Despegar com : 3Q 2020 Despegar.com Earnings Release

Despegar.com Announces 3Q20 Financial Results

Improving Trend in Bookings Despite Government Restrictions on Travel

Leveraging Non-Paid Marketing Channels

Delivered Cost Reduction Targets

British Virgin Islands. November 12, 2020 - Despegar.com, Corp. (NYSE: DESP), ("Despegar" or the "Company") a leading online travel company in Latin America, today announced unaudited results for the three-months ended September 30, 2020 (3Q20). Financial results are expressed in U.S. dollars and are presented in accordance with U.S. generally accepted accounting principles.

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

Subsequent Events

• Best Day - On October 1, 2020, Despegar completed the previously announced acquisition of
  Best Day Travel Group ("Best Day"), one of the leading travel agencies in Mexico. Revised terms of this transaction were announced on June 11, 2020.

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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-19scenario: 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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Business Update on COVID-19

Governmental Flight Restrictions

According to ICAO (International Civil Aviation Organization), in 3Q20 airline seat capacity in LatAm reached 38% of 2019 levels, behind the 44% registered in Europe, 50% in North America and 51% in Asia Pacific.

Multiple travel restrictions remain in place across LatAm. In comparison to other countries, the recovery is taking longer to materialize in Argentina, Colombia, Chile and Peru, where travel was either rather limited or completely banned by government restrictions in place during the quarter. Despegar expects to benefit from pent up demand once these restrictions are lifted.

Throughout 3Q20, Brazil's aviation sector remained open to commercial travel, while each municipality set the level of restrictions to be applicable to the lodging industry. As of today, hotels in only one jurisdiction remain closed. Mexico's commercial aviation remained open, while some restrictions on lodging persisted until early September. In Argentina, both hotels and flights remained unavailable during the quarter, restrictions to tourism are still in place to-date. In Colombia, flights and hotels began a gradual reopening process in September. In Peru and Chile, hotels were allowed to open towards the end of the quarter while in Chile, flight restrictions to relevant touristic destinations are still in place.

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Cost Control Initiatives

The Company met its targeted cost savings goal, achieving a $27.8 million run-rate for Structural Costs, 49% lower on a YoY basis. Included in these cost savings, were sequential declines of 12% in total payroll and 22% in non-payroll expenses.

Solid Financial Position:

The Company's balance sheet remains solid with cash and cash equivalents including restricted cash of $386 million at quarter end. Excluding the proceeds from the capital raise announced last quarter, unrestricted cash and cash equivalents were $196 million, a 14% reduction when compared with June 30, 2020.

• On September 18, 2020, the Company closed on the previously announced private placements with L. Catterton and Waha Capital. The Company intends to use the proceeds from these transactions for general corporate purposes, including potential acquisitions. On that same date, the Company terminated, under the current terms, its $40 million committed revolving credit facility, in the context of a strengthened capital structure.
• On October 1, 2020, Despegar completed the acquisition of Best Day Travel Group under the terms announced on June 11, 2020. The purchase price is subject to adjustments based on net indebtedness and working capital, and is payable 36 months following the closing date. Potential earnout payment due 48 months following closing date.
• Aggregate Net Operational Short-term Obligations (comprised of travel accounts payable plus related party payables and accounts payable and accrued expenses, minus trade accounts receivable net of credit expected loss and related party receivables) were $124.1 million as of September 30, 2020, compared to Aggregate Net Operational Short-Term Obligations of $118.4 million as of June 30, 2020.

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