DESPEGAR.COM, CORP., 20-F filed on 4/26/2019
Annual and Transition Report (foreign private issuer)
v3.19.1
Document and Entity Information
12 Months Ended
Dec. 31, 2018
shares
Document And Entity Information [Abstract]  
Document Type 20-F
Amendment Flag false
Document Period End Date Dec. 31, 2018
Document Fiscal Year Focus 2018
Document Fiscal Period Focus FY
Trading Symbol DESP
Entity Registrant Name Despegar.com, Corp.
Entity Central Index Key 0001703141
Current Fiscal Year End Date --12-31
Entity Well-known Seasoned Issuer No
Entity Current Reporting Status Yes
Entity Filer Category Accelerated Filer
Entity Emerging Growth Company true
Entity Ex Transition Period true
Entity Shell Company false
Entity Common Stock, Shares Outstanding 69,235,699
v3.19.1
Consolidated Balance Sheets - USD ($)
$ in Thousands
Dec. 31, 2018
Dec. 31, 2017
Current assets    
Cash and cash equivalents $ 346,480 $ 371,013
Restricted cash 5,709 29,764
Accounts receivable, net of allowances 228,448 198,273
Related party receivable 8,653 5,253
Other assets and prepaid expenses 68,471 29,405
Total current assets 657,761 633,708
Non-current assets    
Other assets 12,751 4,658
Restricted cash   10,000
Property and equipment, net 19,716 16,171
Intangible assets, net 37,512 35,424
Goodwill 36,207 38,733
Total non-current assets 106,186 104,986
TOTAL ASSETS 763,947 738,694
Current liabilities    
Accounts payable and accrued expenses 42,353 45,609
Travel suppliers payable 185,450 174,817
Related party payable 83,904 84,364
Loans and other financial liabilities 31,162 8,220
Deferred Revenue 8,229 30,113
Other liabilities 33,270 39,751
Contingent liabilities 4,794 4,732
Total current liabilities 389,162 387,606
Non-current liabilities    
Other liabilities 243 1,015
Contingent liabilities 1,968 7,115
Related party liability 125,000 125,000
Total non-current liabilities 127,211 133,130
TOTAL LIABILITIES 516,373 520,736
SHAREHOLDERS' EQUITY    
Common stock [1] 255,254 253,535
Additional paid-in capital 321,627 316,444
Other reserves (728) (728)
Accumulated other comprehensive income 3,051 16,323
Accumulated losses (305,600) (367,616)
Treasury Stock (26,030)  
Total Shareholders' Equity 247,574 217,958
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 763,947 $ 738,694
[1] Represents 69,235 shares issued and outstanding at December 31, 2018 and 69,097 shares issued and outstanding at December 31, 2017.
v3.19.1
Consolidated Balance Sheets (Parenthetical) - shares
Dec. 31, 2018
Dec. 31, 2017
Statement of Financial Position [Abstract]    
Common stock, shares issued 69,235,000 69,097,000
Common stock, shares outstanding 69,235,000 69,097,000
v3.19.1
Consolidated Statements of Operations - USD ($)
shares in Thousands, $ in Thousands
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Dec. 31, 2016
Income Statement [Abstract]      
Revenue [1] $ 530,614 $ 523,940 $ 411,162
Cost of revenue (172,110) (142,479) (126,675)
Gross profit 358,504 381,461 284,487
Operating expenses      
Selling and marketing (174,357) (166,288) (121,466)
General and administrative (67,240) (72,626) (64,683)
Technology and product development (71,154) (71,308) (63,251)
Impairment of long-lived assets (363)    
Total operating expenses (313,114) (310,222) (249,400)
Operating income / (loss) 45,390 71,239 35,087
Financial income 7,621 2,389 8,327
Financial expense [2] (26,788) (19,268) (15,079)
Income before income taxes 26,223 54,360 28,335
Income tax expense (7,069) (11,994) (10,538)
Net income $ 19,154 $ 42,366 $ 17,797
Earnings per share available to common stockholders:      
Basic $ 0.28 $ 0.69 $ 0.30
Diluted $ 0.27 $ 0.69 $ 0.30
Shares used in computing earnings per share (in thousands):      
Basic 69,154 61,457 58,518
Diluted 71,254 61,548 58,609
[1] Includes $ 43,975, $ 37,000 and $ 27,008 for related party transactions for the years 2018, 2017 and 2016, respectively. See note 15.
[2] Includes $ 12,368, $ 8,601 and $ 10,516 for factoring of credit card receivables for the years ended 2018, 2017 and 2016, respectively.
v3.19.1
Consolidated Statements of Operations (Parenthetical) - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Dec. 31, 2016
Revenue from related parties $ 43,975 $ 37,000 $ 27,008
Credit Card Receivable [Member]      
Factoring expense $ 12,368 $ 8,601 $ 10,516
v3.19.1
Consolidated Statements of Comprehensive Income - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Dec. 31, 2016
Statement of Comprehensive Income [Abstract]      
Net income $ 19,154 $ 42,366 $ 17,797
Other comprehensive income, net of tax      
Foreign currency translation adjustment [1] (13,272) 37 (17,501)
Comprehensive income $ 5,882 $ 42,403 $ 296
[1] No tax impact
v3.19.1
Consolidated Statements of Changes in Shareholders' Equity - USD ($)
shares in Thousands, $ in Thousands
Total
Common Stock [Member]
Additional Paid-in Capital [Member]
Other Reserves [Member]
Accumulated Other Comprehensive Income [Member]
Accumulated Losses [Member]
Treasury Stock [Member]
Beginning Balance at Dec. 31, 2015 $ (83,133) $ 6 $ 311,581 $ (728) $ 33,787 $ (427,779)  
Beginning Balance, Shares at Dec. 31, 2015   58,518          
Stock-based compensation expense 574   574        
Foreign currency translation adjustment (17,501) [1]       (17,501)    
Net income for the year 17,797         17,797  
Ending Balance at Dec. 31, 2016 (82,263) $ 6 312,155 (728) 16,286 (409,982)  
Ending Balance, Shares at Dec. 31, 2016   58,518          
Stock-based compensation expense 4,289   4,289        
Foreign currency translation adjustment 37 [1]       37    
Issuance of common stock, value [2] 253,529 $ 253,529          
Issuance of common stock, shares   10,579          
Net income for the year 42,366         42,366  
Ending Balance at Dec. 31, 2017 217,958 $ 253,535 316,444 (728) 16,323 (367,616)  
Ending Balance, Shares at Dec. 31, 2017   69,097          
Change in accounting standard ASC 606 at Dec. 31, 2017 [3] 42,862         42,862  
Adjusted balance at Dec. 31, 2017 260,820 $ 253,535 316,444 $ (728) 16,323 (324,754)  
Stock-based compensation expense 6,766   6,766        
Foreign currency translation adjustment (13,272) [1]       $ (13,272)    
Exercise of Stock Options by Employees 136 $ 1,719 $ (1,583)        
Exercise of Stock Options by Employees, Shares   138          
Net income for the year 19,154         $ 19,154  
Treasury Stock, value $ (26,030)           $ (26,030)
Treasury Stock, shares 0 0 0 0 0 0 0
Ending Balance at Dec. 31, 2018 $ 247,574 $ 255,254 $ 321,627 $ (728) $ 3,051 $ (305,600) $ (26,030)
Ending Balance, Shares at Dec. 31, 2018   69,235          
[1] No tax impact
[2] Net of issuance costs of $21,530.
[3] See note 3
v3.19.1
Consolidated Statements of Cash Flows - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Dec. 31, 2016
Cash flows from operating activities:      
Net income / (loss) $ 19,154 $ 42,366 $ 17,797
Adjustments to reconcile net income to net cash flows from operating activities:      
Unrealized foreign currency translation losses (1,088) 457 466
Depreciation expense 4,985 5,075 5,089
Amortization of intangible assets 10,140 8,751 7,835
Impairment of long-lived assets 363    
Stock based compensation expense 6,766 4,289 574
Interest and penalties 494 (65) 1,494
Income taxes 2,876 5,507 3,846
Allowance for doubtful accounts 1,062 818 2,548
Provision / (Recovery) for contingencies 2,021 (603) 526
Changes in assets and liabilities, net of non-cash transactions:      
(Increase) / Decrease in accounts receivable, net of allowances (54,705) (85,383) (71,389)
(Increase) / Decrease Related party receivables (3,406) (3,013) (293)
(Increase) / Decrease in other assets and prepaid expenses (61,302) (10,090) 3,591
Increase / (Decrease) in accounts payable and accrued expenses 4,277 22,363 (13,895)
Increase / (Decrease) in travel suppliers payable 42,789 78,835 (20,121)
Increase / (Decrease) in other liabilities 3,309 (12,323) 10,440
Increase / (Decrease) in contingencies (5,567) (12,183) 618
Increase / (Decrease) in related party liabilities 4,203 13,964 13,210
Increase / (Decrease) in deferred revenue 6,009 2,461 (5,628)
Net cash flows (used in) / provided by operating activities (17,620) 61,226 (43,292)
Cash flows from investing activities:      
Sales of short-term investments     40,013
Acquisition of property and equipment (13,085) (8,746) (4,419)
Increase of intangible assets, including internal-use software and website development (13,494) (12,929) (12,159)
Net cash flows (used in) / provided by investing activities (26,579) (21,675) 23,435
Cash flows from financing activities:      
Increase in loans and other financial liabilities 66,814 30,159 10,142
Decrease in loans and other financial liabilities (42,177) (29,574) (5,000)
Exercise of stock based compensation 136    
Proceeds from issuance of shares [1]   253,529  
Purchase of Treasury Stock (26,030)    
Net cash flows provided by financing activities (1,257) 254,114 5,142
Effect of exchange rate changes on cash and cash equivalents (13,132) (2,053) (2,008)
Net (decrease) / increase in cash and cash equivalents (58,588) 291,612 (16,723)
Cash and cash equivalents and restricted cash as of beginning of the year 410,777 119,165 135,888
Cash and cash equivalents and restricted cash as of end of the period 352,189 410,777 119,165
Supplemental cash flow information      
Cash paid for income tax 14,423 18,455 6,111
Interest paid $ 5,311 $ 942 $ 684
[1] Net of issuance costs paid of $ 21,530 as of December 31, 2017. See note 1.
v3.19.1
Consolidated Statements of Cash Flows (Parenthetical)
$ in Thousands
12 Months Ended
Dec. 31, 2017
USD ($)
Statement of Cash Flows [Abstract]  
Stock issuance costs, net $ 21,530
v3.19.1
Operations of the Company
12 Months Ended
Dec. 31, 2018
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Operations of the Company
1.

Operations of the Company

On May 3, 2017, the stockholders of Decolar.com, Inc., a Delaware holding company, exchanged their shares for ordinary shares of Despegar.com, Corp. to create a new British Virgin Island holding company. Following the exchange, the Company’s shareholders own shares of Despegar.com, Corp. and Decolar.com, Inc. is a wholly-owned subsidiary of Despegar.com, Corp.

Despegar.com, Corp. (formerly Decolar.com, Inc.), is an online travel agency, which provides leisure and business travelers the tools and information they need to make travel reservations with providers of travel products around the world.

Despegar.com is the leading online travel agency in Latin America and includes both the Decolar and Despegar brands. With a presence in 20 countries, Despegar’s websites and mobile apps help leisure and business travelers to book accommodations, airline tickets, packages, rental cars, cruises, destination services and travel insurance around the world. The Company operates primarily under the “Despegar.com” brand for Spanish and English speaking customers and the “Decolar.com” brand for Portuguese speaking customers. The Company also generates additional revenue through the sale of advertising on its websites.

Despegar.com provides its customers with multiple ways to save on travel-related products and multiple alternatives to pay for such products.

During September 2017, the Company successfully completed its registration process with the United States Securities and Exchange Commission and initial public offering through which 12,770,000 shares of common stock were sold to the underwriters at $ 26 per share less an underwriting discount of 5.75%. From this total, 8,663,431 shares were sold by the Company and 4,106,569 shares were sold by stockholders. The Company granted to the Underwriters an option to purchase up to 1,915,500 additional shares at the public offering price less the underwriting discount, which was exercised on September 20, 2017, for all the shares available. The net proceeds of the offering totaled $253,529 after deducting the underwriting discount and offering expenses payable by the Company.

v3.19.1
Basis of consolidation
12 Months Ended
Dec. 31, 2018
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Basis of consolidation
2.

Basis of consolidation

The consolidated financial statements include the accounts of the Company and its subsidiaries. The following are the Company’s main operating subsidiaries (all wholly-owned):

 

Name of the Subsidiary

   Country of Incorporation
Despegar.com.ar S.A.    Argentina
Decolar.com LTDA.    Brazil
Despegar.com Chile SpA    Chile
Despegar Colombia S.A.S.    Colombia
DespegarEcuador S.A.    Ecuador
Despegar.com México S.A. de C.V.    Mexico
Despegar.com Peru S.A.C.    Peru
Despegar.com USA, Inc.    United States
Travel Reservations S.R.L.    Uruguay

 

The consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”). Although the subsidiaries transact the majority of their businesses in their local currencies, the Company has selected the United States dollar (“U.S. dollar”) as its reporting currency. All significant intercompany accounts and transactions have been eliminated.

Foreign currency translation

The Company’s foreign subsidiaries (except for Travel Reservations S.R.L in Uruguay and other subsidiaries in the United States, Ecuador and Venezuela, which use the U.S. dollar as functional currency) have determined the local currency to be their functional currency. Assets and liabilities are translated from their local currencies into U.S. dollars at the end-of-the-year exchange rates, and revenue and expenses are translated at average monthly rates in effect during the year. Translation adjustments are included in the consolidated statement of comprehensive income / (loss).

Gains and losses resulting from transactions in non-functional currencies are recognized directly in the consolidated statements of operations under the caption “Financial income” and “Financial expense.”

Highly inflationary status in Argentina

During May 2018, the International Practices Task Force (“IPTF”) discussed the highly inflationary status of the Argentine economy. Historically, the IPTF has used the Consumer Price Index (“CPI”) when considering the inflationary status of the Argentine economy. Given that the CPI was considered flawed by the current Argentine Government until December 2015 and the new CPI was published as from June 2016, the IPTF considered alternative indices to determine the three-year cumulative inflation.

A highly inflationary economy is one that has cumulative inflation of approximately 100% or more over a three-year period. The alternative three-year cumulative indices at June 30, 2018 exceeded 100%. According to U.S. GAAP, the company should apply highly inflationary accounting no later than July 1, 2018. As of July 1, 2018, the Company transitioned its Argentinian operations to highly inflationary status in accordance with U.S. GAAP, and changed the functional currency for Argentine subsidiarie from Argentine Pesos to U.S. dollars, which is the functional currency of their immediate parent company

Pursuant to the change in the functional currency, local currency monetary assets and liabilities are remeasured at closing exchange rate, non-monetary assets are remeasured at the rate prevailing on the date of the respective transaction, and revenues and expenses are remeasured at the average exchange rate of each month. The effect of the remeasurement is recognized as foreign currency gains (losses) and have been accounted for under in Financial income/(expense) in the consolidated statement of operations.

v3.19.1
Summary of significant accounting policies
12 Months Ended
Dec. 31, 2018
Accounting Policies [Abstract]  
Summary of significant accounting policies
3.

Summary of significant accounting policies

The following is a summary of significant accounting policies followed by the Company in the preparation of these consolidated financial statements.

 

Use of estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from estimates. The significant estimates underlying the Company’s consolidated financial statements include revenue recognition, including the accounting for certain merchant revenues, allowance for doubtful accounts, recoverability of intangible assets with indefinite useful lives and goodwill, contingencies, fair value of stock based compensation and fair value of financial instruments. The consolidated financial statements reflect all adjustments considered, in the opinion of management, necessary to fairly present the results for the periods presented.

Concentration of risk

The Company’s business is subject to certain risks and concentrations including dependence on relationships with travel suppliers, primarily airlines, dependence on third-party technology providers, exposure to risks associated with online commerce security and payment related fraud. It also relies on global distribution system (“GDS”) partners and third-party service providers for certain fulfillment services.

Financial instruments, which potentially subject the Company to concentration of credit risk, mainly consist of cash and cash equivalents and accounts receivable (i.e. clearing house for credit cards). The Company maintains cash and cash equivalents balances in financial institutions that management believes are high credit quality. Accounts receivable are settled mainly through customer credit cards and debit cards; the company maintains allowance for doubtful accounts based on management’s evaluation of various factors, including the credit risk of customers, historical trends and other information.

Revenue recognition

The Company generates revenue as a result of the booking of travel products and services on its websites and mobile apps. The Company provides customers the ability to book travel products and services on both a stand-alone basis or as a vacation package, primarily through its merchant and agency business models.

The Company derives its revenue mainly from:

 

   

Commissions earned from intermediating services, including facilitating reservations of flight tickets, hotel accommodations, car rentals and other travel-related products and services;

 

   

Service fees charged to customers for processing air tickets, hotel accommodations, car rentals and other travel-related products and services;

 

   

Override commissions or incentives from suppliers and GDS providers if the Company meets certain performance conditions; and

 

   

Advertising revenues from the sale of advertising placements on the Company’s websites.

Revenue is recognized upon the transfer of control of our promised services in an amount that reflects the consideration we expect to be entitled to in exchange for those services, which generally occurs at the completion of the transaction on the Company’s platform at the time of booking. Concurrently, the Company will recognize a provision for cancellations and customers failing to arrive for their reservations for all refundable pre-paid sales and all pay-at-destination reserves recognized under these criteria.

 

For our primary transaction-based revenue sources, discussed below, we have determined net presentation (that is, the amount billed to the traveler less the amount paid to a supplier) is appropriate for the majority of our revenue transactions as the supplier is primarily responsible for providing the underlying travel services and we do not control the service provided by the supplier to the traveler. We exclude all taxes assessed by a government authority, if any, from the measurement of transaction prices that are imposed on our travel related services or collected by the Company from customers (which are therefore excluded from revenue).

The Company offers travel products and services through the following business models: the Prepay/Merchant Model, which represents approximately 80% of total revenue, Other Revenue including GDS incentives, advertising represents 15% and the Pay-at-destination/Agency Model, which represents approximately 5% of total revenue.

Prepay/Merchant Business Model

Through this model the Company’s performance obligation is to facilitate the booking of air travel, accommodation, car rentals, cruises, destination services and vacation packages. The Company generates revenue based on the difference between the total amount that the customer pays for the travel product and the net rate owed to the supplier plus estimated taxes. Despegar.com also earns revenue by charging customers a service fee for booking their travel reservation. Customers generally pay at the time of booking and the Company generally pays to the supplier at a later date, which is normally at the time the customer uses the travel reservation.

Despegar.com recognizes revenue on a net base, and for some bookings where the Company pre-purchase the flight seats, in gross base, when the customer completes the reservation process in the Company’s platform, which is when the Company’s performance obligation is satisfied. For the refundable transaction, the Company records an allowance for collection risk on this revenue based on historical experience for cancellation. For travel products that are cancelled by the customer after a specified period of time, the Company may charge a cancellation fee or penalty similar to the amount that the supplier charges for the cancellation.

Packages and sales transactions performed by customers through affiliated agencies are recognized following the revenue recognition policy described above.

Pursuant to the terms of the Company’s merchant supplier agreements with hotels, the Company’s travel service suppliers are permitted to bill it for the underlying cost of the service during a specified period of time. In the event that the Company is not billed by the travel supplier within a 12-month period from the check-out date, the Company recognizes incremental revenue from the unbilled amounts.

Pay-at-Destination/Agency Business Model

Through this model, the Company’s performance obligation is to facilitate the booking of hotels, car rentals and other travel-related products and services to be paid at destination. Despegar.com earns a commission paid directly by suppliers. The Company generally collects these commissions after the customer uses the travel reservation. In certain circumstances, the Company may also earn revenue by charging customers with a service fee for booking their travel reservation.

 

The Company recognizes revenue on a net basis when the customer completes the reservation process in the Company’s platform, which is when the Company’s performance obligation is satisfied. In addition, the Company records an allowance for collection risk on this revenue based on historical experience.

Incentives

The Company may receive override commissions from air, hotel and other travel service suppliers when it meets certain performance conditions. These variable considerations are recognized on a monthly accrued basis in accordance with the achievement of thresholds determined by each supplier.

Additionally, the Company uses GDS services provided by recognized suppliers. Under GDS service agreements, the Company earns revenue in the form of an incentive payment for sales that are processed through a GDS if certain contractual volume thresholds are met. Revenue is recognized for these incentive payments on a monthly accrued basis in accordance with ratable volume thresholds.

Advertising

The Company records advertising revenue ratably over the advertising period or upon delivery of advertising material, depending on the terms of the advertising agreement.

Cash and cash equivalents

Cash and cash equivalents includes investments with a maturity of three months or less when purchased. All results generated from these investments are recorded as financial results when earned.

Restricted cash

The primary purpose of restricted cash is to collateralize operations with suppliers of travel products and services and related service providers such as IATA.

Accounts receivable, net of allowances for doubtful accounts

Accounts receivables are mainly related to credit card receivables, incentives and advertising, which are carried at the invoice amount less an allowance for doubtful accounts. The Company determines its allowance based on the aging of its receivables. While management uses the information available to make evaluations, future adjustments to the allowance may be necessary if future economic conditions differ substantially from the assumptions used in making the evaluations. Management has considered all events and/or transactions that are subject to reasonable and normal methods of estimations, and the consolidated financial statements reflect that consideration.

 

Property and equipment, net

Property and equipment are stated at acquisition cost, less accumulated depreciation. Depreciation expense is calculated using the straight-line method, based on the estimated useful lives of the related assets.

The estimated useful lives (in years) of the main categories of the Company’s property and equipment are as follows:

 

Asset

   Estimated useful life (years)  

Computer hardware

     3  

Office furniture and fixture

     10  

Buildings

     50  

Expenditures for repairs and maintenance are charged to expense as incurred. The cost of significant renewals and improvements is added to the carrying amount of the respective asset and its depreciated over the life of the contract.

When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts, and any resulting gain or loss is reflected in the consolidated statement of operations.

Goodwill and Intangible assets, net

Goodwill represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired in a business combination. Goodwill is not subject to amortization, but is subject to an annual assessment for impairment, or more frequently if events and circumstances indicate impairment may have occurred.

Intangible assets resulting from the acquisition of companies were estimated by management based on the fair value of assets received. Identifiable intangible assets are comprised of trademarks and internet domains. Trademarks and domains are not subject to amortization, but subject to an annual impairment assessment.

Certain costs incurred related to the development of internal-use software are capitalized. Development costs incurred during the application development stage and upgrades and enhancement to existing software that provides additional functionality are capitalized. Costs incurred related to the preliminary project and post-implementation phases are expensed as incurred.

Software internally developed is amortized over a period of three years according to its expected useful life, using the straight-line method. In addition, the asset value of the software is evaluated for impairment periodically.

Financial systems are amortized over a period of 10 years, using the straight-line method.

Impairment of Long-Lived Assets

The Company reviews long-lived assets for impairments whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to undiscounted future net cash flows expected to be generated by the asset. If such assets are considered to be impaired on this basis, the impairment loss to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets.

 

As of December 31, 2018, the Company concluded that the property held in Caracas, Venezuela, should be impaired. As a consequence, the Company estimated the fair value of the impaired long-live asset and recorded impairment losses of $ 363 thousand as of December 31, 2018, by using the market approach and considering prices for similar assets.

Impairment of goodwill and intangible assets with indefinite useful life

Goodwill and intangible assets with indefinite lives are reviewed at least annually for impairment, generally as of December 31, or more frequently if events and circumstances indicate impairment may have occurred. Impairment of goodwill is tested at the reporting unit level by comparing the reporting units carrying amount, including goodwill, to the fair value of the reporting unit. The fair values of the reporting units are estimated using a combination of the income or discounted cash flows approach and the market approach, which utilizes comparable companies’ data. If the carrying amount of the reporting unit exceeds its fair value, goodwill is considered impaired and a second step is performed to measure the amount of impairment loss, if any.

No impairments were recognized during the reporting years for goodwill or intangible assets with indefinite life.

Travel suppliers payable

Travel suppliers payable is mainly related to debt with airlines, hotels and other product suppliers. These payables are generated when customers complete the reservation process in the Company’s platform and are paid to the suppliers after customers use the service and suppliers invoice the Company, and to the airlines within thirty day of the customers’ booking. These payables are recorded at the invoice amount. For hotels and other product suppliers, the Company instituted a clause in the contract imposing a twelve-month time limit from the check-out date for the Company’s travel supplier to invoice for payment, after the twelve-month time the Company recognizes the revenue for release of age payables.

Pension information

The Company does not maintain any pension plans. The laws in the different countries in which the Company carries out its operations provide for pension benefits to be paid to retired employees from government pension plans and/or private pension plans. Amounts payable to such plans are accounted for on an accrual basis.

Severance payments

The Company may register a liability for severance payments if the following criteria are met: (a) management, having the authority to approve the action, commits to a plan of termination; (b) the plan identifies the number of employees to be terminated, their job classifications or functions and their locations, and the expected completion date; (c) the plan establishes the terms of the benefit arrangement, including the benefits that employees will receive upon termination, in sufficient detail to enable employees to determine the type and amount of benefits they will receive if they are involuntarily terminated; (d) actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn; and (e) the plan has been communicated to employees.

 

Contingent liabilities

The Company has certain regulatory and legal matters outstanding, as discussed further in note 14 “Commitments and Contingencies.” Periodically, the status of all significant outstanding matters is reviewed to assess the potential financial exposure. When (i) it is probable that an asset has been impaired or a liability has been incurred and (ii) the amount of the loss can be reasonably estimated, the Company records the estimated loss in the consolidated statements of operations.

Additionally, disclosure in the notes to the consolidated financial statements is provided for loss contingencies that do not meet both of these conditions if there is a reasonable possibility that a loss may have been incurred that would materially impact the financial position and results of operations. Significant judgment is required to determine the probability that a liability has been incurred and whether such liability is reasonably estimable.

The Company records accruals related to commercial, labor and tax contingencies that may generate an obligation for the Company. Accruals are made on the best information available at the time; such analysis may be highly subjective. The final outcome of these matters could vary significantly from the amounts included in the accompanying consolidated financial statements.

Derivative instruments

Derivative instruments are carried at fair value on the consolidated balance sheets. The fair values of the derivative financial instruments generally represent the estimated amounts the Company would expect to receive or pay upon termination of the contracts as of the reporting date.

As of December 31, 2018 the Company maintained derivative instruments consisting of foreign currency forward contracts. The Company uses foreign currency forward contracts to hedge exposure in currencies different from the reporting currency. The goal in managing the foreign exchange risk is to reduce, to the extent practicable, the potential exposure to exchange rate fluctuations and its resulting effect on earnings, cash flows and financial position. The foreign currency forward contracts are typically short-term and do not qualify for hedge accounting treatment. Changes in fair value are recorded in financial results.

Following is the derivatives position as of December 31, 2018 and 2017:

 

     Currency      Notional
amount
     Type      Due      Avg Price (1)      Fair value  

2018

                 
     Brazilian reais      $ 9,700        Purchase        Mar- 19        4.19        (760
     Chile pesos      $ 7,000        Purchase        Jan / Feb- 19        689.29        92  
     Mexican pesos      $ 2,000        Sell        Feb - 19        19.75        n/m  

2017

                 
     Argentine pesos      $ 2,000        Purchase        Jan-18        17.835        115  
     Chile pesos      $ 8,500        Purchase        Jan-18        634.49        (260

Mexican pesos

      $ 7,000        Sell        Jan / Feb-18        19.27        (214

 

(1)

In each respective currency.

 

The changes in fair value of derivatives have been accounted for under Financial income/(expense) in the consolidated statement of operations.

Comprehensive income / (loss)

Comprehensive income / (loss) includes net income / (loss) as currently reported under U.S. GAAP and also considers the effect of additional economic events that are not required to be recorded in determining net income, but are rather reported as a separate component of shareholders’ deficit.

Other comprehensive income / (loss) includes the cumulative translation adjustment relating to the translation of the financial statements of the Company’s foreign subsidiaries (see Note 2 “Foreign currency translation”).

Stock-based compensation

Compensation cost related to stock-based employee compensation arrangements are accounted for at fair value at the time of grant. The calculation of fair value is affected by the Company’s stock price estimation as well as assumptions regarding a number of highly complex and subjective variables at the time of the grant. Compensation cost is recognized on a straight-line basis over the requisite service period which commences on the grant date as there exists a mutual understanding of the key terms and conditions at the date the award is approved by the board of directors or other management with relevant authority and the following conditions are met:

 

   

The award is a unilateral grant and, therefore, the recipient does not have the ability to negotiate the key terms and conditions of the award with the employer.

 

   

The key terms and conditions of the award had been communicated to an individual recipient within a relatively short time period from the date of approval.

Marketing and advertising expenses

The Company incurs advertising expense consisting of offline costs, including television and radio advertising, and online advertising expense to promote the business. The Company expenses the production costs associated with advertisements in the period in which the advertisement first takes place. The Company expenses the costs of advertisement in the period during which the advertisement space or airtime is consumed. Internet advertising expenses are recognized based on the terms of the individual agreements, which is generally over the greater of (i) the ratio of the number of clicks delivered over the total number of contracted clicks, on a pay-per-click basis, or (ii) on a straight-line basis over the term of the contract.

Advertising expenses for 2018, 2017 and 2016 amounted to $ 150,275, $ 144,777 and $ 102,770, respectively.

Financial income / (expense)

The Company incurs in financial expenses items such as factoring for discounted installments, interest paid for derivatives instruments and financial liabilities and foreign exchange rate, and generates financial income from financial investments, derivatives instruments and foreign exchange rate.

Accounting for income taxes

The Company is subject to U.S. and foreign income taxes. The provision for income taxes includes federal and foreign taxes. Income taxes are accounted for under the asset and liabilities method. Under this method, deferred income tax assets and liabilities are recognized for the future tax consequences attributable to differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases.

Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

The Company set up a valuation allowance for that component of net deferred tax assets which does not meet the more-likely-than-not criterion for realization. A valuation allowance is recognized for a component of net deferred tax assets, including tax loss carryforward, which is assessed as not recoverable. As of December 31, 2018 and 2017 the valuation allowance amounted to $ 18,007 and $ 42,584, respectively.

Due to inherent complexities arising from the nature of the Company’s business, future changes in income tax law, transfer pricing new regulations or variances between actual and anticipated operating results, the Company makes certain judgments and estimates. Therefore, actual income taxes could materially vary from those estimates.

Recently Adopted Accounting Standards

Effective January 1, 2018, the Company adopted ASC 606 – Revenue from contracts with customers related to revenue recognition (ASC 606) issued by the Financial Accounting Standards Board (FASB) in 2014. ASC 606 provides a unified model to determine when and how revenue is recognized. The core principle is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration for which the entity expects to entitled in exchange for those goods or services.

The Company adopted ASC 606 using the modified retrospective approach for all contracts reflecting the aggregate effect of modifications prior to the date of adoption. Results for reporting periods beginning after January 1, 2018 are presented under the new guidance, while prior period amounts were not adjusted and continue to be reported under the accounting standards in effect for those periods.

Upon adoption, we recognized a cumulative effect of applying the new revenue guidance as an increased in the opening balance of retained earnings of $ 42.8 million, comprised of changes in the accounting of our contract with customers mainly due to recognition of commissions and customer fees ($26.4 million) which under the previous accounting standard were deferred and “pay at destination” bookings ($10.5 million) which under the previous accounting standard were recognized on an accrual basis when the travel occurred.

 

The cumulative effect of the revenue accounting changes made to our consolidated balance sheet as of January 1, 2018 were as follows:

 

     Balance at
December 31,
2017
     Adjustments (1)      Balance at
January 1, 2018
 

Current Assets

   $              $       

Accounts Receivables

        198,273        15,407           213,680  

Current Liabilities

              

Deferred Revenue

        30,113        (27,455         2,658  

Shareholders’ Equity

              

Accumulated losses

        (367,616      42,862           (324,754

 

(1)

Net of tax effect

Other Recently Adopted Accounting Standards

Effective January 1, 2018, the Company adopted the Accounting Standard Update No. 2016-18, Statement of cash flows (Topic 230): Restricted Cash (ASU 2016-18), which requires companies to include amounts generally describe as restricted cash and restricted cash equivalents in cash and cash equivalents when reconciling beginning-of-period and end-of-period total amounts shown on the statement of cash flow. The adoption of this standard had only affected the disclosure of the Consolidated Cash Flow statement.

In June 2018, the FASB issued ASU No. 2018-07 related to accounting for share-based payments with non-employees (Topic 505). The updated guidance substantially aligns the accounting requirements of share-based payment awards to non-employees with those of employees. The guidance is effective for annual and interim reporting periods beginning after December 15, 2018, with early adoption permitted. The Company elected to early adopt the new guidance in the fourth quarter of 2018, with the grant of a stock-compensation contract to non-employees during November of 2018. As the Company did not grant share-based payments to non-employees in the previous years, the adoption of this new standard had no impact in the consolidated financial statement for 2018.

Recently issued accounting pronouncements not yet adopted

The Company provides below a description of those standards which are relevant to the Company’s business only and the impact of their adoption if any.

On February 25, 2016 the FASB issued ASU 2016-02. The amendments in this update create Topic 842, Leases, which supersedes Topic 840, Leases. The core principle of Topic 842 is that a lessee should recognize the assets and liabilities that arise from leases. Previous GAAP did not require lease assets and lease liabilities to be recognized for most leases. A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. Topic 842 retains a distinction between finance leases and operating leases. The classification criteria for distinguishing between finance leases and operating leases are substantially similar to the classification criteria for distinguishing between capital leases and operating leases in the previous leases guidance. The result of retaining a distinction between finance leases and operating leases is that under the lessee accounting model in Topic 842, the effect of leases in the statement of comprehensive income and the statement of cash flows is largely unchanged from previous GAAP. Based on existing leases currently classified as operating leases, the Company expects to recognize on the statements of financial position right-of-use assets and lease liabilities. The amendments in this update are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company has adopted this guidance as of January 1, 2019. We have elected the optional transition method that allows for a cumulative-effect adjustment in the period of adoption and will not restate prior periods. Based on our lease portfolio as of December 31, 2018, upon adoption we anticipate recording on our consolidated balance sheet right-of-use assets of approximately $5.4 million as well as operating lease liabilities of approximately $5.4 million with no material impact to our consolidated statements of operations or cash flows.

On June 16, 2016 the FASB issued the ASU 2016-13 “Financial Instruments-Credit Losses (Topic 326): Measurement of credit losses on financial instruments”. This update amends guidance on reporting credit losses for assets held at amortized cost basis and available for sale debt securities. For assets held at amortized cost basis, this update eliminates the probable initial recognition threshold in current GAAP and, instead, requires an entity to reflect its current estimate of all expected credit losses. For available for sale debt securities, credit losses should be measured in a manner similar to current GAAP, however this topic will require that credit losses be presented as an allowance rather than as a write-down. The new standard is effective for fiscal years beginning after December 15, 2019. The Company is assessing the effects that the adoption of this accounting pronouncement may have on its financial statements.

In January 2017, the FASB issued ASU No. 2017-04. To simplify the subsequent measurement of goodwill, the amendments eliminate Step 2 from the goodwill impairment test. The annual, or interim, goodwill impairment test is performed by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. In addition, income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit should be considered when measuring the goodwill impairment loss, if applicable. The amendments also eliminate the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. A public business entity should adopt the amendments for its annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The adoption of this standard is not expected to have a material impact on the Company’s financial statements.

On August 28, 2018, the FASB issued the ASU 2018-13 “Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement”. The update is related to the disclosure requirements on fair value measurements, which removes, modifies or adds certain disclosures. The guidance is effective for annual and interim reporting periods beginning after December 15, 2019, with early adoption permitted. The Company is assessing the effects that the adoption of this accounting pronouncement may have on its financial statements.

In August 2018, the U.S. Securities and Exchange Commission (SEC) adopted the final rule under SEC Release No. 33-10532, Disclosure Update and Simplification. This final rule amends certain disclosure requirements that are redundant, duplicative, overlapping, outdated or superseded. In addition, the amendments expand the disclosure requirements on the analysis of stockholders’ equity for interim financial statements. Under the amendments, an analysis of changes in each caption of stockholders’ equity presented in the balance sheet must be provided in a note or separate statement. The analysis should present a reconciliation of the beginning balance to the ending balance of each period for which a statement of comprehensive income is required to be filed. This final rule is effective for the Company for all filings made on or after November 5, 2018. The SEC staff clarified that the first presentation of the changes in shareholders’ equity may be included in the first Form 10-Q for the quarter that begins after the effective date of the amendments. The adoption of the final rule did not have a material impact on the Company’s consolidated financial statements. The Company will change its presentation of shareholder’s equity in its Form 20-F for the period ending December 31, 2019.

On August 29, 2018, the FASB issued the ASU 2018-15 “Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract.” The update conforms the requirements for capitalizing implementation costs incurred in a cloud computing arrangement that is a service contract with the accounting guidance that provides for capitalization of costs incurred to develop or obtain internal-use-software. The new guidance is effective for annual and interim reporting periods beginning after December 15, 2019, with early adoption permitted. The Company is assessing the effects that the adoption of this accounting pronouncement may have on its financial statements.

v3.19.1
Cash and Cash Equivalents
12 Months Ended
Dec. 31, 2018
Cash and Cash Equivalents [Abstract]  
Cash and Cash Equivalents
4.

Cash and cash equivalents

Cash and cash equivalents consist of the following:

 

     As of December 31,
2018
     As of December 31,
2017
 

Cash

     20        12  

Banks

     177,013        344,809  

Time deposits

     135,614        —    

Money market funds

     33,833        26,192  
  

 

 

    

 

 

 
   $ 346,480      $ 371,013  
  

 

 

    

 

 

 
v3.19.1
Accounts Receivable, Net of Allowances
12 Months Ended
Dec. 31, 2018
Receivables [Abstract]  
Accounts Receivable, Net of Allowances
5.

Accounts receivable, net of allowances

Accounts receivable, net of allowances consists of the following:

 

     As of December 31,
2018
     As of December 31,
2017
 

Accounts receivable

     230,060        197,389  

Others

     453        4,048  

Allowance for doubtful accounts

     (2,065      (3,164
  

 

 

    

 

 

 
   $ 228,448      $ 198,273  
  

 

 

    

 

 

 

 

v3.19.1
Other Assets and Prepaid Expenses
12 Months Ended
Dec. 31, 2018
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]  
Other Assets and Prepaid Expenses
6.

Other assets and prepaid expenses

Other current assets and prepaid expenses consist of the following:

 

     As of December 31,
2018
     As of December 31,
2017
 

Tax credits (1)

     33,042        23,866  

Prepaid expenses and advance to suppliers

     31,553        3,473  

Advertising paid in advance

     1,934        383  

Others

     1,942        1,683  
  

 

 

    

 

 

 
   $ 68,471      $ 29,405  
  

 

 

    

 

 

 

 

(1)

Mainly includes $ 14,631 of VAT credits, $ 14,321 of income tax credits, $ 2,410 of sales tax credits and $ 1,680 of other tax credits as of December 31, 2018; and $ 10,833 of VAT credits, $ 7,394 of income tax credits, $ 2,965 of sales tax credits and $ 2,674 other tax credits as of December 31, 2017.

Other non-current assets consist of the following:

 

     As of December 31,
2018
     As of December 31,
2017
 

Deferred tax assets

     12,751        4,658  
  

 

 

    

 

 

 
   $ 12,751      $ 4,658  
  

 

 

    

 

 

 

 

v3.19.1
Property and equipment, net
12 Months Ended
Dec. 31, 2018
Property, Plant and Equipment [Abstract]  
Property and equipment, net
7.

Property and equipment, net

Property and equipment, net consists of the following:

 

     As of December 31,
2018
     As of December 31,
2017
 

Computer hardware and software

     27,365        26,001  

Office furniture and fixture

     15,255        11,915  

Buildings

     2,018        2,790  

Land

     41        64  
  

 

 

    

 

 

 

Total property and equipment

     44,679        40,770  
  

 

 

    

 

 

 

Accumulated depreciation

   $ (24,963    $ (24,599
  

 

 

    

 

 

 

Total property and equipment, net

   $ 19,716      $ 16,171  
  

 

 

    

 

 

 

Total depreciation expense for the years 2018 and 2017 is $4,985 and $5,075, respectively and for the year 2018 $363 of impairment for long-lived assets for the building in Venezuela subsidiary.

v3.19.1
Goodwill and intangible assets, net
12 Months Ended
Dec. 31, 2018
Goodwill and Intangible Assets Disclosure [Abstract]  
Goodwill and intangible assets, net
8.

Goodwill and intangible assets, net

Goodwill and intangible assets, net consists of the following:

 

     As of December 31,
2018
     As of December 31,
2017
 

Goodwill (1)

     36,207        38,733  

Intangible assets with indefinite lives

     

Brands and domains

     13,882        13,882  

Amortizable Intangible assets

     

Internal-use software and site internally developed

     54,406        47,980  
  

 

 

    

 

 

 

Total intangible assets

     68,288        61,862  
  

 

 

    

 

 

 

Accumulated amortization (2)

     (30,776      (26,438
  

 

 

    

 

 

 

Total intangible assets, net

   $ 37,512      $ 35,424  
  

 

 

    

 

 

 

 

(1)

Following is the breakdown of Goodwill per reporting unit as of December 31, 2018 and 2017:

 

     Balance of beginning
of period
     Other comprehensive
Income / (Loss)
     Balance at end of
period
 

2018

        

Argentina

     1,866        (665      1,201  

Brazil

     12,766        (1,865      10,901  

Mexico

     7,262        4        7,266  

Uruguay

     16,839        —          16,839  
  

 

 

    

 

 

    

 

 

 

Total

     38,733        (2,526      36,207  

2017

        

Argentina

     2,187        (321      1,866  

Brazil

     12,959        (193      12,766  

Mexico

     6,909        353        7,262  

Uruguay

     16,839        —          16,839  
  

 

 

    

 

 

    

 

 

 

Total

     38,894        (161      38,733  

Goodwill is mainly attributable to the Air operating segment.

 

(2)

Total amortization expense for the years 2018 and 2017 is $ 10,140 and $ 8,751, respectively. The estimated future amortization expense related to intangible assets with definite lives as of December 31, 2018, assuming no subsequent impairment of the underlying assets, is as follows:

 

2019

     7,076  

2020

     7,076  

2021

     7,076  

2022

     801  

2023 and beyond

     1,601  
  

 

 

 

Total

     23,630  
  

 

 

 

 

v3.19.1
Accounts Payable and Accrued Expenses
12 Months Ended
Dec. 31, 2018
Payables and Accruals [Abstract]  
Accounts Payable and Accrued Expenses
9.

Accounts payable and accrued expenses

Accounts payable and accrued expenses consist of the following:

 

     As of December 31,
2018
     As of December 31,
2017
 

Marketing suppliers

     25,484        28,301  

Provision for invoices to be received

     8,513        6,285  

Affiliated agencies

     —          977  

Other suppliers

     8,356        10,046  
  

 

 

    

 

 

 
   $ 42,353      $ 45,609  
  

 

 

    

 

 

 

 

v3.19.1
Travel Suppliers Payable
12 Months Ended
Dec. 31, 2018
Text Block [Abstract]  
Travel Suppliers Payable
10.

Travel Suppliers payable

Travel Supplier payables consist of the following

 

     As of December 31,
2018
     As of December 31,
2017
 

Hotels and other travel service suppliers (1)

     151,393        151,023  

Airlines

     34,057        23,794  
  

 

 

    

 

 

 
   $ 185,450      $ 174,817  
  

 

 

    

 

 

 

 

(1)

Includes $ 132,863 and $ 137,396 as of December 31, 2018 and 2017, respectively, for deferred merchant bookings which will be due after the traveler has checked out.

v3.19.1
Other Liabilities
12 Months Ended
Dec. 31, 2018
Other Liabilities Disclosure [Abstract]  
Other Liabilities
11.

Other liabilities

Other current liabilities consist of the following:

 

     As of December 31,
2018
     As of December 31,
2017
 

Salaries payable

     22,030        31,141  

Taxes payable

     8,586        5,517  

Others

     2,654        3,093  
  

 

 

    

 

 

 
   $ 33,270      $ 39,751  
  

 

 

    

 

 

 

Other non-current liabilities consist of the following:

 

     As of December 31,
2018
     As of December 31,
2017
 

Taxes payable

     243        1,015  
  

 

 

    

 

 

 
   $ 243      $ 1,015  
  

 

 

    

 

 

 
v3.19.1
Income taxes
12 Months Ended
Dec. 31, 2018
Income Tax Disclosure [Abstract]  
Income taxes
12.

Income taxes

The following table presents a summary of U.S. and foreign income tax expense components:

 

     As of December 31,
2018
     As of December 31,
2017
     As of December 31,
2016
 

Current:

        

Foreign

     (10,289      (7,682      (4,459

Federal

     (1,336      (36      (50

Deferred:

        

Foreign

     8,749        2,063        663  

Withholding:

        

Foreign

     (3,921      (6,339      (6,692

Federal

     (272      —          —    
  

 

 

    

 

 

    

 

 

 

Income tax expense

   $ (7,069    $ (11,994    $ (10,538
  

 

 

    

 

 

    

 

 

 

Below the classification of deferred tax assets/liabilities by current and non-current:

 

     As of December 31, 2018      As of December 31, 2017  

Non-Current deferred tax assets

     30,758        47,242  
  

 

 

    

 

 

 

Total deferred tax assets

     30,758        47,242  
  

 

 

    

 

 

 

Less valuation allowance

     (18,007      (42,584

Net deferred tax assets

     12,751        4,658  

Non-Current deferred tax liabilities

     —          —    
  

 

 

    

 

 

 

Total deferred tax liabilities

     —          —    
  

 

 

    

 

 

 

Total deferred tax

     12,751        4,658  
  

 

 

    

 

 

 

The Company had adopted ASU 2015-17, which requires entities to present deferred tax assets and deferred tax liabilities as noncurrent in a classified statement of financial position. The Company adopted the retrospective approach.

As of December 31, 2018, consolidated loss carryforwards for income tax purposes were $79,022. If not utilized, tax loss carryforwards will begin to expire as follows:

 

Expiration Date

   NOLs Amount  

Expires 2020

     32  

Thereafter

     29,124  

Without expiration dates

     49,866  
  

 

 

 

TOTAL (1)

     79,022  

 

(1)

A partial valuation allowance is booked as of December 31, 2018 in order to reserve $58,275 of the tax loss carryforwards detailed above.

NOLs Carryforwards expiration:

 

   

Brazil: $46,292. No expiration but offset limitation of 30% of the taxable income by fiscal year.

 

   

USA: $6,851. Expiration after 20 years, but offset limitation of 90% of the taxable income by fiscal year.

 

   

Argentina: $5,068. Five fiscal years expiration.

 

   

Colombia: $ 5,371. Twelve fiscal years expiration in general.

 

   

Venezuela: $ 64. Three fiscal years expiration, but offset limitation of 25% of the taxable income by fiscal year.

 

   

Peru: $3,574. No expiration, but offset limitation of 50% of the taxable income by fiscal year.

 

   

Mexico: $9,858. Ten fiscal years expiration.

 

   

Uruguay: $1,220. Five fiscal years expiration.

 

   

Panama: $397. Five fiscal years expiration.

 

   

Spain: $219. No expiration.

 

   

Ecuador: $108. Five fiscal years expiration.

Deferred tax assets and liabilities are recognized for the future tax consequences of differences between the carrying amounts of assets and liabilities and their respective tax bases using enacted tax rates in effect for the year in which the differences are expected to reverse. The Company has foreign subsidiaries with aggregated undistributed earnings of $ 61,897 as of December 31, 2018. We have not provided deferred income taxes on taxable temporary differences related to investments in certain foreign subsidiaries where the foreign subsidiary has or will invest undistributed earnings indefinitely outside of the United States. In the event we distribute such earnings in the form of dividends or otherwise, we may be subject to income taxes. Further, a sale of these subsidiaries may cause these temporary differences to become taxable. Due to complexities in tax laws, uncertainties related to the timing and source of any potential distribution of such earnings, and other important factors such as the amount of associated foreign tax credits, it is not practicable to estimate the amount of unrecognized deferred taxes on these taxable temporary differences.

The Company’s management considers the earnings of the foreign subsidiaries to be indefinitely reinvested, other than certain earnings the distributions of which do not imply withholdings or state income taxes, and for that reason has not recorded a deferred tax liability.

The following table summarizes the composition of deferred tax assets and liabilities as of the years ended December 31, 2018 and 2017:

 

     December 31, 2018      December 31, 2017  

Deferred Tax Assets

     

Tax loss carryforwards

     23,445        33,067  

Allowance for doubtful accounts

     175        322  

Royalties

     2,296        1,379  

Provisions and other assets

     6,037        12,474  

Property and equipment

     (125      —    

Others

     (1,070      —    
  

 

 

    

 

 

 

Total Deferred Tax Assets

     30,758        47,242  
  

 

 

    

 

 

 

Less valuation allowance

     (18,007      (42,584
  

 

 

    

 

 

 

Total Deferred Tax Assets, net

     12,751        4,658  
  

 

 

    

 

 

 

Deferred Tax Liabilities

     —          —    
  

 

 

    

 

 

 

Total Deferred Tax Liabilities

     —          —    
  

 

 

    

 

 

 

Total Deferred Tax

     12,751        4,658  
  

 

 

    

 

 

 

The following is a reconciliation of the difference between the actual provision for income taxes and the provision computed by applying the weighted average income tax rate for 2018, 2017 and 2016 to income / (loss) before taxes:

 

     As of December 31,
2018
    As of December 31,
2017
    As of December 31,
2016
 

Net Income / (Loss) before Income Tax

     26,223       54,360       28,335  

Weighted average income tax rate (3)

     39     33     30
  

 

 

   

 

 

   

 

 

 

Income tax expense at weighted average income tax rate

     10,273       17,740       8,501  

Permanent differences:

      

(Non-Taxable Income) / Non-Deductible Losses (1)

     (1,448     (10,714     (6,826

Foreign non-creditable withholding tax (2)

     4,193       6,339       6,692  

Non-deductible expenses

     1,346       2,223       2,928  

Currency translation adjustment

     1,902      

Others

     540       (651     (94

True up

     1,204      

Change in Valuation allowance

     (10,941     (2,943     (663
  

 

 

   

 

 

   

 

 

 

Income Tax expense

     7,069       11,994       10,538  
  

 

 

   

 

 

   

 

 

 

 

(1)

Includes tax benefits/losses generated by operations located in the Uruguayan “Free Trade Zone” and the benefits from Promotion Software Law in Argentina.

(2)

Includes foreign withholding taxes on royalties and services.

(3)

The Company uses a weighted average rate for the income tax reconciliation, since most of the business operations are run by subsidiaries located outside the U.S. The calculation is performed based on an average between the enacted tax rates of the foreign jurisdictions.

The following table presents the changes in the Company’s valuation allowance as of December 31, 2018, 2017 and 2016:

 

     Balance of beginning of period      Increase      (Decrease)      Balance at end of period  
2018      42,584        997        (25,574      18,007  
2017      45,526        4,716        (7,658      42,584  
2016      46,189        1,897        (2,560      45,526  

Tax Reform

Argentina

On December 27, 2017, the Argentine Senate approved a comprehensive income tax reform effective since January 1, 2018. Among the key features of the bill, (i) reduces the current 35% income tax rate to 30% for 2018 and 2019, and to 25% as from 2020; (ii) imposes a dividend withholding tax paid by an Argentine entity of 7% for 2018 and 2019, increasing to 13% as from 2020; (iii) repeals the “equalization tax” (i.e., 35% withholding applicable to dividends distributed in excess of the accumulated taxable income) for income accrued from January 1, 2018; iv) imposes income tax on indirect sales of assets located in Argentina for new stock acquisition, when Argentinean assets represent at least 30% of the value of the foreign entity; v) creates new rules applicable to controlled foreign companies for tax recognition of foreign profit investment; vi) introduces taxation of foreign digital services on VAT for B2C (business to consumer) transactions; vii) establishes an advance pricing agreement regime and, viii) establishes a mutual agreement procedure for tax treaty interpretation disputes.

USA

On December 22, 2017, the U.S. government enacted a comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act made broad and complex changes to the U.S. tax code, including, but not limited to, (1) requiring a one-time transition tax on certain unrepatriated earnings of foreign subsidiaries that is payable over eight years and (2) bonus depreciation that will allow for full expensing of qualified property.

The Tax Act also established new tax laws that came into effect on January 1, 2018, including, but not limited to: (a) the elimination of the corporate alternative minimum tax (“AMT”); (b) the creation of the base erosion anti-abuse tax (“BEAT”), a new minimum tax; (c) a general elimination of U.S. federal income taxes on dividends from foreign subsidiaries -participation exemption system-; (d) a new provision designed to tax global intangible low-taxed income (“GILTI”), which allows for the possibility of using foreign tax credits (“FTCs”) and a deduction of up to 50 percent to offset income tax liability (subject to some limitations); (e) a new limitation on deductible interest expense; (f) the repeal of the domestic production activity deduction; (g) limitations on the deductibility of certain executive compensation; (h) limitations on the use of FTCs to reduce the U.S. income tax liability; and (i) limitations on net operating losses (“NOLs”) generated after December 31, 2017, to 80 percent of taxable income and the elimination of expiration rules.

The Deemed Repatriation Transition Tax (“Transition Tax”) is a tax on previously untaxed accumulated and current earnings and profits (“E&P”) of certain of our foreign subsidiaries. To determine the amount of the Transition Tax, the Company must determine, in addition to other factors, the amount of post-1986 E&P of the relevant subsidiaries, as well as the amount of non-U.S. income taxes paid on such earnings. The Company determined that no tax liability related to the Transition Tax is due. Accordingly, no adjustments have been made to income tax expense.

The Tax Act created a new requirement that certain income (i.e., GILTI) earned by controlled foreign corporations (CFCs) must be included in the gross income of the CFCs’ U.S. shareholder. GILTI is the excess of the shareholder’s “net CFC tested income” over the net deemed tangible income return, which is currently defined as the excess of (1) 10 percent of the aggregate of the U.S. shareholder’s pro rata share of the qualified business asset investment of each CFC with respect to which it is a U.S. shareholder over (2) the amount of certain interest expenses taken into account in the determination of net CFC-tested income. In addition, Tax Law allows to offset foreign tax credit against GILTI liability, with some limitations.

Under U.S. GAAP, the Company was allowed to make an accounting policy choice of either (1) treat GILTI as a period cost if and when incurred, or (2) recognize deferred taxes for basis differences that are expected to reverse as GILTI in future years. The Company selected the period cost method.

The Company estimates that GILTI liability for 2018 fiscal year will be fully compensated against available foreign tax credit. Therefore, it is not recorded any impact as of December 31, 2018.

v3.19.1
Revenue
12 Months Ended
Dec. 31, 2018
Revenue from Contract with Customer [Abstract]  
Revenue
13.

Revenue

The following tables summarizes the Company’s revenues by business model and product types:

Business model

 

     As of
December 31,
2018
     As of
December 31,
2017
     As of
December 31,
2016
 

Pre-pay model

     415,812        412,679        321,990  

Pay-at-destination model

     20,143        23,710        22,907  

Others

     94,659        87,551        66,265  
  

 

 

    

 

 

    

 

 

 
   $ 530,614      $ 523,940      $ 411,162  
  

 

 

    

 

 

    

 

 

 

Product types

 

     As of
December 31,
2018
     As of
December 31,
2017
     As of
December 31,
2016
 

Air

     214,804        241,015        205,721  

Packages, Hotels and Other Travel Products

     315,810        282,925        205,441  
  

 

 

    

 

 

    

 

 

 
   $ 530,614      $ 523,940      $ 411,162  
  

 

 

    

 

 

    

 

 

 

 

v3.19.1
Commitments and contingencies
12 Months Ended
Dec. 31, 2018
Commitments and Contingencies Disclosure [Abstract]  
Commitments and contingencies
14.

Commitments and contingencies

Leases

The Company leases office space under operating lease agreements with original terms ranging from 2 to 5 years. Rent expense amounted to $ 4,354 and $ 4,413 for the years ended December 31, 2018 and 2017, respectively. The Company’s lease obligations under non-cancellable operating leases are as follows:

 

Year ended December 31, 2018

   Amount  

Within 1 year

     5,341  

2 – 3 years

     9,679  

4 – 5 years

     8,421  

After 5 years

     21,763  
  

 

 

 

Total

     45,204  
  

 

 

 

 

Employment agreements

The Company has entered into employment agreements with certain key employees providing compensation guidelines for each employee. Pursuant to the terms of the employment agreements, the executives are generally entitled to receive compensation in the form of (i) an annual salary payable in cash on a monthly basis and (ii) a yearly bonus subject to the fulfillment of certain performance targets.

Tax, legal and other

The Company is involved in disputes arising from its ordinary course of business. Although the ultimate resolution on these matters cannot be reasonably estimated at this time, management does not believe that they will have a material adverse effect on the financial condition or results of operations of the Company.

As of December 31, 2018 the Company had accrued liabilities approximately $3,000 related to unasserted tax claims. The Company currently estimates unasserted possible losses related to matters for which it has not accrued liabilities, as they are not deemed probable and reasonably estimable, to be approximately $13,700. The Company evaluates the likelihood of probable and reasonably possible losses, if any, related to all known contingencies on an ongoing basis. As a result, future increases or decreases to its accrued liabilities may be necessary and will be recorded in the period when such amounts are determined to be probable and reasonably estimable.

Argentina

On June 28, 2017, the Sindicato Empleados de Comercio de Capital Federal (Union for Employees of the Commercial Sector in the City of Buenos Aires, or “SECCF”) filed a lawsuit against our Argentine subsidiary, in which SECCF is demanding the application of its collective labor agreement to all of the employees of the subsidiary. SECCF is demanding payment of approximately AR$18 million.

On April 19, 2018 SECCF filed a new claim, similar to the previous one, but against La Inc S.A. - an Argentine subsidiary company that had already been merged with Despegar.com.ar several months before. In this new claim, SECCF is demanding an amount equal to the 0.5% of the gross monthly salaries of La Inc’s employees for certain periods.

The Argentine subsidiary filed both responses in a timely manner, rejecting all the claims, with similar defenses. Although we believe Despegar.com.ar has meritorious defenses to this lawsuit, we cannot assure you what the ultimate outcome of this matter will be. The final resolution of these claims, which could take several years, is not likely to have a material effect on our financial position or results of operations.

v3.19.1
Related party transactions
12 Months Ended
Dec. 31, 2018
Related Party Transactions [Abstract]  
Related party transactions
15.

Related party transactions

Settlement with Certain Management Stockholders

In the last two months of 2016, the Company entered into settlement agreements and terminated the employment of two management stockholders (“Founders”). The settlement agreements includes a payable cash amount of $ 5,800, as a result of an employee relationship benefit and non-competition and non-disclosure agreement, out of which 50% was payable on July 1, 2018 or upon the occurrence of a liquidity event, which may result from the consummation of an initial public offering, or a capital injection among other conditions. On September 20, 2017, the Company completed its initial public offering, and the settlement was fully paid in December 2017.

 

Balances and operations with Expedia

Starting in March 2015, as a result of the execution of the Expedia Outsourcing Agreement executed with Expedia, the Company recognized balances and operations with Expedia as a related party.

The balances between the Company and Expedia are: $ 8,653 and $ 5,253 as of December 31, 2018 and 2017, respectively, recorded in Related party receivable; $ 83,904 and $ 84,364 as of December 31, 2018 and 2017, respectively, recorded in Related party payables; and $125,000 as of December 31, 2018 and 2017, recorded in Related party liability.

The net related party transactions are $ 43,975, $ 37,000 and $ 27,008 for the years ended December 31, 2018, 2017 and 2016, respectively, recorded in Revenue.

v3.19.1
Fair value measurements
12 Months Ended
Dec. 31, 2018
Fair Value Disclosures [Abstract]  
Fair value measurements
16.

Fair value measurements

The following table summarizes the Company’s financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2018 and 2017:

 

Description

   Balances
as of
December
31, 2018
    Quoted
prices in
active
markets for
(Level1)
     Significant
other
(Level 2)
    Balances as
of December
31, 2017
    Quoted
prices in
active
markets for
(Level1)
     Significant
other
(Level 2)
 

Liabilities

              

Derivatives

              

Foreign currency forward contract

     (668     —          (668     (359     —          (359
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 

Total financial Liabilities

     (668     —          (668     (359     —          (359
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 

As of December 31, 2018 and 2017, the Company’s financial assets valued at fair value consisted of assets valued using; (i) Level 1 inputs: unadjusted quoted prices in active markets (Level 1 instrument valuations are obtained from observable inputs that reflect quoted prices (unadjusted) for identical assets in active markets); and (ii) Level 2 inputs, which are obtained from readily-available pricing sources for comparable instruments as well as instruments with inactive markets at the measurement date. As of December 31, 2018 and 2017, the Company did not have any assets without market values that would require a high level of judgment to determine fair value (Level 3).

As of December 31, 2018 and 2017, the carrying value of the Company’s financial assets and liabilities measured at amortized cost approximated their fair value because of its short term maturity. These assets and liabilities included cash and cash equivalents; restricted cash; accounts receivables, net; other receivables and prepaid expenses; other non-current assets; accounts payable and accrued expenses; hotel suppliers payable; loans and other financial liabilities; salaries and social security payable; taxes payable and other liabilities. Loans payable approximate their fair value because the interest rates are not materially different from market interest rates.

The fair values for those financial assets and liabilities of the Company measured at amortized cost, is equal to their respective book values as of December 31, 2018 and 2017.

 

In addition, as of December 31, 2018 and 2017, the Company had $ 141,323 and $ 39,764 of cash and cash equivalents and restricted cash, respectively, which consisted of time deposits. Those investments are accounted for at amortized cost, which, as of December 31, 2018 and 2017, approximates their fair values.

There have been no reclasifications among fair value levels.

v3.19.1
Shareholders' Equity - Treasury Stock
12 Months Ended
Dec. 31, 2018
Federal Home Loan Banks [Abstract]  
Shareholders' Equity - Treasury Stock
17.

Shareholders’ Equity – Treasury Stock

On August 9, 2018, the Company’s Board of Directors approved a share repurchase program that enables the Company to repurchase up to $75 million of its ordinary shares effective immediately and expiring in one year. Share repurchases may be made through a variety of methods, including in the open market, a 10b5-1 program and through privately negotiated transactions. The timing and number of ordinary shares repurchased will depend on a variety of factors, including price, general business and market conditions, and alternative investment opportunities. The Company is not obligated to acquire any specific number of ordinary shares and the repurchase program may be suspended, terminated or modified at any time for any reason.

Under the share repurchase program, the Company purchased 1,544,475 shares at a cost of $ 26 million with a weighted average cost per share of $16.84, for the period ended December 31, 2018. As of December 31, 2018, $ 49 million remained available for repurchase under the current authorization.

v3.19.1
Earnings per share
12 Months Ended
Dec. 31, 2018
Earnings Per Share [Abstract]  
Earnings per share
18.

Earnings per share

Earnings per share

Basic earnings per share

Basics earnings per share was calculated for the year ended December 31, 2018, 2017 and 2016 using the weighted average number of ordinary shares outstanding during the period.

Diluted earnings per share

For the year ended December 31, 2018, 2017 and 2016, the Company computed diluted earnings per share using (i) the number of shares of common stock used in the basic earnings per share calculation as indicated above (ii) if diluted, the incremental common stock that the Company would issue upon the assumed exercise of restricted stock units.

For the year ended December 31, 2018, there were 2,100 thousand shares included in the diluted earnings per share as the incremental common stock that the Company would issue upon the assumed exercise of the stock option plan, estimated under the treasury stock computation method.

For the year ended December 31, 2017, the incremental common stock that the Company would issue upon the assumed exercise of the stock option plan was not included in the diluted earnings per share even when they were in-the-money, as under the treasury stock computation method they have an antidilutive effect as the sum of the proceeds, including unrecognized compensation expense, exceeds the average stock price.

 

For the year ended December 31, 2016, stock options were out-of-the-money as the strike price exceeded the current share price; therefore, they are not included in the computation of diluted earnings per share.

The following table presents basic and diluted earnings per share:

 

     2018      2017      2016  

Net income / (loss) attributable to Despegar.com Corp.

     19,154        42,366        17,797  

Earnings per share attributable to Despegar.com Corp.

        

Basic

     0.28        0.69        0.30  

Diluted

     0.27        0.69        0.30  

Weighted average number of shares outstanding

        

Basic

     69,154        61,457        58,518  

Dilutive effect of restricted stock units

     2,100        91        91  

 

v3.19.1
Stock based compensation
12 Months Ended
Dec. 31, 2018
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Stock based compensation
19.

Stock based compensation

2015 Restricted Stock Unit Plan

On March 6, 2015, the shareholders of the Company approved a new restricted stock unit plan including the issuance of 90,626 restricted stock unit (the “RSUs”) in favor of an officer of the Company.

The RSUs include the following conditions:

 

   

Time-based condition: satisfied with respect to

 

   

40,626 RSUs on January 1, 2016;

 

   

20,000 RSUs on January 1, 2017;

 

   

20,000 RSUs on January 1, 2018; and

 

   

10,000 RSUs on July 1, 2018;

provided that the officer remains in continuous service through each applicable date.

 

   

Liquidity Event Requirement: satisfied on the earlier to occur of

 

   

an Initial Public Offering of the Company’s common stock, or

 

   

a change of control transaction (sale event).

 

   

No additional vesting exists upon completion of a liquidity event.

 

   

Restrictions:

 

   

Repurchase rights: in the event of a change of control, the Company has the right to repurchase certain shares contingent upon the valuation of the Company at such time, and

 

   

Transfer restrictions: after the consummation of an Initial Public Offering transfer restrictions apply limiting the ability to transfer certain shares subject to the valuation of the Company at such time.

 

The fair value of RSU granted during the year ended December 31, 2015, was estimated at the date of grant using the income approach valuation technique, including the Black-Scholes and Monte Carlo option-pricing models, assuming the following weighted average assumptions:

 

Expected volatility

     41.69

Expected life (in years)

     10  

Weighted-average estimated fair value of options granted during the year

   $ 7.47  

As of December 31, 2018, these RSUs are fully vested.

The following table presents a summary of the Company’s RSU activity:

 

     RSU’s      Weighted Average Grant
Date Fair Value

per share
 

Balance as of December 31, 2016

     90,626        7.47  

Granted

Vested / (Cancelled)

    

—  

—  

 

 

    

—  

—  

 

 

  

 

 

    

 

 

 

Balance as of December 31, 2017

     90,626        7.47  

Granted

     —          —    

Vested as of March 21, 2018

     (80,626      —    

Vested as of July 1, 2018

     (10,000   
  

 

 

    

 

 

 

Balance as of December 31, 2018

     —          —    
  

 

 

    

 

 

 

2016 Stock Option Plan

On November 2016, the Board of Directors of the Company approved, subject to the approval of the Company’s Stockholders (which occurred in March 2017), to adopt a stock plan and reserve for issuance up to 4,000,000 stock options, from which 3,175,000 stock options were effectively granted in favor of some officers of the Company.

The plan includes the following conditions:

 

   

Time-based condition: satisfied with respect to:

 

   

5% of stock options vest on December 1, 2017;

 

   

10% of stock options vest on December 1, 2018;

 

   

15% of stock options vest on December 1, 2019;

 

   

20% of stock options vest on December 1, 2020;

 

   

25% of stock options vest on December 1, 2021; and

 

   

25% of stock options vest on December 1, 2022;

if the officer remains in continuous service through each applicable date.

 

   

Liquidity Event Requirement: satisfied on the earlier to occur of

 

   

(i) an Initial Public Offering of the Company’s common stock, or

 

   

(ii) a change of control event.

 

   

No additional vesting exists upon completion of a liquidity event.

 

The Company has used the Fair Value Method for determining the value of the stock options plan. The remaining vesting period as of December 31, 2018 is 47 months.

The fair value of stock options granted during the year ended December 31, 2016, was estimated at the date of grant using the income approach valuation technique, including the Black-Scholes and Monte Carlo option-pricing models, assuming the following weighted average assumptions:

 

Risk-free interest rate

     1.84

Expected volatility

     39.9

Expected life (in years)

     10  

Weighted-average estimated fair value of options granted during the year

   $ 6.90  

The fair value of stock options granted during the year ended December 31, 2017, was estimated at the date of grant using the income approach valuation technique, including the Black-Scholes and Monte Carlo option-pricing models, assuming the following weighted average assumptions:

 

Risk-free interest rate

     1.49

Expected volatility

     40.1

Expected life (in years)

     10  

Weighted-average estimated fair value of options granted during the year

   $ 10.737  

The fair value of stock options granted during the year ended December 31, 2018, was estimated at the date of each grant using the income approach valuation technique, including the Black-Scholes and Monte Carlo option-pricing models, assuming the following weighted average assumptions:

 

Grant date    March 1     April 9     May 3     November 1     December 24  

Risk-free interest rate

     1.49     2.58     2.58     3.11     2.74

Expected volatility

     40.1     47.8     45.7     41.3     39.9

Expected life (in years)

     10       10       10       10       10  

Weighted-average estimated fair value of options granted during the year

   $ 14.55       17.21       16.81       4.96       13.62  

Number of shares

     250,000       25,000       250,000       150,000       499,489  

The fair value of the RSUs granted during the year ended December 31, 2018, was:

 

Grant date    September 9      November 26      December 24  

Weighted-average estimated fair value of options granted during the year

   $ 15.06        14.82        11.55  

Number of shares

     340,939        30,000        1,023,220  

In December 2018, the Company approved a change in the stock option exercise price and an amendment to the relevant stock option contracts was made. Following ASC 718 – Stock based compensation, a change in the stock-based compensation plan should be accounted for a modification. Incremental compensation cost should be measured as: (a) the excess of the fair value of the replacement award or other valuable consideration over (b) the fair value of the cancelled award at the cancellation date.

 

As the Company replaced an award for another with the same fair value, no incremental compensation cost needed to be recognized as a result of the exchange of the awards.

The following table presents a summary of the Company’s stock option activity:

 

     Options      Weighted
Average
Exercise Price

per share
     Remaining
Contractual
Life
 

Balance as of December 31, 2016

     3,175,000        26.02        6  

Granted

     600,000        26.02     

Balance as of December 31, 2017

     3,775,000        26.02        5  

Granted

     2,693,648        18.40     

Forfeited

     (2,158,213      26.34     

Balance as of December 31, 2018

     4,310,435        21.08        4  

As of December 31, 2018, there was approximately $40,119 of unrecognized stock-based compensation expense related to unvested stock-based awards, which is expected to be recognized in expense over a weighted-average period of 4 years. Compensation cost will not be impacted upon completion of a liquidity event.

On August 10, 2017, the Board of Directors and Company’s Stockholders approved Amended and Restated 2016 Stock Incentive Plan and reserve for issuance of 861,777 shares, which increases total stock subject to the plan to no more than 4,861,777 shares.

v3.19.1
Guarantees
12 Months Ended
Dec. 31, 2018
Guarantees and Product Warranties [Abstract]  
Guarantees
20.

Guarantees

The Company is required to be accredited by the International Air Transport Association (“IATA”) to be permitted to sell international airlines tickets of airlines affiliated with IATA.

During 2018, certain Despegar.com subsidiaries granted guarantees for $ 5,709 for the benefit of the IATA and other suppliers in the form of time deposits or bank and insurance guarantees, which were recorded as Restricted cash in the consolidated balance sheet at December 31, 2018.

v3.19.1
Valuation and Qualifying Accounts
12 Months Ended
Dec. 31, 2018
SEC Schedule, 12-09, Valuation and Qualifying Accounts [Abstract]  
Valuation and Qualifying Accounts
21.

Valuation and qualifying accounts

The following table presents the changes in the Company’s valuation and qualifying accounts.

 

     Balance of
beginning of
period
     Increase /
(Decrease)
     Utilization     Other
comprehensive
Income /
 (Loss)
    Balance at end
of period
 

2018

            

Allowance for doubtful accounts

     3,164        1,062        (1,063     (1,098     2,065  

2017

            

Allowance for doubtful accounts

     3,513        818        (984     (183     3,164  

2016

            

Allowance for doubtful accounts

     3,401        2,548        (2,515     79       3,513  

 

v3.19.1
Segment information
12 Months Ended
Dec. 31, 2018
Segment Reporting [Abstract]  
Segment information
22.

Segment information

In order to make operating decisions and assess performance, the Company’s chief operating decision function organized the Company’s business in two operating segments, namely “Air” and “Packages, Hotels and Other travel products”, each of them having their own respective segment management.

The “Air” operating segment derives its revenue from commissions earned from facilitating reservations of flight tickets, service fees charged to customers for processing flight tickets and override commissions or incentives from suppliers and GDS if the Company meets certain volume thresholds.

The “Packages, Hotels and Other travel products” operating segment derives its revenue from commissions earned from facilitating reservations of packages, accommodations, car rentals and other travel related products and services, service fees charged to customers for processing bookings, advertising revenue from the sale of advertising placements on the Company’s websites and override commissions or incentives from suppliers if the Company meets certain volume thresholds. Packages are bundle deals where the customer selects and buys multiple products, within the same session. In these transactions the Company acts as an intermediary. Packages transaction may include airline tickets. The air portion of these package transactions is included within the “Packages, Hotels and Other travel products” operating segment.

The Company’s primary measure of a segment’s profit or loss is Adjusted EBITDA, which includes allocations of certain expenses based on transaction volumes and other usage metrics. The Company’s allocation methodology is periodically evaluated and may change.

The Company does not have:

 

   

transactions between reportable segments

 

   

assets allocated by segment, or

 

   

revenue from transactions with a single customer amounting to 10 percent or more of revenue.

The following tables present the Company’s segment information for 2018, 2017 and 2016. While depreciation and amortization is allocated to operating segments based on operational measures such as relative headcount and IT investment, property and equipment is not allocated to operating segments, and the Company does not report the assets by segment as this information is not regularly provided to its chief operating decision makers.

 

     2018  
     Air      Packages, Hotels and Other
travel products
     Unallocated      Total  

Third-party revenue

     214,804        315,810        —          530,614  

Adjusted EBITDA

     27,790        37,739        2,115        67,644  

Depreciation and amortization

     (4,630      (4,582      (6,276      (15,488

Stock-based compensation

     —          —          (6,766      (6,766

Operating income / (loss)

     23,160        33,157        (10,927      45,390  

Financial income

              7,621  

Financial expense

              (26,788

Income before income tax

              26,223  

Income tax expense

              (7,069

Net income

              19,154  

 

     2017  
     Air      Packages, Hotels and other
travel products
     Unallocated      Total  

Third-party revenue

     241,015        282,925        —          523,940  

Adjusted EBITDA

     58,397        31,341        (384      89,354  

Depreciation and amortization

     (1,865      (2,556      (9,405      (13,826

Stock-based compensation

     —          —          (4,289      (4,289

Operating income / (loss)

     56,532        28,785        (14,078      71,239  

Financial income

     —          —          —          2,389  

Financial expense

     —          —          —          (19,268

Income before income tax

     —          —          —          54,360  

Income tax expense

     —          —          —          (11,994

Net income

     —          —          —          42,366  

 

     2016  
     Air      Packages, Hotels and other
travel products
     Unallocated      Total  

Third-party revenue

     205,721        205,441        —          411,162  

Adjusted EBITDA

     27,940        20,643        2        48,585  

Depreciation and amortization

     (4,099      (3,842      (4,983      (12,924

Stock-based compensation

     —          —          (574      (574

Operating income / (loss)

     23,841        16,801        (5,555      35,087  

Financial income

              8,327  

Financial expense

              (15,079

Income / (loss) before income tax

              28,335  

Income tax expense

              (10,538

Net income / (loss)

              17,797  

Geographic information

The following table summarizes the allocation of the Long-lived assets based on geography:

 

     As of December
31, 2018
     As of December
31, 2017
 

Argentina

     7,830        7,346  

Brazil

     2,950        1,072  

Uruguay

     1,463        2,044  

USA

     4,097        3,729  

Other countries

     3,376        1,980  
  

 

 

    

 

 

 
   $ 19,716      $ 16,171  
  

 

 

    

 

 

 

 

The following table summarizes the allocation of the intangible assets based on geography:

 

     As of December
31, 2018
     As of December
31, 2017
 

Argentina

     19,616        16,854  

Uruguay

     14,837        14,760  

Other countries

     3,059        3,810  
  

 

 

    

 

 

 
   $ 37,512      $ 35,424  
  

 

 

    

 

 

 

The following table summarizes the allocation of the Goodwill based on geography:

 

     As of December
31, 2018
     As of December
31, 2017
 

USA

     36,207        38,733  
  

 

 

    

 

 

 
   $ 36,207      $ 38,733  
  

 

 

    

 

 

 

The following table summarizes the allocation of the revenue based on geography:

 

     As of
December 31,
2018
     As of
December 31,
2017
     As of
December 31,
2016
 

Argentina

     122,656        137,843        109,695  

Brazil

     165,688        151,550        115,636  

Uruguay

     142,902        145,534        111,617  

Other countries

     99,368        89,013        74,214  
  

 

 

    

 

 

    

 

 

 
   $ 530,614      $ 523,940      $ 411,162  
  

 

 

    

 

 

v3.19.1
Subsequent events
12 Months Ended
Dec. 31, 2018
Subsequent Events [Abstract]  
Subsequent events
23.

Subsequent events

In April 2019, the Company had agreed to acquire Viajes Falabella in Chile, Colombia, Perú and Argentina, together with a license to use the Viajes Falabella brand name for $ 27 million. The transaction assumes the transfer of these operations free of any financial debt. With this agreement, the Companies’ clients will have access to an enhanced travel and tourism product and service offering, through an omnichannel service model (online, call center and physical stores). In addition, customers will be able to access exclusive discounts, earn double CMR Points Falabella’s loyalty program, both at Viajes Falabella and Despegar, as well as an expanded product offering in exchange for CMR Points at Viajes Falabella.

v3.19.1
Summary of significant accounting policies (Policies)
12 Months Ended
Dec. 31, 2018
Accounting Policies [Abstract]