And welcome to Despegar's Fourth Quarter 2021 earnings call. A slide presentation is accompanying today's webcast and is available at the Investor section of the company's website, www.investor. despegar.com. There will be an opportunity for you to ask questions at the end of today's presentation. This conference call is being recorded.

As a reminder, all participants will be on listen-only mode. Now, I would like to turn the -- turn the call over to Ms. Natalia Nirenberg, Investor Relations. Please go ahead..

Good morning, everyone and thanks for joining us today for a discussion of Despegar fourth quarter 2021 result. In addition to reporting financial results in accordance with U.S. generally accepted accounting principles, we discuss certain non-GAAP financial measures and operating metrics, including foreign exchange neutral calculation.

Investors to read the definitions of these measures and metrics included in our press release carefully to ensure that they understand them. Non-GAAP financial measures and operating metrics should not be considered in isolation as substitute for or superior to GAAP financial measures and are provided as supplemental information only.

Before we begin our prepared remarks, 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 assumptions to a number of risks and uncertainties that could cause actual results materially differ, including factors that maybe [Indiscernible].

This include but are not limited to expectations and assumptions related to the impacts of the COVID-19 pandemic and the integration and performance of the businesses we acquired, including Best Day and Koin. 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 Scokin, who will provide an overview of the fourth quarter and update you on our strategic priorities. Alberto Gaffney, our CFO will then discuss the quarter's financial results in more detail. After that, we'll open the call for your questions. Damian, please go ahead..

Thanks Natalia and good everyone. Thank you for joining our results call and for your interest in Despegar. The spread on the value earnings follower became more evident this past quarter as consistent execution of our strategy makes us who got the growth coming from the governing travel demand are gross.

Our geographic footprint, growth flow through our income statement, as we will explain. The star, we acted the highest level of gross bookings, transactions and ASPs since the beginning of the funded, farther greater demand for more profitable products that the travel packages and hotel significantly offset Currency depreciation in the region.

Although bookings were already 75% of fourth quarter 2019 levels, we grew adjusted EBITDA by 30% to $16 million when excluding extraordinary charges and cost (ph). Our American (ph) paying solutions in Brazil where we're investing to scale the business. Taking a step back, multiple relievers are driving our performance.

First, the more efficient cost of structure that is now in-play.

Second, the synergies that we are now able to realize from past acquisitions, which, together with our cost cutting efforts, resulted in a steady 7% reduction in operating expenses when compared to the fourth quarter of 2019 levels and excluding extraordinary charges and the impact from Best Day and Koin in both quarters.

Third, more diverse sources of revenue in terms of geography and products. Fourth, the take rate of 13.4% when excluding extraordinary cancellations.

And lastly, we are seeing a good result from our marketing efforts with the share of non-paid profits increasing two percentage points, while the share of gross bookings captured through the app was up four percentage points, both when compared to the fourth quarter of 2019.

Looking ahead at Omnicom receipts, a more pent-up travel demand materializes. We expect the operating leverage that we have built into the business to accelerate and generate additional earnings.

Moreover, we have maintained a solid balance sheet with cash and equivalents of nearly $280 million, giving us the flexibility to invest in technology and in market consolidation, among other growth initiatives. Let's move to Slide 4 for a closer look at the improving demand conditions in our key markets.

Our market gained additional momentum in October and November as more pandemic restrictions were lifted and travel activity picked up. Although there has been a pause in travel demand since December, impacted by seasonality and the emergence of Omicron, we expect industry travel should resume to its growth trajectory in the second quarter.

Our performance was strong in Brazil, generating a third of transactions. Gross booking growth, 50% sequentially and with 56% on the fourth quarter of 2017 level, as domestic air travel improve and international transactions increased.

Turning to other relevant markets, Colombia and Chile benefited from pent-up demand, which drove bookings above fourth quarter 2018 level by 43% and 39% respectively.

Growth in gross bookings was pretty good not only by an increasing transactions but also by an improvement in ASPs, which rose 19% sequentially to $410 per transaction at just 9% below fourth quarter of 2018 level.

Returning to our growth strategy on slide 5, we need to show how our loyalty program about this regard has been gaining significant momentum in Mexico. Particularly in this market, we made adjustments to our website which makes the program more visible to visitors, and we simplify the registration process.

All these measures have resulted in a tripling of members and have also increased the level of customer engagement critical in the context of changes in [Indiscernible] [Indiscernible] [Indiscernible] features 75% of total [Indiscernible] were done by loyalty program numbers. Let's move to Slide 6.

The goal of further enhancing our alternative accommodation proposition, we have just entered into an agreement to acquire 51% ownership stake in states.

Brazil, leading vacation [Indiscernible] for the total price of approximately 15.7 million [Indiscernible] founded in 2016, State offer a comprehensive solution to buy vocation property managers and owners in Brazil. State is also a [Indiscernible] integration partner of alternative accommodations for leading international bookings platforms.

In the near term, these latest acquisition will allow us to add new inventory of over 17,000 properties, mainly throughout Brazil, expanding our 400,000 plus total vacation rental inventory. Stays also brings us new digitize capability and significant segment expertise to expand our vacation rental offerings within Brazil.

Longer-term, Stays will lever disregard leading position in other key geographies in Latin America to accelerate its expansion. Note that only 10% of Latin American vacation property owners is digital channel management compared to 90% Europe with ample growth potential for our partnership with Stays. Turning to Slide 7.

The heart of our strategy for calling another key component in our growth plan is establishing a presence wherever the consumer makes purchases.

As a meaning to effectively escape Koin platform, we continue expanding its merchant ecosystem, mainly consisting of guided merchants, e-commerce platforms and payment gateway, among other distribution channels. As you're going to see on these slide, some of these merchants and platforms are leading brands in Latin America.

We are encouraged by the strong adoption of Koin's payment solutions for merchants today. It is now available as a payment option to some 100,000 merchants from a range of businesses and from small to large. The current rate of adoption is setting the stage for Koin to become another key growth driver for our company.

By the way of example, Koin Fourth Quarter 2021, total purchase volume increased 73% sequentially to nearly $18 million in the Fourth Quarter of last year. In January 23% of volume came from new merchants reflecting expansion in the customer base. And the collateral the penetration of Koin via Npl's solution accounts for 6% of gross bookings.

Reflecting insensitive investments to scale up this business, stand alone, adjusted EBITDA for Koin resulted in a loss of just over $3 million. I would like to point out that 100% of the solutions engine and risk model are in-house. Under Koin payment solutions, we offer merchants are fault prevention and payments via APIC.

The very attractive potential from Koin at its Buy Now Pay Later and fraud prevention services have a total addressable market of between $15 billion and $20 billion in Latin America. That concludes my portion of the presentation. Alberto, please, go ahead..

Thank you, Damian, and thank you all for joining us today. For our review of our top-line results, please, turn to Slide 8. Record levels of gross bookings and ASPs since the start of the pandemic resulted in our 49% sequential increases enough to reported revenues.

Excluding extraordinary cancellations stemming from the pandemic, revenues would have increased 43% quarter-on-quarter and just 12% below comparable for quarter '19 levels. Note that cancellations continue to decline in this quarter, down by 39% sequentially.

While we expect cancellations to continue in the first quarter due to Omicron disruptions, as the level of cancellations normalize, we should see a decline in front payments and turn costs. Our take rate remains strong at 13.4% when excluding cancellations and almost up by over 200 basis points when compared with fourth quarter '19.

With contribution from Best Day, together we have more advanced prices strategy, which are allowed us to get higher upfront incentives, and customer fees were the key drivers behind this improvement. Now, please, turn to Slide 9. We delivered significantly higher profitability this quarter.

When excluding extraordinary charges and coins, comparable adjusted EBITDA would have increased 30% when compared to fourth quarter '19 numbers, up to adjust over $16 million. We are keep is -- even though U.S. bookings reached only 75% of pre -pandemic levels.

This much increased performance, reflect the operating efficiencies, synergies and revenue diversification we have built into the business over the past two years that is allowing this figure to emerge from this pandemic as a compound with a more sustainable business model on greater earnings and more.

We expect to Koin 's impact on profitability, as Damian noted earlier, standalone adjusted EBITDA that were merchant payment operations, was a loss of just over $3 million, reflecting significant investments to scale up businesses. Now, please turn to Slide 10.

We ended the year with a strong balance sheet with cash and equivalents at nearly $280 million on breakeven operating cash flow. In turn, our net payable position remained relatively unchanged sequentially are nearly $197 million. During the quarter the [Indiscernible] reported net cash flow or $3 million.

This compares to use of cash of nearly $40 million the prior quarter, when customers redeemed allowance amount of travel vouchers in demand. Now, please turn to slide 11. In summary, when excluding extraordinary charges on Koin, adjusted EBITDA was over $1.6 million, 30% higher than in fourth quarter 19.

This is even more impressive when you consider that gross bookings reach only 75% of that quarter [Indiscernible] level. This substantial improvement in profitability together with breakeven operating cash flow, make clear the operating leverage we are carrying into the future quarters.

Despite lower travel demand in December, impacted by the Omicron variant, our business cut strong momentum in the fourth quarter, with particularly robust sequential growth in Brazil, Colombia, and Chile. We see that momentum building again in the remainder of this year.

A substantial pent up demand drives travel purchases above pre -pandemic land (ph). We also entered 2022 with a strong cash position of close to $280 million. One that allows us to continue investing in our growth [Indiscernible], started as further been similarly aided in our industry and scaling Koin's payments platform.

As market acceptance continues growing, Koin's, ecosystems of merchants is expanding, setting the stage for higher purchase volumes in Brazil. And finally, we would like to highlight again, the tripling of debt payout, loyalty members who now number 2.8 million customers.

Now moving to slide 12, while we observed a slow down in demand in recent months when concerns around the Omnicom variant going forward, we expect the variance to have a diminishing impact on travel demand.

Despite first-quarter seasonality and the recent pullback in demand, we nevertheless expected the [Indiscernible] to be adjusted EBITDA positive in the first quarter when excluding Koin. For the remainder of the year, we expect to continue investing in marketing activities in countries with promising demand trends.

Looking farther out, the [Indiscernible] acquisition of Stays, Brazil's leading vocational rental channel will allow us to expand our vacation rental business in the country, as well as in other key markets in Latin America.

We will also remain focused on further enhancing Koin's value competition, where the capturing additional clients in the B2B segment and developing new attractive features for our end consumers.

Finally, we expect sales to continue to recover throughout this year and beyond as long as Latin America is not impacted by the current global state of affairs. In the meantime, we continue executing on our strategy that has proven to deliver solid results, despite demand levels having not fully recovered yet. This concludes our prepared remarks.

We are ready to address your questions. Operator, please open the line for questions..

Thank you. [Operator Instructions] We kindly ask that you stick to one question and one follow-up. Thank you. Our first question today comes from Kevin Kopelman from Cowen and Co. Kevin, please, do go ahead. Your line is now open..

Hi. Good morning.This is Emily, on for Kevin. Congrats on a strong Q4. I was just wondering, to what extent do you believe the improvement in gross bookings you saw in the quarter to minus 25% reflected market share gains versus pent-up demand? And then, I have a follow-up. Thank you..

the pent-up demand and market share gains, in most countries..

Got it. Thank you. And my follow-up is, how do you plan to manage your sales and marketing spend throughout 2022? And asked another way, at what level of gross bookings would we see marketing levels increase? Thanks..

The marketing spend as you know is the result of our [Indiscernible], evaluating the profitability of the next bill. So, it's not just a strategic decision which will come in terms of investing more but we believe that the relevant aspect [Indiscernible] the increasing by organic traffic, our non-paid traffic in general will sustain across 2022.

So even though we will increase investments as markets recover, our portion of organic traffic will remain at higher level than pre -pandemic..

Thank you..

Thank you. [Operator Instructions]. The next question today comes from Alejandra Aranda, from ITAU. Please go ahead your line is now open..

Hi. Good morning and congratulations on the really good results that you just show.

I'm wondering if you could share a little bit the breakdown between the revenues coming from PIX, some Koin and the rest from what should we expect there going forward in terms of cost savings?.

Hello, Alejandra. Good morning. Yeah. As Damian pointed out, in what we are seeing Koin today is approximately today, 20% of the activity comes from third-party clients. And then the remaining 80 or slightly lower than that is related to the decolar.com captive clients.

On that front, what you're seeing is on a penetration basis for now, a number of transactions because likely the actual revenue currently is much, much low when it comes to the fixed product. You actually see that you have approximately over 6%, that is the penetration on our website.

And then when it comes PIX, that's an additional of 4% for a total on Ag rate of approximately 10%..

Okay, thank you..

You are very welcome. Thank you..

Thank you. Next question today comes from Karen Kenny from Morgan Stanley. Please, go ahead. Your line is now open..

Thank you and congrats on the great results.

First, could you talk a little bit about bookings in 1Q and whether you expect bookings relative to 2019 levels to improve versus the 75% in 4Q? And then second, could you just talk a little bit about, how you're thinking of fuel costs and whether or not you expect those to negatively impact demand over the short to medium term? Thank you..

Sure. Good morning. On the first piece of your question regarding let's say visibility on Q1.

Importantly, we're actually experiencing or we can describe the situation very similar to what our competitors in region or globally had that is certainly booking activity came down in the very last weeks of December that trailed into January, and then by February started little by little coming up.

And we actually have a perspective that, that improvement will continue up until the end of Q1. So as we were in GB, around minus 25% Vis -a - Vis 2019. Okay, we actually see that our bookings overall will come slightly down from what we actually saw in Q4. But -- and that is vis -a - vis Omnicom. On top of that, you add the seasonality factor.

As you know, Q1 is in relative terms, the weakest quarter for the company. So you actually -- you will see that as a percent of 2019, you actually have let's say from between 5% to 10% decrease vis -a - vis '19, and then on top of that, you need to add the seasonality in order to understand what will be the level of activity.

But most importantly, as you look into how far out into Q2, Q3, and the rest of the year, we believe Omnicom will end up impacting the industry in Latin America. We're very positive on that front so that the impact will be mostly contained to Q1. On your second question.

The geopolitical developments, certain not very, very sad news for all, do not have a direct impact in the region, or particularly for this payout. In material, the amount of revenue or transactions that we actually are related to travel to Eastern Europe, so that's certainly good news.

With regards to the impact on jet fuel prices that could potentially push ASPs up because our suppliers would actually, particularly on the air side, will likely push prices up.

I think the key thing to look at there, is the balance between foreign exchange in the region, because Latin America could potentially benefit from high commodity prices and the on such consumers through their jobs could benefit.

So the balance will be between, jet fuel prices, ASPs going up, maybe that less transactions but if FX in the region actually appreciates that should be positive. So, it's still too soon to tell but that's the way to, from a framework perspective, how to analyze it..

That's really helpful. Thank you..

You are welcome..

Thank you. There are currently no further questions registered. [Operator Instructions]. There are no additional questions waiting at this time, so I'd like to pass the conference over to Damian Scokin, CEO, for closing remarks. Damian, please, go ahead..

We thank you again for your interest in Despegar and we hope you all remain healthy and safe. Thanks for joining us today and for your interest in the company. Goodbye and have a nice day. Bye..

That concludes today's Despegar fourth quarter 2021 earnings call. Thank you for your participation. You may now disconnect your lines..