGR of 20% and 29%, respectively. Improvements mainly driven by higher domestic demand in Brazil and Mexico, while travel restrictions remain in place in other key markets
• Marketing decreased $1.5 million compared with 2Q20, despite a 3X quarter-over-quarter (QoQ) increment in transactions. 51% share of mobile transactions in 3Q20
• As reported Gross Bookings more than tripled QoQ but declined 86% year-over-year (YoY) to $165.3 million. Gross bookings on an FX neutral basis declined 82% YoY
• As reported Revenues were $11.7 million, which include the impact of cancellations given the increased flexibility of the Company’s refund policy due to Covid-19. Excluding the impact of cancellations, as reported revenues would have declined 84% to $21 million and would have increased 406% sequentially.
• Transactions and Room Nights both down 78% YoY and up 188% and 315% QoQ, respectively
• Structural Costs declined 49% YoY and 16% QoQ to $27.8 million, reflecting measures implemented throughout the year, and meeting the Company’s $28 million run-rate target for the quarter
• Excluding Extraordinary Charges, Adjusted EBITDA was a loss of $16.6 million compared to a loss of $32.0 million in 2Q20. Reported Adjusted EBITDA was a loss of $33.7 million in 3Q20 compared to an EBITDA loss of $65.8 million in 2Q20 and positive $9.4 million in 3Q19. Non-recurring charges that impacted Adjusted EBITDA were $17.1 million in 3Q20
• Use of operating cash of $24.2 million in 3Q20, compared to positive operating cash flow of $20.0 million in 2Q20 and $25.5 million in 3Q19
• Solid balance sheet - Cash and cash equivalents including restricted cash of $386 million at quarter end, including proceeds of US$189.6 million from private placement closed on September 21, 2020

Message from CEO

Commenting on the Company’s performance, Damian Scokin, CEO stated, “We continue making strong progress on the key initiatives defined as a response to Covid-19 scenario: 1) Adjusting our value proposition targeting profitability and cash generation, 2) focus on strict cost control and increasing operational leverage, 3) balance sheet strengthening and, 4) efficient integration of acquired businesses. These priorities are aligned with the Company's long term focus.

In that context we are encouraged by the steady monthly increases in our Gross Booking levels mainly driven by higher demand for domestic travel both in Brazil and Mexico. Additionally, the recent closure of the Best Day acquisition, with its focus on domestic travel in Mexico, is expected to be a positive contributor to Despegar’s performance in the coming months. By contrast, travel restrictions remained in place during the quarter in the Andean Region and Argentina.

With respect to the Company’s financial position, we are pleased that we have achieved the objectives we had set for Despegar at the beginning of this pandemic including: i) reaching our targeted Structural Cost run rate of $28 million, ii) renegotiating and closing the Best Day acquisition, iii) and strengthening our Balance Sheet by raising $200 million in private capital.

This past quarter we have made strong progress in the integration of the Best Day and Koin businesses, and we continue working with our travel partners on the pending refunds and cancellations.

We remain disciplined yet opportunistic in our expenses and capital deployment, targeting attractive returns through an increase in scale by leveraging our technological platform and strong brand, moving ahead with the integration of Best Day and Koin as we further build on our low-cost delivery model.”

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