DESPEGAR.COM, CORP., POS AM filed on 11/20/2018
Post-Effective Amendment to Registration Statement
v3.10.0.1
Document and Entity Information
6 Months Ended
Jun. 30, 2018
Document And Entity Information [Abstract]  
Document Type F-3
Amendment Flag false
Document Period End Date Jun. 30, 2018
Trading Symbol DESP
Entity Registrant Name Despegar.com, Corp.
Entity Central Index Key 0001703141
v3.10.0.1
Unaudited Interim Condensed Consolidated Balance Sheets - USD ($)
$ in Thousands
Jun. 30, 2018
Dec. 31, 2017
Current Assets    
Cash and cash equivalents $ 390,716 $ 371,013
Restricted cash and cash equivalents 12,790 29,764
Accounts receivable, net of allowances 195,472 198,273
Related party receivable 6,004 5,253
Other assets and prepaid expenses 42,471 29,405
Total current assets 647,453 633,708
Non-current assets    
Other assets 5,317 4,658
Restricted cash and cash equivalents 10,000 10,000
Property and equipment, net 17,221 16,171
Intangible assets, net 37,261 35,424
Goodwill 36,108 38,733
Total non-current assets 105,907 104,986
TOTAL ASSETS 753,360 738,694
Current liabilities    
Accounts payable and accrued expenses 45,549 45,609
Travel suppliers payable 153,961 174,817
Related party payable 94,022 84,364
Loans and other financial liabilities 23,479 8,220
Deferred Revenue 1,178 30,113
Other liabilities 35,018 39,751
Contingent liabilities 4,061 4,732
Total current liabilities 357,268 387,606
Non-current liabilities    
Other liabilities 363 1,015
Contingent liabilities 2,704 7,115
Related party liability 125,000 125,000
Total non-current liabilities 128,067 133,130
TOTAL LIABILITIES 485,335 520,736
SHAREHOLDERS' EQUITY    
Common stock [1] 254,137 253,535
Additional paid-in capital 318,091 316,444
Other reserves (728) (728)
Accumulated other comprehensive income 3,681 16,323
Accumulated losses (307,156) (367,616)
Total Shareholders' Equity 268,025 217,958
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 753,360 $ 738,694
[1] Represents 58,518 shares issued at $0.0001, 10,579 shares issued at $26.00 and 81 restricted shares issued and outstanding at June 30, 2018 and 58,518 shares issued at $0.0001 and 10,579 shares issued at $26.00 and outstanding at December 31, 2017.
v3.10.0.1
Unaudited Interim Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares
Jun. 30, 2018
Dec. 31, 2017
Statement of Financial Position [Abstract]    
Common stock, shares issued 58,518,000 58,518,000
Common stock, par value $ 0.0001 $ 0.0001
Common stock, shares outstanding 10,579,000 10,579,000
Share issued price per share $ 26.00 $ 26.00
Restricted stock, shares issued 81,000  
Restricted stock, shares outstanding 81,000  
v3.10.0.1
Unaudited Interim Condensed Consolidated Statements of Operations - USD ($)
shares in Thousands, $ in Thousands
6 Months Ended
Jun. 30, 2018
Jun. 30, 2017
Income Statement [Abstract]    
Revenue [1] $ 276,852 $ 248,461
Cost of revenue (85,734) (66,227)
Gross profit 191,118 182,234
Operating expenses    
Selling and marketing (89,860) (78,835)
General and administrative (32,874) (37,487)
Technology and product development (37,957) (33,052)
Total operating expenses (160,691) (149,374)
Operating income / (loss) 30,427 32,860
Financial income 2,972 915
Financial expense [2] (11,095) (8,682)
Income before income taxes 22,304 25,093
Income tax expense (4,706) (6,292)
Net income $ 17,598 $ 18,801
Earnings per share available to common stockholders:    
Basic $ 0.25 $ 0.32
Diluted $ 0.25 $ 0.32
Shares used in computing earnings per share (in thousands):    
Basic 69,142 58,518
Diluted 69,152 58,609
[1] Includes $ 23,300 and $18,900 for related party transactions for the periods ended June 30, 2018 and 2017, respectively. See note 14.
[2] Includes $5,935 and $3,646 for factoring of credit card receivables for the periods ended June 30, 2018 and 2017, respectively.
v3.10.0.1
Unaudited Interim Condensed Consolidated Statements of Operations (Parenthetical) - USD ($)
$ in Thousands
6 Months Ended
Jun. 30, 2018
Jun. 30, 2017
Revenue from related parties $ 23,300 $ 18,900
Credit Card Receivable [Member]    
Factoring expense $ 5,935 $ 3,646
v3.10.0.1
Unaudited Interim Condensed Consolidated Statements of Comprehensive Income - USD ($)
$ in Thousands
6 Months Ended
Jun. 30, 2018
Jun. 30, 2017
Statement of Comprehensive Income [Abstract]    
Net income $ 17,598 $ 18,801
Other comprehensive income, net of tax    
Foreign currency translation adjustment [1] (12,642) 169
Comprehensive income $ 4,956 $ 18,970
[1] No tax impact
v3.10.0.1
Unaudited Interim Condensed 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]
Beginning Balance at Dec. 31, 2016 $ (82,263) $ 6 $ 312,155 $ (728) $ 16,286 $ (409,982)
Beginning Balance, Shares at Dec. 31, 2016   58,518        
Stock-based compensation expense 2,106   2,106      
Foreign currency translation adjustment 169 [1]       169  
Net income for the period 18,801         18,801
Ending Balance at Jun. 30, 2017 (61,187) $ 6 314,261 (728) 16,455 (391,181)
Ending Balance, Shares at Jun. 30, 2017   58,518        
Beginning Balance at Dec. 31, 2017 217,958 $ 253,535 316,444 (728) 16,323 (367,616)
Beginning Balance, Shares at Dec. 31, 2017   69,097        
Change in accounting standard ASC 606 at Dec. 31, 2017 [2] 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 2,249   2,249      
Foreign currency translation adjustment (12,642) [1]       (12,642)  
Exercise of Stock Options by Employees   $ 602 (602)      
Exercise of Stock Options by Employees, Shares   81        
Net income for the period 17,598         17,598
Ending Balance at Jun. 30, 2018 $ 268,025 $ 254,137 $ 318,091 $ (728) $ 3,681 $ (307,156)
Ending Balance, Shares at Jun. 30, 2018   69,178        
[1] No tax impact
[2] See note 3.
v3.10.0.1
Unaudited Statements of Cash Flows - USD ($)
$ in Thousands
6 Months Ended 12 Months Ended
Jun. 30, 2018
Jun. 30, 2017
Dec. 31, 2017
Cash flows from operating activities:      
Net income / (loss) $ 17,598 $ 18,801  
Adjustments to reconcile net income to net cash flows from operating activities:      
Unrealized foreign currency translation losses 1,228 686  
Depreciation expense 2,334 2,705 $ 5,075
Amortization of intangible assets 4,246 3,556 8,751
Stock based compensation expense 2,249 2,106  
Interest and penalties   454  
Income taxes 3,007 2,795  
Allowance for doubtful accounts 313 743  
Provision for contingencies 1,124 779  
Changes in assets and liabilities, net of non-cash transactions:      
(Increase) / Decrease in accounts receivable, net of allowances (17,588) (40,544)  
(Increase) / Decrease Related party receivables (757) (1,386)  
(Increase) / Decrease in other assets and prepaid expenses (27,191) 430  
Increase / (Decrease) in accounts payable and accrued expenses 7,627 13,621  
Increase / (Decrease) in travel suppliers payable 9,461 14,251  
Increase / (Decrease) in other liabilities 2,507 2,528  
Increase / (Decrease) in contingencies (4,383) (637)  
Increase / (Decrease) in related party liabilities 14,230 10,208  
Increase / (Decrease) in deferred revenue (1,480) (5,815)  
Net cash flows provided by / (used in) operating activities 14,525 25,281  
Cash flows from investing activities:      
(Increase) / Decrease in short-term investments   (238)  
Acquisition of property and equipment (7,264) (4,122)  
Increase of intangible assets, including internal-use software and website development (6,632) (6,157)  
Net cash flows (used in) / provided by investing activities (13,896) (10,517)  
Cash flows from financing activities:      
Increase in loans and other financial liabilities 30,765 9,318  
Decrease in loans and other financial liabilities (14,389) (2,642)  
Net cash flows provided by financing activities 16,376 6,676  
Effect of exchange rate changes on cash and cash equivalents (14,276) 689  
Net increase / (decrease) in cash and cash equivalents 2,729 22,129  
Cash and cash equivalents and restricted cash and cash equivalents as of beginning of the year 410,777 119,165 119,165
Cash and cash equivalents and restricted cash and cash equivalents as of end of the period 413,506 141,294 $ 410,777
Supplemental cash flow information      
Cash paid for income tax 10,987 7,476  
Interest paid $ 2,044 $ 454  
v3.10.0.1
Operations of the Company
6 Months Ended
Jun. 30, 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 Security and Exchange Commission and initial public offering pursuant to which the Company sold 10,578,931 shares of common stock and certain selling shareholders sold 4,106,569 shares of common stock, resulting in net proceeds to us of $253,529 thousand.

v3.10.0.1
Basis of Consolidation
6 Months Ended
Jun. 30, 2018
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Basis of Consolidation

2. Basis of consolidation

In the opinion of the Company, the accompanying unaudited interim condensed consolidated financial statements contain all adjustments, consisting of only normal recurring adjustments, necessary for a fair statement of its financial position as of June 30, 2018, and its results of operations, changes in equity and cash flows for the six months ended June 30, 2018, and 2017. The consolidated balance sheet as of December 31, 2017, was derived from the audited annual consolidated financial statements but does not contain all of the footnote disclosures from the audited consolidated financial statements.

The unaudited interim condensed 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
Despegar Ecuador 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 interim condensed 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 for consolidation purposes.

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-period / year exchange rates, and revenue and expenses are translated at average monthly rates in effect during the period / year. Translation adjustments are included in the unaudited interim condensed consolidated statement of comprehensive income.

Gains and losses resulting from transactions in non-functional currencies are recognized directly in the unaudited interim condensed 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. Therefore, the Company will transition the Argentinian operations to highly inflationary status as of July 1, 2018 and, going forward, will change the functional currency for Argentina from Argentine Pesos to U.S. dollars, which is the functional currency of its immediate parent company.

The Argentine subsidiaries have monetary assets and monetary liabilities denominated in Argentine Pesos, which will expose the Company to foreign exchange losses or gains resulting from exchange rate changes from July 1, 2018 forward. The Company does not anticipate that the change in functional currency will have any significant impact on revenues and expenses, as they were already translated to U.S. dollars for consolidation purposes at exchange rates prevailing at the date of the transaction or at the average monthly rates. Furthermore, although translation of property and equipment and intangible assets with definite useful life at the exchange rate as of July 1, 2018 or the respective date of the subsequent acquisition is likely to maintain the level of the future depreciation charge expressed in U.S. dollars, the Company does not anticipate that effect to be significant. Moreover, the Company has not identified any triggering event or impairment indicator that should be considered to assess the recoverability of the net book value of the property and equipment, goodwill and intangible assets assigned to the Argentine reporting unit as of June 30, 2018. As part of its assessment, the Company considered the expected business and macroeconomic trends, the impact of the change in functional currency as previously mentioned and the net book value of property and equipment, goodwill and intangible assets allocated to the Argentine reporting unit as of June 30, 2018.

v3.10.0.1
Summary of Significant Accounting Policies
6 Months Ended
Jun. 30, 2018
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies

3. Summary of significant accounting policies

Because all of the disclosures required by U.S. GAAP for audited consolidated financial statements are not included herein, these unaudited interim condensed financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto for the year ended December 31, 2017, contained in the Company’s Form 20-F filed with the Securities and Exchange Commission (“SEC”). The unaudited interim condensed consolidated statements of operations, of comprehensive income, of changes in equity and of cash flows for the periods presented herein are not necessarily indicative of results expected for any future period. For a more detailed discussion of the Company’s significant accounting policies, see note 3 to the audited consolidated financial statements in the Company’s Form 20-F for the year ended December 31, 2017. As it is describe below in this note, during the six-month period ended June 30, 2018, there were no material updates made to the Company’s significant accounting policies, except for the adoption of ASC 606 as of January 1, 2018. The following is a summary of the new significant accounting policies followed by the Company in the preparation of these unaudited interim condensed consolidated financial statements.

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

 

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 this 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 basis 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.

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.

 

Recently issued accounting pronouncements not yet adopted

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 is assessing the effects that the adoption of this accounting pronouncement may have on the Company’s financial statements.

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.

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.

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.

v3.10.0.1
Cash and Cash Equivalents
6 Months Ended
Jun. 30, 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
June 30,

2018
     As of
December 31,
2017
 

Cash

     62        12  

Banks

     239,781        344,809  

Time deposits

     130,296        —    

Money market funds

     20,577        26,192  
  

 

 

    

 

 

 
   $ 390,716      $ 371,013  
  

 

 

    

 

 

 
v3.10.0.1
Accounts Receivable, Net of Allowances
6 Months Ended
Jun. 30, 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
June 30,

2018
     As of
December 31,
2017
 

Accounts receivable

     196,526        197,389  

Others

     2,578        4,048  

Allowance for doubtful accounts

     (3,632      (3,164
  

 

 

    

 

 

 
   $ 195,472      $ 198,273  
  

 

 

    

 

 

 
v3.10.0.1
Other Assets and Prepaid Expenses
6 Months Ended
Jun. 30, 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
June 30,

2018
     As of
December 31,
2017
 

Tax credits (1)

     31,834        23,866  

Prepaid expenses and advance to suppliers

     6,547        3,473  

Advertising paid in advance

     1,526        383  

Others

     2,564        1,683  
  

 

 

    

 

 

 
   $ 42,471      $ 29,405  
  

 

 

    

 

 

 

 

(1)

Mainly includes $ 13,636 of VAT credits, $ 10,702 of income tax credits, $ 1,960 of sales tax credits and $ 5,536 of other tax credits as of June 30, 2018; and $ 10,833 of VAT credits, $ 7,394 of income tax credits, $ 2,965 of sales tax credits and $ 2,674 of other tax credits as of December 31, 2017.

Other non-current assets consist of the following:

 

     As of
June 30,

2018
     As of
December 31,
2017
 

Deferred tax assets

     5,317        4,658  
  

 

 

    

 

 

 
   $ 5,317      $ 4,658  
  

 

 

    

 

 

 

 

v3.10.0.1
Property and Equipment, Net
6 Months Ended
Jun. 30, 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
June 30,

2018
     As of
December 31,
2017
 

Computer hardware and software

     27,654        26,001  

Office furniture and fixture

     12,519        11,915  

Buildings

     2,092        2,790  

Land

     41        64  
  

 

 

    

 

 

 

Total property and equipment

     42,306        40,770  
  

 

 

    

 

 

 

Accumulated depreciation

   $ (25,085    $ (24,599
  

 

 

    

 

 

 

Total property and equipment, net

   $ 17,221      $ 16,171  
  

 

 

    

 

 

 

Total depreciation expense for the six-month period ended June 30, 2018 is $2,334 and for the year ended December 31, 2017 is $5,075, respectively.

v3.10.0.1
Goodwill and Intangible Assets, Net
6 Months Ended
Jun. 30, 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
June 30,

2018
     As of
December 31,
2017
 

Goodwill (1)

     36,108        38,733  

Intangible assets with indefinite lives Brands and domains

     13,882        13,882  

Amortizable Intangible assets Internal-use software and site internally developed

     48,397        47,980  
  

 

 

    

 

 

 

Total intangible assets

     62,279        61,862  
  

 

 

    

 

 

 

Accumulated amortization (2)

     (25,018      (26,438
  

 

 

    

 

 

 

Total intangible assets, net

   $ 37,261      $ 35,424  
  

 

 

    

 

 

 

 

(1)

Following is the breakdown of Goodwill per reporting unit as of June 30, 2018 and as of December 31, 2017:

 

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

June 30, 2018

        

Argentina

     1,866        (664      1,202  

Brazil

     12,766        (1,871      10,895  

Mexico

     7,262        (90      7,172  

Uruguay

     16,839        —          16,839  
  

 

 

    

 

 

    

 

 

 

Total

     38,733        (2,625      36,108  

December 31, 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 fully attributable to the Air operating segment.

 

(2)

Total amortization expense for intangible assets with definite lives for the six-month period ended June 30, 2018 is $ 4,246 and for the year ended December 31, 2017 is $ 8,751, respectively. The estimated future amortization expense related to intangible assets with definite lives as of June 30, 2018, assuming no subsequent impairment of the underlying assets, is as follows:

 

Remaining 2018

     3,425  

2019

     6,850  

2020

     6,850  

2021

     3,739  

2022 and beyond

     2,515  
  

 

 

 

Total

     23,379  
  

 

 

 
v3.10.0.1
Accounts Payable and Accrued Expenses
6 Months Ended
Jun. 30, 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
June 30,

2018
     As of
December 31,
2017
 

Marketing suppliers

     23,716        28,301  

Provision for invoices to be received

     8,027        6,285  

Affiliated agencies

     801        977  

Other suppliers

     13,005        10,046  
  

 

 

    

 

 

 
   $ 45,549      $ 45,609  
  

 

 

    

 

 

 
v3.10.0.1
Travel Suppliers Payable
6 Months Ended
Jun. 30, 2018
Text Block [Abstract]  
Travel Suppliers Payable

10. Travel Suppliers payable

Travel Supplier payables consist of the following

 

     As of
June 30,

2018
     As of
December 31,
2017
 

Hotels and other travel service suppliers (1)

     122,489        151,023  

Airlines

     31,472        23,794  
  

 

 

    

 

 

 
   $ 153,961      $ 174,817  
  

 

 

    

 

 

 

 

(1)

Includes $ 111,038 and $ 137,396 as of June 30, 2018 and December 31, 2017, respectively, for deferred merchant bookings which will be due after the traveler has checked out.

v3.10.0.1
Other Liabilities
6 Months Ended
Jun. 30, 2018
Other Liabilities Disclosure [Abstract]  
Other Liabilities

11. Other liabilities

Other current liabilities consist of the following:

 

     As of
June 30,

2018
     As of
December 31,
2017
 

Salaries payable

     22,621        31,141  

Taxes payable

     8,723        5,517  

Others

     3,674        3,093  
  

 

 

    

 

 

 
   $ 35,018      $ 39,751  
  

 

 

    

 

 

 

Other non-current liabilities consist of the following:

 

     As of
June 30,

2018
     As of
December 31,
2017
 

Taxes payable

     363        1,015  
  

 

 

    

 

 

 
   $ 363      $ 1,015  
  

 

 

    

 

 

 
v3.10.0.1
Income Taxes
6 Months Ended
Jun. 30, 2018
Income Tax Disclosure [Abstract]  
Income Taxes

12. Income taxes

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 estimates that no tax liability related to the Transition Tax is expected to be due. Accordingly, no adjustments have been made to income tax expense. The Transition Tax calculation will not be finalized until the Despegar.com, Corp Federal Income Tax return is filed.

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.

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. Accordingly, the Company has not recorded any impact in connection with the potential GILTI tax as of June 30, 2018 and December 31, 2017.

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

v3.10.0.1
Commitments and Contingencies
6 Months Ended
Jun. 30, 2018
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies

13. 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 $ 2,296 and $ 4,413 for the period ended June 30, 2018, and the year ended December 31, 2017, respectively. The Company’s lease obligations under non-cancellable operating leases are as follows:

 

Period ended June 30, 2018

   Amount  

Within 1 year

     4,149  

2 – 3 years

     7,115  

4 – 5 years

     835  
  

 

 

 

Total

     12,099  
  

 

 

 

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

As of June 30, 2018 the Company had accrued liabilities of approximately $3,600 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 $23,000. 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.

Brazilian Tax Authority Claim

In March 2013, São Paulo tax authorities asserted taxes (Brazilian municipal taxes “Imposto Sobre Serviço”) and fines against the Company’s Brazilian subsidiary relating to the period from 2008 to 2011 in an approximate updated amount of $ 21,500, including ordinary taxable services on commissions earned. On April 2, 2013, the Company’s Brazilian subsidiary filed an administrative defense against the authorities’ claim. In a decision published on August 30, 2014 the São Paulo tax authorities ruled against the Brazilian subsidiary upholding the claimed taxes and the fines previously imposed. An appeal to the São Paulo City Administrative Court was filed on September 30, 2014. On December 4, 2015, the Administrative Court ruled partially against the Brazilian subsidiary upholding the claimed taxes and the fines previously imposed. The Company accrued liabilities of $ 9,928 for the contingency.

On July 5, 2017, the Municipality of São Paulo published the terms of a special installment program called “Programa de Parcelamento Incentivado , PPI 2017”. On September 12, 2017 the Company applied for the program and was permited to pay in a single installment of $ 8,900 with a reduction in the interests and penalties due.

v3.10.0.1
Related Party Transactions
6 Months Ended
Jun. 30, 2018
Related Party Transactions [Abstract]  
Related Party Transactions

14. 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 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: $ 6,004 and $ 5,253 as of June 30, 2018 and as of December 31, 2017, respectively, recorded in Related party receivable; and $ 94,022 and $ 84,364 as of June 30, 2018 and as of December 31, 2017, respectively, recorded in Related party payables.

The net related party transactions are $23,300 and $18,900 for the periods ended June 30, 2018 and 2017, respectively, recorded in Revenue.

In addition, the Company has provided Expedia with a guaranty in form of security deposits in an aggregated amount of $ 10,000. They are recorded in restricted cash and cash equivalents non-current.

v3.10.0.1
Revenue
6 Months Ended
Jun. 30, 2018
Revenue from Contract with Customer [Abstract]  
Revenue

15. Revenue

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

Business model

 

     Six month ended
June 30, 2018
     Six month ended
June 30, 2017
 

Pre-pay model

     216,234        190,734  

Pay-at-destination model

     7,482        11,738  

Others

     53,136        45,989  
  

 

 

    

 

 

 
   $ 276,852      $ 248,461  
  

 

 

    

 

 

 

Product types

 

     Six month ended
June 30, 2018
     Six month ended
June 30, 2017
 

Air

     114,055        116,653  

Packages, Hotels and Other Travel Products

     162,797        131,808  
  

 

 

    

 

 

 
   $ 276,852      $ 248,461  
  

 

 

    

 

 

 
v3.10.0.1
Fair Value Measurements
6 Months Ended
Jun. 30, 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 June 30, 2018 and December 31, 2017:

 

Description

   Balances
as of June 30,
2018
     Quoted
prices in
active
markets for
(Level 1)
     Significant
other
(Level 2)
     Balances as
of December 31,
2017
    Quoted
prices in
active
markets for
(Level 1)
     Significant
other
(Level 2)
 

Assets

                

Derivatives

                

Foreign currency forward contract

     20        —          20        —         —          —    

Liabilities

                

Derivatives

                

Foreign currency forward contract

     —          —          —          (359     —          (359
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Total financial assets

     20        —          20        (359     —          (359
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

As of June 30, 2018 and December 31, 2017, the Company’s financial assets were measured at fair value using the following measurement techinques: (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 June 30, 2018 and December 31, 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 June 30, 2018 and December 31, 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 off those financial assets and liabilities of the Company measured at amortized cost, is equal to their respective book values as of June 30, 2018 and December 31, 2017.

In addition, as of June 30, 2018 and December 31, 2017, the Company had $ 153,086 and $ 39,764 of cash and cash equivalents and restricted cash and cash equivalents, respectively, which consisted of time deposits. Those investments are accounted for at amortized cost, which, as of June 30, 2018 and December 31, 2017, approximates their fair values.

There have been no reclasifications among fair value levels.

v3.10.0.1
Earnings Per Share
6 Months Ended
Jun. 30, 2018
Earnings Per Share [Abstract]  
Earnings Per Share

17. Earnings per share

Earnings per share

Basic earnings per share

Basics earnings per share was calculated for the periods ended June 30, 2018 and 2017 using the weighted average number of common shares outstanding during the period.

Diluted earnings per share

For the periods ended June 30, 2018 and 2017, 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 period ended June 30, 2018, 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 proceedsincluding unrecognized compensation expense, exceeds the average stock price. For the period ended June 30, 2017, 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:

 

     For the six
month ended

June 30, 2018
     For the six
month ended

June 30, 2017
 

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

     17,598        18,801  

Earnings per share attributable to Despegar.com Corp.

     

Basic

     0.25        0.32  

Diluted

     0.25        0.32  

Weighted average number of shares outstanding

     

Basic

     69,142        58,518  

Dilutive effect of restricted stock units

     10        91  
v3.10.0.1
Stock Based Compensation
6 Months Ended
Jun. 30, 2018
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Stock Based Compensation

18. 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  

The remaining vesting period as of June 30, 2018 is 1 day.

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      —    
  

 

 

    

 

 

 

Balance as of June 30, 2018

     10,000        7.47  

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 of up to 4,000,000 stock options. On August 10, 2017, the Board of Directors and Company´s Stockholders approved Amended and Restated 2016 Stock Incentive Plan and reserve for issuance 861.777 shares, which increases total stock subject to the plan to no more than 4.861.777 shares. As of June 30, 2018, 3,865,000 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 June 30, 2018 is 53 months.

The fair value of stock options granted during the period ended June 30, 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:

 

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

   $ 14.55  

 

Risk-free interest rate

     2.58

Expected volatility

     47.8

Expected life (in years)

     10  

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

   $ 17.21  

 

Risk-free interest rate

     2.58

Expected volatility

     45.7

Expected life (in years)

     10  

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

   $ 16.81  

 

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, 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 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

     650,000        28.48     

Forfeited

     (560,000      26.43     
  

 

 

       

Balance as of June 30, 2018

     3,865,000        26.44        4.5  

As of June 30, 2018, there was approximately $39,180 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 4.5 years. Compensation cost will not be impacted upon completion of a liquidity event.

v3.10.0.1
Guarantees
6 Months Ended
Jun. 30, 2018
Guarantees and Product Warranties [Abstract]  
Guarantees

19. 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.

Certain Despegar.com subsidiaries granted guarantees for $ 22,790 for the benefit of the IATA, Expedia and other suppliers in the form of time deposits or bank and insurance guarantees, which were recorded as Restricted cash and cash equivalent in the unaudited interim condensed consolidated balance sheet at June 30, 2018.

v3.10.0.1
Segment information
6 Months Ended
Jun. 30, 2018
Segment Reporting [Abstract]  
Segment information

20. 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 the six month periods ended June 30, 2018 and 2017. 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.

 

     Six-month period ended June 30, 2018  
     Air      Packages, Hotels
and Other travel
products
     Unallocated      Total  

Third-party revenue

     114,055        162,797        —          276,852  

Adjusted EBITDA

     17,309        21,503        444        39,256  

Depreciation and amortization

     (2,026      (1,991      (2,563      (6,580

Stock-based compensation

     —          —          (2,249      (2,249

Operating income / (loss)

     15,283        19,512        (4,368      30,427  

Financial income

     —          —          —          2,972  

Financial expense

     —          —          —          (11,095

Income before income tax

     —          —          —          22,304  

Income tax expense

     —          —          —          (4,706

Net income

     —          —          —          17,598  

 

     Six-month period ended June 30, 2017  
     Air      Packages, Hotels
and other travel
products
     Unallocated      Total  

Third-party revenue

     116,653        131,808        —          248,461  

Adjusted EBITDA

     27,873        18,043        (4,689      41,227  

Depreciation and amortization

     (1,340      (1,874      (3,047      (6,261

Stock-based compensation

     —          —          (2,106      (2,106

Operating income / (loss)

     26,533        16,169        (9,842      32,860  

Financial income

     —          —          —          915  

Financial expense

     —          —          —          (8,682

Income before income tax

     —          —          —          25,093  

Income tax expense

     —          —          —          (6,292

Net income

              18,801  

Geographic information

In the six-month period ended June 30, 2018, 25% of revenue was originated in transactions invoiced by the subsidiary in Argentina, 30% by the subsidiary in Brazil and 27% by subsidiaries in Uruguay (23%, 28% and 32%, respectively, as of June 30, 2017). Subsidiaries in no individual country other than those detailed above accounted for more than 10% of revenue.

v3.10.0.1
Subsequent events
6 Months Ended
Jun. 30, 2018
Subsequent Events [Abstract]  
Subsequent events

21. Subsequent events

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 shares effective immediately and expiring in one year. The timing and number of 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 shares and the repurchase program may be suspended, terminated or modified at any time for any reason.

Up to October 2018, the Company has repurchased 1,545 thousand shares for $ 26 million.

v3.10.0.1
Summary of Significant Accounting Policies (Policies)
6 Months Ended
Jun. 30, 2018
Accounting Policies [Abstract]  
Revenue recognition

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 this 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 basis 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.

Recently issued accounting pronouncements

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.

 

Recently issued accounting pronouncements not yet adopted

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 is assessing the effects that the adoption of this accounting pronouncement may have on the Company’s financial statements.

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.

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.

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.

v3.10.0.1
Basis of Consolidation (Tables)
6 Months Ended
Jun. 30, 2018
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Summary of Company's Main Operating Subsidiaries

The unaudited interim condensed 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
Despegar Ecuador 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

 

v3.10.0.1
Summary of Significant Accounting Policies (Tables)
6 Months Ended
Jun. 30, 2018
Accounting Policies [Abstract]  
Cumulative Effect of the Revenue Accounting Changes to Consolidated Balance Sheet

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

v3.10.0.1
Cash and Cash Equivalents (Tables)
6 Months Ended
Jun. 30, 2018
Cash and Cash Equivalents [Abstract]  
Schedule of Cash and Cash Equivalents

Cash and cash equivalents consist of the following:

 

     As of
June 30,

2018
     As of
December 31,
2017
 

Cash

     62        12  

Banks

     239,781        344,809  

Time deposits

     130,296        —    

Money market funds

     20,577        26,192  
  

 

 

    

 

 

 
   $ 390,716      $ 371,013  
  

 

 

    

 

 

 
v3.10.0.1
Accounts Receivable, Net of Allowances (Tables)
6 Months Ended
Jun. 30, 2018
Receivables [Abstract]  
Summary of Accounts Receivable, Net of Allowances

Accounts receivable, net of allowances consists of the following:

 

     As of
June 30,

2018
     As of
December 31,
2017
 

Accounts receivable

     196,526        197,389  

Others

     2,578        4,048  

Allowance for doubtful accounts

     (3,632      (3,164
  

 

 

    

 

 

 
   $ 195,472      $ 198,273  
  

 

 

    

 

 

 
v3.10.0.1
Other Assets and Prepaid Expenses (Tables)
6 Months Ended
Jun. 30, 2018
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]  
Summary of Other Current Assets and Prepaid Expenses

Other current assets and prepaid expenses consist of the following:

 

     As of
June 30,

2018
     As of
December 31,
2017
 

Tax credits (1)

     31,834        23,866  

Prepaid expenses and advance to suppliers

     6,547        3,473  

Advertising paid in advance

     1,526        383  

Others

     2,564        1,683  
  

 

 

    

 

 

 
   $ 42,471      $ 29,405  
  

 

 

    

 

 

 

 

(1)

Mainly includes $ 13,636 of VAT credits, $ 10,702 of income tax credits, $ 1,960 of sales tax credits and $ 5,536 of other tax credits as of June 30, 2018; and $ 10,833 of VAT credits, $ 7,394 of income tax credits, $ 2,965 of sales tax credits and $ 2,674 of other tax credits as of December 31, 2017.

Summary of Other Assets, Non-current

Other non-current assets consist of the following:

 

     As of
June 30,

2018
     As of
December 31,
2017
 

Deferred tax assets

     5,317        4,658  
  

 

 

    

 

 

 
   $ 5,317      $ 4,658  
  

 

 

    

 

 

 

 

v3.10.0.1
Property and Equipment, Net (Tables)
6 Months Ended
Jun. 30, 2018
Property, Plant and Equipment [Abstract]  
Summary of Property and Equipment

Property and equipment, net consists of the following:

 

     As of
June 30,

2018
     As of
December 31,
2017
 

Computer hardware and software

     27,654        26,001  

Office furniture and fixture

     12,519        11,915  

Buildings

     2,092        2,790  

Land

     41        64  
  

 

 

    

 

 

 

Total property and equipment

     42,306        40,770  
  

 

 

    

 

 

 

Accumulated depreciation

   $ (25,085    $ (24,599
  

 

 

    

 

 

 

Total property and equipment, net

   $ 17,221      $ 16,171  
  

 

 

    

 

 

 

 

v3.10.0.1
Goodwill and Intangible Assets, Net (Tables)
6 Months Ended
Jun. 30, 2018
Goodwill and Intangible Assets Disclosure [Abstract]  
Summary of Goodwill and Intangible Assets, Net

Goodwill and intangible assets, net consists of the following:

 

     As of
June 30,

2018
     As of
December 31,
2017
 

Goodwill (1)

     36,108        38,733  

Intangible assets with indefinite lives Brands and domains

     13,882        13,882  

Amortizable Intangible assets Internal-use software and site internally developed

     48,397        47,980  
  

 

 

    

 

 

 

Total intangible assets

     62,279        61,862  
  

 

 

    

 

 

 

Accumulated amortization (2)

     (25,018      (26,438
  

 

 

    

 

 

 

Total intangible assets, net

   $ 37,261      $ 35,424  
  

 

 

    

 

 

 

 

(1)

Following is the breakdown of Goodwill per reporting unit as of June 30, 2018 and as of December 31, 2017:

 

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

June 30, 2018

        

Argentina

     1,866        (664      1,202  

Brazil

     12,766        (1,871      10,895  

Mexico

     7,262        (90      7,172  

Uruguay

     16,839        —          16,839  
  

 

 

    

 

 

    

 

 

 

Total

     38,733        (2,625      36,108  

December 31, 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 fully attributable to the Air operating segment.

 

(2)

Total amortization expense for intangible assets with definite lives for the six-month period ended June 30, 2018 is $ 4,246 and for the year ended December 31, 2017 is $ 8,751, respectively. The estimated future amortization expense related to intangible assets with definite lives as of June 30, 2018, assuming no subsequent impairment of the underlying assets, is as follows:

 

Remaining 2018

     3,425  

2019

     6,850  

2020

     6,850  

2021

     3,739  

2022 and beyond

     2,515  
  

 

 

 

Total

     23,379  
  

 

 

 

 

v3.10.0.1
Accounts Payable and Accrued Expenses (Tables)
6 Months Ended
Jun. 30, 2018
Payables and Accruals [Abstract]  
Summary of Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses consist of the following:

 

     As of
June 30,

2018
     As of
December 31,
2017
 

Marketing suppliers

     23,716        28,301  

Provision for invoices to be received

     8,027        6,285  

Affiliated agencies

     801        977  

Other suppliers

     13,005        10,046  
  

 

 

    

 

 

 
   $ 45,549      $ 45,609  
  

 

 

    

 

 

 
v3.10.0.1
Travel Suppliers Payable (Tables)
6 Months Ended
Jun. 30, 2018
Text Block [Abstract]  
Schedule of Travel Supplier Payables

Travel Supplier payables consist of the following

 

     As of
June 30,

2018
     As of
December 31,
2017
 

Hotels and other travel service suppliers (1)

     122,489        151,023  

Airlines

     31,472        23,794  
  

 

 

    

 

 

 
   $ 153,961      $ 174,817  
  

 

 

    

 

 

 

 

(1)

Includes $ 111,038 and $ 137,396 as of June 30, 2018 and December 31, 2017, respectively, for deferred merchant bookings which will be due after the traveler has checked out.

v3.10.0.1
Other Liabilities (Tables)
6 Months Ended
Jun. 30, 2018
Other Liabilities Disclosure [Abstract]  
Summary of Other Current Liabilities

Other current liabilities consist of the following:

 

     As of
June 30,

2018
     As of
December 31,
2017
 

Salaries payable

     22,621        31,141  

Taxes payable

     8,723        5,517  

Others

     3,674        3,093  
  

 

 

    

 

 

 
   $ 35,018      $ 39,751  
  

 

 

    

 

 

 
Summary of Other Non-current Liabilities

Other non-current liabilities consist of the following:

 

     As of
June 30,

2018
     As of
December 31,
2017
 

Taxes payable

     363        1,015  
  

 

 

    

 

 

 
   $ 363      $ 1,015  
  

 

 

    

 

 

 
v3.10.0.1
Commitments and Contingencies (Tables)
6 Months Ended
Jun. 30, 2018
Commitments and Contingencies Disclosure [Abstract]  
Summary of Lease Obligations Under Non-cancellable Operating Leases

The Company’s lease obligations under non-cancellable operating leases are as follows:

 

Period ended June 30, 2018

   Amount  

Within 1 year

     4,149  

2 – 3 years

     7,115  

4 – 5 years

     835  
  

 

 

 

Total

     12,099  
  

 

 

 
v3.10.0.1
Revenue (Tables)
6 Months Ended
Jun. 30, 2018
Revenue from Contract with Customer [Abstract]  
Summary of Revenues by Business Model and Product Types

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

Business model

 

     Six month ended
June 30, 2018
     Six month ended
June 30, 2017
 

Pre-pay model

     216,234        190,734  

Pay-at-destination model

     7,482        11,738  

Others

     53,136        45,989  
  

 

 

    

 

 

 
   $ 276,852      $ 248,461  
  

 

 

    

 

 

 

Product types

 

     Six month ended
June 30, 2018
     Six month ended
June 30, 2017
 

Air

     114,055        116,653  

Packages, Hotels and Other Travel Products

     162,797        131,808  
  

 

 

    

 

 

 
   $ 276,852      $ 248,461  
  

 

 

    

 

 

 

v3.10.0.1
Fair Value Measurements (Tables)
6 Months Ended
Jun. 30, 2018
Fair Value Disclosures [Abstract]  
Summary of Financial Assets and Liabilities Measured at Fair Value on Recurring Basis

The following table summarizes the Company’s financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2018 and December 31, 2017:

 

Description

   Balances
as of June 30,
2018
     Quoted
prices in
active
markets for
(Level 1)
     Significant
other
(Level 2)
     Balances as
of December 31,
2017
    Quoted
prices in
active
markets for
(Level 1)
     Significant
other
(Level 2)
 

Assets

                

Derivatives

                

Foreign currency forward contract

     20        —          20        —         —          —    

Liabilities

                

Derivatives

                

Foreign currency forward contract

     —          —          —          (359     —          (359
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Total financial assets

     20        —          20        (359     —          (359
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 
v3.10.0.1
Earnings Per Share (Tables)
6 Months Ended
Jun. 30, 2018
Earnings Per Share [Abstract]  
Basic and Diluted Earnings Per Share

The following table presents basic and diluted earnings per share:

 

     For the six
month ended

June 30, 2018
     For the six
month ended

June 30, 2017
 

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

     17,598        18,801  

Earnings per share attributable to Despegar.com Corp.

     

Basic

     0.25        0.32  

Diluted

     0.25        0.32  

Weighted average number of shares outstanding

     

Basic

     69,142        58,518  

Dilutive effect of restricted stock units

     10        91  

v3.10.0.1
Stock Based Compensation (Tables)
6 Months Ended
Jun. 30, 2018
Summary of Weighted Average Assumptions of Black-Scholes and Monte Carlo Option-Pricing Models

The fair value of stock options granted during the period ended June 30, 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:

 

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

   $ 14.55  

 

Risk-free interest rate

     2.58

Expected volatility

     47.8

Expected life (in years)

     10  

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

   $ 17.21  

 

Risk-free interest rate

     2.58

Expected volatility

     45.7

Expected life (in years)

     10  

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

   $ 16.81  

 

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, 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  
Schedule of Share Based Compensation Restricted Stock Units Award Activity

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      —    
  

 

 

    

 

 

 

Balance as of June 30, 2018

     10,000        7.47  
Summary of Stock Option Activity

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

     650,000        28.48     

Forfeited

     (560,000      26.43     
  

 

 

       

Balance as of June 30, 2018

     3,865,000        26.44        4.5  
Restricted Stock Units (RSUs) [Member]  
Summary of Weighted Average Assumptions of Black-Scholes and Monte Carlo Option-Pricing Models

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  
v3.10.0.1
Segment information (Tables)
6 Months Ended
Jun. 30, 2018
Segment Reporting [Abstract]  
Schedule of Segment Information

The following tables present the Company’s segment information for the six month periods ended June 30, 2018 and 2017. 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.

 

     Six-month period ended June 30, 2018  
     Air      Packages, Hotels
and Other travel
products
     Unallocated      Total  

Third-party revenue

     114,055        162,797        —          276,852  

Adjusted EBITDA

     17,309        21,503        444        39,256  

Depreciation and amortization

     (2,026      (1,991      (2,563      (6,580

Stock-based compensation

     —          —          (2,249      (2,249

Operating income / (loss)

     15,283        19,512        (4,368      30,427  

Financial income

     —          —          —          2,972  

Financial expense

     —          —          —          (11,095

Income before income tax

     —          —          —          22,304  

Income tax expense

     —          —          —          (4,706

Net income