Despegar reports fourth consecutive period of losses, despite boom in Brazil

The digital travel agency Despegar (DESP) reported this Thursday a net loss of US$9.3 million during the third quarter of 2022, thus reaching a total red of US$50.4 million so far this year. The result came despite a boom in transactions in Brazil, which grew 46% year-on-year in that country.

The result occurred despite a 75% year-on-year growth in billing (US$145.6 million). On the expenditure side, Despegar spent 77% more in the period than last year on sales and marketing (US$46.2 million); 12% more in general and administrative expenses (US$24.9 million) and 18% more in technology and product development (US$22.8 million).

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The ADR: Despegar.com’s share on the Nasdaq fell 2.10% this Thursday at 11:50 a.m. The paper is thus 41.3% below in relation to the beginning of 2022.

Despegar cut its headcount significantly during the pandemic, as Bloomberg Línea was able to find out. However, from the company, they emphasize that today they have more employees than before the pandemic, due to the acquisitions of ViajaNet and Stays in Brazil and Best Day in Mexico.

Despite being the fourth consecutive third quarter of negative net profit, the third quarter posted the smallest loss of 2022, after the reds of $30.9 million and $13.2 million between January-March and April-June, respectively.

LESS RELEVANCE IN ARGENTINA AND LEADS IN BRAZIL

Brazil represented 37% of transactions during the period –growing 46% year-on-year in that country–, while Mexico accounted for 19%. Thus, Argentina, which is not even mentioned in this section of the results statement, continues to lose relevance within the framework of the company’s regional operation.

Despegar’s total transactions grew 21% year-over-year, to 2,208.

POSITIVE SIGNS

The company highlighted, for its part, that a Total Adjusted EBITDA increased by US$22.3 million, year-on-year, to US$12.0 million.

Between August and October, the company led by the Argentine Damián Scokin finished incorporating the Stays vacation rental inventory into its technological platform, expanding the number of available properties of that brand to 21,600 units.

“We have begun to expand Stays beyond Brazil, its market of origin” and “we have fully integrated Viajanet,” Despegar said in a statement.

Room for M&A: The company also highlighted having closed the period with a cash position of US$263 million, something that “maintains our financial flexibility to strategically expand Despegar’s travel ecosystem and reinforce core competencies as long as we identify suitable opportunities.”

TRAVEL DEMAND

Regarding the demand for travel in the current post-pandemic scenario, Despegar maintained that it “continues to constantly approach 2019 levels.”

“Despite short-term uncertainties, we remain optimistic about the long-term potential of the business,” the company commented, stressing at the same time that it expects “to see continued improvements in profitability in the fourth quarter.”

Recovering profitability will then be the main objective for 2023, “in line with our 5-year objective”.

With information from Bloomberg Línea/Francisco Aldaya

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