DESPEGAR.COM, CORP., 20-F filed on 4/10/2020
Annual and Transition Report (foreign private issuer)
v3.20.1
Cover Page
12 Months Ended
Dec. 31, 2019
shares
Cover [Abstract]  
Document Type 20-F
Amendment Flag false
Document Period End Date Dec. 31, 2019
Document Fiscal Year Focus 2019
Document Fiscal Period Focus FY
Trading Symbol DESP
Title of 12(b) Security Ordinary Shares
Security Exchange Name NYSE
Entity Registrant Name Despegar.com, Corp.
Entity Central Index Key 0001703141
Current Fiscal Year End Date --12-31
Entity Well-known Seasoned Issuer No
Entity Current Reporting Status Yes
Entity Filer Category Accelerated Filer
Entity Emerging Growth Company true
Entity Ex Transition Period true
Entity Shell Company false
Document Annual Report true
Document Transition Report false
Document Shell Company Report false
Entity Address, Country AR
Entity Interactive Data Current Yes
Entity Voluntary Filers No
Document Accounting Standard U.S. GAAP
Entity Common Stock, Shares Outstanding 69,648,263
v3.20.1
Consolidated Balance Sheets - USD ($)
$ in Thousands
Dec. 31, 2019
Dec. 31, 2018
Current assets    
Cash and cash equivalents $ 309,187 $ 346,480
Restricted cash 4,457 5,709
Accounts receivable, net of allowances 213,551 228,448
Related party receivable 19,555 8,653
Other assets and prepaid expenses 69,694 68,471
Total current assets 616,444 657,761
Non-current assets    
Other assets 25,351 12,751
Lease right-of-use assets 41,638  
Property and equipment, net 21,205 19,716
Intangible assets, net 49,619 37,512
Goodwill 46,956 36,207
Total non-current assets 184,769 106,186
TOTAL ASSETS 801,213 763,947
Current liabilities    
Accounts payable and accrued expenses 59,673 42,353
Travel suppliers payable 206,954 185,450
Related party payable 86,602 83,904
Loans and other financial liabilities 19,209 31,162
Deferred revenue 8,853 8,229
Other liabilities 46,722 33,270
Contingent liabilities 6,297 4,794
Lease liabilities 6,498  
Total current liabilities 440,808 389,162
Non-current liabilities    
Other liabilities 6,646 243
Contingent liabilities 54 1,968
Lease liabilities 34,469  
Related party liability 125,000 125,000
Total non-current liabilities 166,169 127,211
TOTAL LIABILITIES 606,977 516,373
SHAREHOLDERS' EQUITY    
Common stock [1] 261,608 255,254
Additional paid-in capital 327,523 321,627
Other reserves (728) (728)
Accumulated other comprehensive income 610 3,051
Accumulated losses (326,510) (305,600)
Treasury Stock (68,267) (26,030)
Total Shareholders' Equity 194,236 247,574
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 801,213 $ 763,947
[1] Represents 69,648 shares issued and outstanding at December 31, 2019 and 69,235 shares issued and outstanding at December 31, 2018.
v3.20.1
Consolidated Balance Sheets (Parenthetical) - shares
shares in Thousands
Dec. 31, 2019
Dec. 31, 2018
Statement of Financial Position [Abstract]    
Common stock, shares issued 69,648 69,235
Common stock, shares outstanding 69,648 69,235
v3.20.1
Consolidated Statements of Income - USD ($)
shares in Thousands, $ in Thousands
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2017
Income Statement [Abstract]      
Revenue [1] $ 524,876 $ 530,614 $ 523,940
Cost of revenue (179,565) (172,110) (142,479)
Gross profit 345,311 358,504 381,461
Operating expenses      
Selling and marketing (187,894) (174,357) (166,288)
General and administrative (92,962) (67,240) (72,626)
Technology and product development (73,375) (71,154) (71,308)
Impairment of long-lived assets   (363)  
Total operating expenses (354,231) (313,114) (310,222)
Operating (loss) / income (8,920) 45,390 71,239
Financial income 7,944 7,621 2,389
Financial expense [2] (25,159) (26,788) (19,268)
(Loss) / Income before income taxes (26,135) 26,223 54,360
Income tax benefit / (expense) 5,225 (7,069) (11,994)
Net (loss) / income $ (20,910) $ 19,154 $ 42,366
(Losses) / Earnings per share available to common stockholders:      
Basic $ (0.30) $ 0.28 $ 0.69
Diluted $ (0.30) $ 0.27 $ 0.69
Shares used in computing (losses) / earnings per share (in thousands):      
Basic 69,465 69,154 61,457
Diluted 70,615 71,254 61,548
[1] Includes $ 38,760, $ 43,975 and $ 37,000 for related party transactions for the years 2019, 2018 and 2017, respectively. See note 17.
[2] Includes $15,379, $ 12,368 and $ 8,601 for factoring of credit card receivables for the years ended 2019, 2018 and 2017, respectively.
v3.20.1
Consolidated Statements of Income (Parenthetical) - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2017
Revenue from related parties $ 38,760 $ 43,975 $ 37,000
Credit Card Receivable [Member]      
Factoring expense $ 15,379 $ 12,368 $ 8,601
v3.20.1
Consolidated Statements of Comprehensive Income - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2017
Statement of Comprehensive Income [Abstract]      
Net (loss) / income $ (20,910) $ 19,154 $ 42,366
Other comprehensive (loss) / income, net of tax      
Foreign currency translation adjustment (2,441) (13,272) 37
Comprehensive (loss) / income $ (23,351) $ 5,882 $ 42,403
v3.20.1
Consolidated Statements of Changes in Shareholders' Equity - USD ($)
shares in Thousands, $ in Thousands
Total
Common Stock [Member]
Additional Paid-in Capital [Member]
Other Reserves [Member]
Accumulated Other Comprehensive Income [Member]
Accumulated Losses [Member]
Treasury Stock [Member]
Beginning Balance at Dec. 31, 2016 $ (82,263) $ 6 $ 312,155 $ (728) $ 16,286 $ (409,982)  
Beginning Balance, Shares at Dec. 31, 2016   58,518          
Stock-based compensation expense 4,289   4,289        
Foreign currency translation adjustment 37       37    
Issuance of common stock, value [1] 253,529 $ 253,529          
Issuance of common stock, shares [1]   10,579          
Net income (loss) for the year 42,366         42,366  
Ending Balance at Dec. 31, 2017 217,958 $ 253,535 316,444 (728) 16,323 (367,616)  
Ending Balance, Shares at Dec. 31, 2017   69,097          
Change in accounting standard ASC 606 at Dec. 31, 2017 42,862         42,862  
Adjusted balance at Dec. 31, 2017 260,820 $ 253,535 316,444 (728) 16,323 (324,754)  
Stock-based compensation expense 6,766   6,766        
Foreign currency translation adjustment (13,272)       (13,272)    
Exercise of Stock Options by Employees 136 $ 1,719 (1,583)        
Exercise of Stock Options by Employees, Shares   138          
Net income (loss) for the year 19,154         19,154  
Treasury Stock, value (26,030)           $ (26,030)
Ending Balance at Dec. 31, 2018 247,574 $ 255,254 321,627 (728) 3,051 (305,600) (26,030)
Ending Balance, Shares at Dec. 31, 2018   69,235          
Stock-based compensation expense 11,686   11,686        
Foreign currency translation adjustment (2,441)       (2,441)    
Exercise of Stock Options by Employees 564 $ 6,354 (5,790)        
Exercise of Stock Options by Employees, Shares   413          
Net income (loss) for the year (20,910)         (20,910)  
Treasury Stock, value (42,237)           (42,237)
Ending Balance at Dec. 31, 2019 $ 194,236 $ 261,608 $ 327,523 $ (728) $ 610 $ (326,510) $ (68,267)
Ending Balance, Shares at Dec. 31, 2019   69,648          
[1] Net of issuance costs of $21,530.
v3.20.1
Consolidated Statements of Cash Flows - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2017
Cash flows from operating activities:      
Net (loss) / income $ (20,910) $ 19,154 $ 42,366
Adjustments to reconcile net (loss) / income to net cash flows from operating activities:      
Unrealized foreign currency losses / (gains) 6,748 (1,088) 457
Depreciation expense 6,659 4,985 5,075
Amortization of intangible assets 16,137 10,140 8,751
Disposal of property and equipment 597    
Impairment of long-lived assets   363  
Stock based compensation expense 11,686 6,766 4,289
Amortization of right of use 3,923    
Interest and penalties 1,228 494 (65)
Income taxes (9,666) 2,876 5,507
Allowance for doubtful accounts 4,294 1,062 818
Provision / (Recovery) for contingencies 1,603 2,021 (603)
Changes in assets and liabilities, net of non-cash transactions:      
Decrease / (Increase) in accounts receivable, net of allowances 13,823 (54,705) (85,383)
Increase in related party receivables (10,905) (3,406) (3,013)
Decrease / (Increase) in other assets and prepaid expenses 19,695 (61,302) (10,090)
Increase in accounts payable and accrued expenses 16,651 4,277 22,363
(Decrease) / Increase in travel suppliers payable (19,459) 42,789 78,835
Increase / (Decrease) in other liabilities 4,391 3,309 (12,323)
Decrease in contingencies (1,990) (5,567) (12,183)
Increase in related party liabilities 3,678 4,203 13,964
Increase in lease liability (4,573)    
Increase in deferred revenue 628 6,009 2,461
Net cash flows provided by / (used in) operating activities 44,238 (17,620) 61,226
Cash flows from investing activities:      
Payments for acquired business, net of cash acquired (228)    
Acquisition of property and equipment (5,942) (13,085) (8,746)
Increase of intangible assets, including internal-use software and website development (24,614) (13,494) (12,929)
Net cash flows used in investing activities (30,784) (26,579) (21,675)
Cash flows from financing activities:      
Increase in loans and other financial liabilities 55,652 66,814 30,159
Decrease in loans and other financial liabilities (67,159) (42,177) (29,574)
Exercise of stock based compensation 564 136  
Proceeds from issuance of shares [1]     253,529
Purchase of treasury stock (42,237) (26,030)  
Net cash flows (used in) / provided by financing activities (53,180) (1,257) 254,114
Effect of exchange rate changes on cash and cash equivalents 1,181 (13,132) (2,053)
Net (decrease) / increase in cash and cash equivalents (38,545) (58,588) 291,612
Cash and cash equivalents and restricted cash as of beginning of the year 352,189 [2] 410,777 [2] 119,165
Cash and cash equivalents and restricted cash as of end of the period [2] 313,644 352,189 410,777
Supplemental cash flow information      
Cash paid for income tax 9,106 14,423 18,455
Interest paid 5,767 $ 5,311 $ 942
Financed portion of acquisition $ 10,696    
[1] Net of issuance costs paid of $ 21,530 as of December 31, 2017.
[2] See Note 4
v3.20.1
Consolidated Statements of Cash Flows (Parenthetical)
$ in Thousands
12 Months Ended
Dec. 31, 2017
USD ($)
Statement of Cash Flows [Abstract]  
Stock issuance costs, net $ 21,530
v3.20.1
Business
12 Months Ended
Dec. 31, 2019
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Business
1.
Business
Despegar.com, Corp. (formerly Decolar.com, Inc.) (hereinafter referred to as “the Company”) is the leading online travel company in Latin America, known by its two brands, “Despegar”, the Company’s global brand, and “Decolar”, the Company’s Brazilian brand. The Company provides its traveler customers a comprehensive product offering, including airline tickets, packages, hotels and other travel-related products, which enables them to find, compare, plan and purchase travel products easily through our marketplace. The Company provides its network of travel suppliers a technology platform for managing the distribution of their travel products and access to traveler customers.
On May 3, 2017, the stockholders of Decolar.com, Inc., a Delaware holding company, exchanged their shares for ordinary shares of the Company to create a new British Virgin Island holding company. Following the exchange, Decolar.com, Inc.’s shareholders owned shares of the Company and Decolar.com, Inc. became a wholly-owned subsidiary of the Company. In September 2017, the Company successfully completed its initial public offering in the United States.
The Company primarily generates revenue from facilitation services to travel suppliers and travelers. The Company derives substantially all of its revenue from commissions earned from facilitation services to travel suppliers, including facilitating reservations of flight tickets, hotel accommodations, car rentals, vacation packages and other travel-related products and services and service fees charged to travelers for facilitation services including the handling and processing selected travel products, the facilitation of payment processing, and limited post-booking services related to handling minor inquiries or minor administrative changes. To a lesser extent, the Company also derives revenue from override commissions or incentives from travel suppliers and GDS providers if certain performance conditions are met and advertising revenues from the sale of third-party advertising placements on the Company’s websites and from certain suppliers when their brands appear in the Company’s advertisements in mass media.
v3.20.1
Basis of consolidation and presentation
12 Months Ended
Dec. 31, 2019
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Basis of consolidation and presentation
2.
Basis of consolidation and presentation
The consolidated financial statements include the accounts of the Company and its subsidiaries. The following are the Company’s main operating subsidiaries (all wholly-owned):
 
Name of the Subsidiary
  
Country of Incorporation
Despegar.com.ar S.A.  Argentina
Viajes Falabella S.A.  Argentina
Decolar.com LTDA.  Brazil
Despegar.com Chile SpA  Chile
Viajes Falabella SpA  Chile
Despegar Colombia S.A.S.  Colombia
Agencia de Viajes y Turismo Falabella S.A.S.  Colombia
Despegar Ecuador S.A.  Ecuador
Despegar.com México S.A. de C.V.  Mexico
Despegar.com Peru S.A.C.  Perú
Viajes Falabella S.A.C.  Perú
Despegar.com USA, Inc.  United States
Travel Reservations S.R.L.  Uruguay
 
The consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”). Although the subsidiaries transact the majority of their businesses in their local currencies, the Company has selected the United States dollar (“U.S. dollar”) as its reporting currency. All significant intercompany accounts and transactions have been eliminated.
Foreign currency translation
The Company’s foreign subsidiaries (except for Travel Reservations S.R.L in Uruguay and other subsidiaries in the United States, Ecuador, Argentina and Venezuela, which use the U.S. dollar as functional currency) have determined the local currency to be their functional currency. Assets and liabilities are translated from their local currencies into U.S. dollars at the
end-of-the-year
exchange rates, and revenue and expenses are translated at average monthly rates in effect during the year. Translation adjustments are included in the consolidated statements of comprehensive income.
Gains and losses resulting from transactions in
non-functional
currencies are recognized directly in the consolidated statements of income under the line items “Financial income” and “Financial expense”, respectively.
Highly inflationary status in Argentina
During May 2018, the International Practices Task Force (“IPTF”) discussed the highly inflationary status of the Argentine economy. Historically, the IPTF has used the Consumer Price Index (“CPI”) when considering the inflationary status of the Argentine economy. Given that the CPI was considered flawed by the current Argentine Government until December 2015 and the new CPI was published as from June 2016, the IPTF considered alternative indices to determine the three-year cumulative inflation.
A highly inflationary economy is one that has cumulative inflation of approximately 100% or more over a three-year period. The alternative three-year cumulative indices at June 30, 2018 exceeded 100%. According to U.S. GAAP, the company should apply highly inflationary accounting no later than July 1, 2018. As of July 1, 2018, the Company transitioned its Argentinian operations to highly inflationary status in accordance with U.S. GAAP, and changed the functional currency of the Argentine subsidiary from Argentine Pesos to U.S. dollars, which is the functional currency of their immediate parent company.
Accordingly, local currency monetary assets and liabilities are remeasured at closing exchange rate,
non-monetary
assets are remeasured at the rate prevailing on the date of the respective transaction, and revenues and expenses are remeasured at the average exchange rate of each month. The effect of the remeasurement is recognized as foreign currency gains / (losses) and are recognized in the consolidated statements of income under the line items “Financial income” and “Financial expense”, respectively.
v3.20.1
Summary of significant accounting policies
12 Months Ended
Dec. 31, 2019
Accounting Policies [Abstract]  
Summary of significant accounting policies
3.
Summary of significant accounting policies
The following is a summary of significant accounting policies followed by the Company in the preparation of these consolidated financial statements.
 
Use of estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from estimates. The significant estimates underlying the Company´s consolidated financial statements include revenue recognition, including the accounting for certain merchant revenues, allowance for doubtful accounts, recoverability of intangible assets with indefinite useful lives and goodwill, contingencies, fair value of stock based compensation and fair value of financial instruments. The consolidated financial statements reflect all adjustments considered, in the opinion of management, necessary to fairly present the results for the periods presented.
Concentration of risk
The Company´s business is subject to certain risks and concentrations including dependence on relationships with travel suppliers, primarily airlines, dependence on third-party technology providers, exposure to risks associated with online commerce security and payment related fraud. It also relies on global distribution system (“GDS”) partners and third-party service providers for certain fulfillment services.
Financial instruments, which potentially subject the Company to concentration of credit risk, mainly consist of cash and cash equivalents and accounts receivable (i.e. clearing house for credit cards). The Company maintains cash and cash equivalents balances in financial institutions that management believes are high credit quality. Accounts receivable are settled mainly through customer credit cards and debit cards; the company maintains allowance for doubtful accounts based on management’s evaluation of various factors, including the credit risk of customers, historical trends and other information.
Revenue recognition
The Company primarily generates revenue as a result of its facilitation services to two groups of customers, travel suppliers and travelers.
The Company primary sources of revenue are:
 
  
Commissions earned from facilitation services to travel suppliers, including facilitating reservations of flight tickets, hotel accommodations, car rentals, vacation packages and other travel-related products and services;
 
  
Service fees charged to travelers for facilitation services including the handling and processing selected travel products, the facilitation of payment processing, and limited post-booking services related to handling minor inquiries or minor administrative changes;
 
  
Override commissions or incentives from travel suppliers and GDS providers if certain performance conditions are met; and
 
  
Advertising revenues from the sale of advertising placements on the Company’s websites.
 
Facilitation services (commissions and service fees)
The Company offers its facilitation services to travel suppliers and travelers through the following business models: the Prepay/Merchant Model and the
Pay-At-Destination/Agency
Model, which represents approximately 78% and 2% of the Company’s total revenue for the year ended December 31, 2019, respectively. The remaining 20% of the total revenue comprises the other revenue sources including GDS incentives and advertising revenue.
Under both business models, the Company provides travel suppliers access to the Company’s platform so they can have an outlet for selling their travel products to millions of travelers in an interactive and organized way. Specifically, the Company’s performance obligation to travel suppliers is to help them facilitate the sales of their travel products by connecting the travel supplier and the traveler. The Company receives a commission from the travel supplier in exchange for satisfying its performance obligation to the travel supplier. Under the contracts with travel suppliers, after an initial booking is completed, there are no post booking services outstanding to the travel supplier included in the initial performance obligation.
Under both business models, the Company provides travelers access to the Company’s platforms so they can search for thousands of alternatives in travel products. The Company’s performance obligation to travelers is the handling and processing of a selected travel product, the facilitation of payment processing, and limited post-booking services related to handling minor inquiries or minor administrative changes (i.e. correction of clerical errors) to the reservations through the Company’s call center or via online. The Company considers these post-booking services to be immaterial in the context of the contract with the travelers. The Company charges a service fee to travelers, which is the consideration the Company receives in exchange for satisfying its performance obligation to the traveler. Any post-booking services beyond minor inquiries or minor administrative changes to the reservation, such as modifications to the original terms of the reservations, are considered as new performance obligations with the traveler and the travel supplier. Accordingly, the Company charges a new booking fee and a new administrative fee for this service. Also, if the requested change results in an incremental price of the reservation to the traveler set by the travel supplier, the Company receives an incremental commission from the travel supplier as well.
Under both business models, the Company recognizes revenue upon the transfer of control of the promised facilitation services to travelers and travel suppliers in an amount that reflects the consideration the Company expects to be entitled to in exchange for those facilitation services. The Company has determined the point in time of revenue recognition by evaluating when customers obtain control to the promised facilitation services. The Company has considered the indicators that control has transferred to the customers at the time the booking is completed within the context of the nature of the performance obligations discussed above including (i) for the majority of transactions, travelers are obligated to pay upfront the entire amount of the travel product selected (which amount comprises the value of the travel product plus the service fee) at the time of booking before it can be considered confirmed and a voucher issued (even for refundable or cancellable bookings) and the Company is legally entitled to retain its commission out of this total amount, (ii) the Company has the right to invoice the traveler for its facilitation services at the time of booking despite the fact that the amount could be subject to refund in the future, (iii) the traveler is in legal and physical possession of a travel voucher representing the reservation purchased through the Company’s platform and the travel supplier receives a confirmed reservation which constitutes a separate agreement between the traveler and the travel supplier, (iv) the traveler obtained the significant risks and rewards of the facilitation services provided by the Company and the travel supplier obtained the significant risks and rewards of having sold a travel product to travelers and (v) the traveler and travel supplier explicitly accepts the terms and conditions of the facilitation services provided by the Company.
For those cancellable or refundable transactions pursuant to the terms and conditions of the travel products set by travel suppliers, the Company considers the consideration received for cancellable or refundable transactions as variable and records a provision for cancellations against revenue based on past objective historical experience. Each reservation may have its own terms and conditions for refunds as established by travel suppliers. Under the terms and conditions of certain reservations set by travel suppliers, the traveler may incur costs upon requesting a refund. Generally, reservations cancelled after a specified date and time prior to commencement of travel are not fully refunded.
Under both business models, the Company has determined that net presentation (that is the amount billed to the traveler less the amount paid to the travel supplier) is appropriate for the majority of the Company’s revenue transactions because the travel supplier is primarily responsible for providing the underlying travel services, the Company does not control the service or travel product provided by the travel supplier to the traveler and the Company does not bear inventory risk. Taxes assessed by a government authority, if any, are excluded from the measurement of transaction prices that are imposed on the travel related services or collected from customers (which are therefore excluded from revenue). The Company presents its revenue on a gross basis for some bookings where the Company
pre-purchases
flight seats. These transactions have been limited to date.
The Company has agreed with certain local and regional banks to allow the Company to offer travelers the possibility of purchasing travel related products under installment plans established, offered and administered by the credit card holders’ issuing banks. The Company does not provide any type of financing by itself. Regardless of any financing or installment agreement offered by the banks, for transactions in certain territories, the Company generally receives full payment of its commissions and service fees within less than one month after the traveler completes the booking in the Company’s platforms, in an amount that reflects its cash-selling price. The banks assume full risk of default and delinquency by travelers. In other territories, such as in Brazil, the Company generally receives payment from the financing bank only after each scheduled payment is due from the traveler regardless of the fact that the traveler actually makes the scheduled payments. The Company generally receives payment before or during when the travel occurs. The Company expects at the time of booking that the period between when the traveler completes the booking and the Company receives the scheduled payments from the banks is one year or less (on average the Company receives payment during 8 months), thus the Company has made use of the practical expedient in ASC
606-10-32-18
whereby the Company does not adjust the amount of consideration for the effects of a significant financing component.
As mentioned above, the Company operates under two business models: the Prepay/Merchant Model and the
Pay-at-destination/Agency
Model.
Prepay/Merchant Business Model
Under this business model which represents approximately 78% of the total revenue of the Company for the year ended December 31, 2019, the Company receives the entire amount of the travel product sold up front at the time of booking, which amount comprises the value of the travel product set and offered by the travel supplier plus the service fee charged by the Company for the facilitation services.
 
The Company retains its commission agreed with the travel supplier out of this total amount paid by the traveler. The Company generally pays to the travel supplier for the travel product sold on its behalf at a later date, which is normally at the time the traveler uses the travel service.
Pursuant to the terms of the travel supplier agreements entered into with hotel operators, the hotels are permitted to invoice the Company for the travel products the Company sold on their behalf during a specified period of time. Generally, if 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
Under this business model which represents approximately 2% of the total revenue of the Company for the year ended December 31, 2019, travelers pay the travel supplier directly at destination. Commissions from travel suppliers are paid directly to the Company by travel suppliers, generally after the traveler uses the travel service. Service fees charged to travelers are nevertheless paid up front.
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.
Loyalty revenue
In August 2019, the Company launched a global loyalty program. As of December 31, 2019, the program is only operating in Brazil. The Company expects to roll out the program in the other countries where it operates in 2020.
The program awards loyalty points to customers who complete a purchase of any travel product offered by the Company, or by using the services of other program participants, such as bank
co-branded
credit cards. Loyalty points can be redeemed for free or discounted travel products on the Company’s websites and physical locations at the discretion of customers without restrictions. The objective of the program is to encourage higher levels of repeat business from travel customers and brand appreciation and loyalty.
For loyalty points earned through travel product purchases, the Company applies a relative selling price approach whereby the total amount collected from each travel product sale is allocated between the travel product and the loyalty points earned. The portion of each travel product sale attributable to loyalty points is initially deferred and then recognized in loyalty revenue when the points are redeemed. Due to the lack of historical data and redemption patterns, the Company has not estimated any breakage as of December 31, 2019. The Company therefore recognizes breakage when the likelihood of the customer exercising its remaining rights becomes remote. The Company will continue evaluate its information about breakage.
For loyalty points earned through
co-branded
credit card partners, consideration received from the sale of loyalty points is variable and payment terms typically are within 30 days subsequent to the month of points sale. Sales of loyalty points to business partners are comprised of two components, loyalty points and marketing (i.e. the use of intellectual property, including the Despegar brand and access to customer lists and databases, which is the predominant element in the agreements, as well as advertising, collectively, the marketing component). The Company allocates the consideration received from these sales of loyalty points based on the relative selling price of each product or service delivered. Accordingly, the Company recognizes the marketing component in other revenue in the period of the loyalty points sale following the sales-based royalty method. The loyalty points component is initially deferred and then recognized in revenue when points are redeemed. As of December 31, 2019, an amount of $ 1,611 was recognized as deferred revenue in the consolidated balance sheet.
Cash and cash equivalents
Cash and cash equivalents includes cash on hand, deposits held with banks and other short-term liquid investments with original maturities of three months or less. Gains or losses on short-term investments are recognized in financial expenses or financial income when incurred.
Accounts receivable, net of allowances for doubtful accounts
Accounts receivables are mainly related to credit card receivables, incentives and advertising, which are carried at the invoice amount less an allowance for doubtful accounts. The Company determines its allowance based on the aging of its receivables. While management uses the information available to make evaluations, future adjustments to the allowance may be necessary if future economic conditions differ substantially from the assumptions used in making the evaluations. Management has considered all events and/or transactions that are subject to reasonable and normal methods of estimations, and the consolidated financial statements reflect that consideration. See Note 23 for additional information. See “Recently issued accounting pronouncements not yet adopted” later in this Note for the accounting change to the measurement of credit losses for accounts receivable, effective January 1, 2020.
Property and equipment, net
Property and equipment are stated at acquisition cost, less accumulated depreciation. Depreciation expense is calculated using the straight-line method, based on the estimated useful lives of the related assets.
 
The estimated useful lives (in years) of the main categories of the Company’s property and equipment are as follows:
 
Asset
  Estimated useful life (years)
Computer hardware
  3
Office furniture and fixture
  10
Buildings
  50
Expenditures for repairs and maintenance are charged to expense as incurred. The cost of significant renewals and improvements is added to the carrying amount of the respective asset and its depreciated over the life of the contract.
When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts, and any resulting gain or loss is reflected in the consolidated statements of income.
Goodwill and Intangible assets, net
Goodwill
The Company accounts for acquired businesses using the acquisition method of accounting which requires that the assets acquired and liabilities assumed be recorded at the date of acquisition at their respective fair values. Any excess of the purchase price over the estimated fair values of the net assets acquired is recorded as goodwill. The Company’s consolidated financial statements reflect an acquired business starting at the date of the acquisition.
Goodwill is not subject to amortization and is tested at least annually for impairment, or earlier if an event occurs or circumstances change and there is an indication of impairment. The Company tests goodwill at a reporting unit level. The fair value of the reporting unit is compared to its carrying value, including goodwill. Fair values are determined using a combination of standard valuation techniques, including an income approach (discounted cash flows) and market approaches and based on market participant assumptions and based on market participant assumptions. An impairment is recorded to the extent that the implied fair value of goodwill is less than the carrying value of goodwill. See Note 9 for further information. See “Recently issued accounting pronouncements not yet adopted” later in this Note for the new accounting standard that the Company adopted in the first quarter of 2020.
No impairment of goodwill was recognized in any of the years presented.
Intangible assets
Acquired intangible assets
Intangible assets acquired in business combinations are initially recorded at fair value. The fair value of intangible assets is determined using a combination of standard valuation techniques, including an income approach (discounted cash flows) and market approaches and based on market participant assumptions.
 
Indefinite-lived intangible assets such as trademarks and internet domains are not subject to amortization and are tested at least annually for impairment, or earlier if an event occurs or circumstances change and there is an indication of impairment.
Definite-lived intangible assets such as customer relationships and licenses are amortized over their respective estimated useful lives.
See Note 9 for further information.
Website and
Internal-use
Software Capitalization
Certain direct development costs associated with website and
internal-use
software are capitalized and include external direct costs of services and payroll costs for employees devoting time to the software projects principally related to platform development, including support systems, software coding, designing system interfaces and installation and testing of the software. These costs are recorded as definite-lived intangible assets and are generally amortized over a period of three years beginning when the asset is substantially ready for use. Costs incurred for enhancements that are expected to result in additional features or functionalities are capitalized and amortized over the estimated useful life of the enhancements. Costs incurred during the preliminary project stage, as well as maintenance and training costs, are expensed as incurred. See Note 9 for further information.
Impairment of long-lived assets
Long-lived assets include property and equipment, definite-lived intangible assets acquired in business combinations and capitalized website and
internal-use
software.
The Company reviews long-lived assets whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. The assessment of possible impairment is based upon the Company’s ability to recover the carrying value of the assets from the estimated undiscounted future net cash flows, before interest and taxes, of the related asset group. The amount of impairment loss, if any, is measured as the excess of the carrying value of the asset over the present value of estimated future cash flows, using a discount rate commensurate with the risks involved and based on assumptions representative of market participants.
As of December 31, 2019, no impairment of long-lived assets was recognized. As of December 31, 2018, the Company recognized an impairment of $363 for an office property in Caracas, Venezuela.
Travel suppliers payable
Travel suppliers payable comprises trade accounts payable to airlines, hotels and other travel suppliers for products and services offered. Airline suppliers are generally within thirty days of a confirmed air booking reservation. Under the
pre-pay
model, hotel suppliers are generally paid after traveler checks out. Generally, the Company’s contracts with hotels and other suppliers provide for a
12-month
time period for invoicing the Company for past services. If an invoice is not received after that period, the Company recognizes breakage revenue for the uninvoiced payable.
 
Severance payments
The Company recognizes a liability for severance payments if the following criteria are met: (a) management, having the authority to approve the action, commits to a plan of termination; (b) the plan identifies the number of employees to be terminated, their job classifications or functions and their locations, and the expected completion date; (c) the plan establishes the terms of the benefit arrangement, including the benefits that employees will receive upon termination, in sufficient detail to enable employees to determine the type and amount of benefits they will receive if they are involuntarily terminated; (d) actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn; and (e) the plan has been communicated to employees.
Pension information
The Company does not maintain any pension plans. The laws in the different countries in which the Company carries out its operations provide for pension benefits to be paid to retired employees from government pension plans and/or private pension plans. Amounts payable to such plans are accounted for on an accrual basis.
Contingent liabilities
The Company has certain regulatory and legal matters outstanding, as discussed further in note 16 “Commitments and Contingencies.” Periodically, the status of all significant outstanding matters is reviewed to assess the potential financial exposure. When (i) it is probable that an asset has been impaired or a liability has been incurred and (ii) the amount of the loss can be reasonably estimated, the Company records the estimated loss in the consolidated statements of income.
Additionally, disclosure in the notes to the consolidated financial statements is provided for loss contingencies that do not meet both of these conditions if there is a reasonable possibility that a loss may have been incurred that would materially impact the financial position and results of operations. Significant judgment is required to determine the probability that a liability has been incurred and whether such liability is reasonably estimable.
The Company records accruals related to commercial, labor and tax contingencies that may generate an obligation for the Company. Accruals are made on the best information available at the time; such analysis may be highly subjective. The final outcome of these matters could vary significantly from the amounts included in the accompanying consolidated financial statements.
Derivative financial instruments
As a result of the Company’s international operations, it is exposed to various market risks that may affect its consolidated results of operations, cash flows and financial position. These market risks include, but are not limited to, fluctuations in foreign currency exchange rates. The Company’s primary foreign currency exposures are in the currencies of Argentina, Brazil, Chile, Colombia and Mexico, in which it conducts a significant portion of its business activities. As a result, the Company faces exposure to adverse movements in foreign currency exchange rates as the financial results of its international operations are translated from local currencies into U.S. Dollars upon consolidation. Additionally, foreign currency exchange rate fluctuations on transactions denominated in currencies other than the functional currency of an entity result in gains and losses that are reflected in net income.
 
The Company reports the fair value of its derivative assets and liabilities on a gross basis in the consolidated balance sheets in “Other assets and prepaid expenses” and ”Other liabilities“ respectively. Unless designated as hedges for accounting purposes, gains and losses resulting from changes in the fair value of derivative instruments are recognized in ”Financial income“ or ”Financial expense“ in the consolidated statements of income in the period that the changes occur and are classified within “Net cash provided by operating activities” in the consolidated statements of cash flows.
As of December 31, 2019 and 2018, derivative financial instruments consist of foreign currency forward contracts of a short-term nature. The following table shows the derivative financial position as of the end of each year:
 
   
Local currency
  
National
amount
   
Type
  
Maturity
  
Fair value
 
2019
          
  Argentinian pesos  $15,000   Purchase  Jan - 20   (360
  Chile pesos  $24,500   Purchase  Jan / Feb / Mar - 20   (848
  Colombian pesos  $2,000   Purchase  Jan - 20   (63
  Argentinian pesos  $6,000   Sell  Jan - 20   335 
  Mexican pesos  $7,000   Sell  Jan / Feb - 20   119 
2018
          
  Brazilian reais  $9,700   Purchase  
Mar-
19
   (760
  Chile pesos  $7,000   Purchase  Jan /
Feb-
19
   92 
  Mexican pesos  $2,000   Sell  Feb - 19   n/m 
Leases
On January 1, 2019, the Company adopted Accounting Standards Codification (“ASC”) 842, Leases, using a modified retrospective method applied to all contracts as of January 1, 2019. Therefore, for reporting periods beginning after December 31, 2018, the financial statements are prepared in accordance with the current lease standard and the financial statements for all periods prior to January 1, 2019 are presented under the previous lease standard (“ASC 840”). See “Recent Adopted Accounting Standards” later in this Note for further information related to the impact of the adoption of this accounting standard.
The Company determines if an arrangement is a lease, or contains a lease, when a contract is signed. The Company determines if a lease is an operating or finance lease and records a lease asset and a lease liability upon lease commencement, which is the date when the underlying asset is made available for use by the lessor. The Company has operating leases for office space and customer service centers. The Company uses its incremental borrowing rate as its discount rate to determine the present value of its remaining lease payments to calculate its lease assets and lease liabilities because the rate implicit in the lease is not readily determinable. The incremental borrowing rates approximate the rate the Company would pay to borrow in the currency of the lease payments on a collateralized basis for the weighted-average life of the lease. Operating lease assets also include any prepaid lease payments and lease incentives received prior to lease commencement.
The Company recognizes lease expense on a straight-line basis over the lease term.
Generally leases are for periods between 3 and 5 years. Most leases have one or more options to renew, with renewal terms that can initially extend the lease term for various periods up to 15 or 25 years. The exercise of renewal options for office space and customer centers is at the Company’s discretion and are included if they are reasonably certain to be exercised.
Financial income / (expense)
The Company incurs in financial expenses items such as factoring for discounted installments, interest paid for derivatives instruments and financial liabilities and foreign exchange rate and generates financial income from financial investments, derivatives instruments and foreign exchange rates.
Comprehensive income / (loss)
Comprehensive income / (loss) includes net income / (loss) as currently reported under U.S. GAAP and also considers the effect of additional economic events that are not required to be recorded in determining net income, but are rather reported as a separate component of shareholders’ deficit.
Other comprehensive income / (loss) includes the cumulative translation adjustment relating to the translation of the financial statements of certain of the Company’s foreign subsidiaries (see Note 2 “Foreign currency translation”).
Stock-based compensation
Compensation cost related to stock-based employee compensation arrangements are accounted for at fair value at the time of grant. The calculation of fair value is affected by the Company’s stock price estimation as well as assumptions regarding a number of highly complex and subjective variables at the time of the grant. Compensation cost is recognized on a straight-line basis over the requisite service period which commences on the grant date as there exists a mutual understanding of the key terms and conditions at the date the award is approved by the board of directors or other management with relevant authority and the following conditions are met:
 
 
The award is a unilateral grant and, therefore, the recipient does not have the ability to negotiate the key terms and conditions of the award with the employer.
 
 
The key terms and conditions of the award had been communicated to an individual recipient within a relatively short time period from the date of approval.
Marketing and advertising expenses
The Company incurs advertising expense consisting of offline costs, including television and radio advertising, and online advertising expense to promote the business. The Company expenses the production costs associated with advertisements in the period in which the advertisement first takes place. The Company expenses the costs of advertisement in the period during which the advertisement space or airtime is consumed. Internet advertising expenses are recognized based on the terms of the individual agreements, which is generally over the greater of (i) the ratio of the number of clicks delivered over the total number of contracted clicks, on a
pay-per-click
basis, or (ii) on a straight-line basis over the term of the contract.
Advertising expenses for 2019, 2018 and 2017 amounted to $ 147,033, $ 150,275 and $ 144,777, respectively.
Accounting for income taxes
The Company is organized as a British Virgin Islands corporation. However, under the “anti-inversion” rules of Section 7874 of the U.S. Internal Revenue Code, the Company is treated as a U.S. corporation for U.S. federal tax purposes. Accordingly, the Company is subject to U.S. federal income tax on its worldwide income. The Company is subject to foreign taxes in the several jurisdictions where it operates.
Income taxes are accounted for under the asset and liabilities method. Under this method, deferred income tax assets and liabilities are recognized for the future tax consequences attributable to differences between the consolidated financial statements carrying amounts of existing assets and liabilities and their respective tax bases.
Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
The Company records deferred tax assets to the extent it believes these assets will more likely than not be realized. The Company regularly reviews its deferred tax assets for recoverability considering historical profitability, projected future taxable income, the expected timing of the reversals of existing temporary differences, the carryforward periods available for tax reporting purposes, and tax planning strategies. A valuation allowance is provided when it is more likely than not that some portion or all of a deferred tax asset will not be realized. The ultimate realization of deferred tax assets depends on the generation of future taxable income during the period in which related temporary differences become deductible. In determining the future tax consequences of events that have been recognized in the financial statements or tax returns, significant judgments, estimates, and interpretation of statutes are required.
In 2018, the Company adopted an accounting policy to treat taxes on global intangible
low-taxed
income (“GILTI”) introduced by the U.S. Tax Cuts and Jobs Act (the “Tax Act”) as period costs. See Note 14 for further details related to income taxes.
Due to inherent complexities arising from the nature of the Company’s business, future changes in income tax law, transfer pricing new regulations or variances between actual and anticipated operating results, the Company makes certain judgments and estimates. Therefore, actual income taxes could materially vary from those estimates.
 
Recently adopted accounting standards
Leases
In February 2016, the FASB issued a new accounting standard that requires lessees to recognize an asset and a liability in the balance sheet for the rights and obligations created by entering into lease transactions. The new standard retains the dual-model concept by requiring entities to determine if a lease is an operating or finance lease. The new standard also expands qualitative and quantitative disclosures for lessees.
The Company adopted this new standard on January 1, 2019 on a modified retrospective basis and has elected not to restate comparative periods. The Company elected other options, which allow the Company to use its previous evaluations regarding if an arrangement contains a lease, if a lease is an operating or finance lease and what costs are capitalized as initial direct costs prior to adoption. The Company also elected to combine lease and
non-lease
components.
Upon the adoption of the new lease standard, on January 1, 2019, the Company recognized operating lease assets of $ 31,578 and total operating lease liabilities of $ 31,578 (including a current liability of $ 6,498) in the consolidated balance sheet. There was no impact to retained earnings at adoption. See Note 25 for more information related to leases.
Recently issued accounting pronouncements not yet adopted
Simplifying the Accounting for Income Taxes
In December 2019, the FASB issued a new accounting update relating to income taxes. This update provides an exception to the general methodology for calculating income taxes in an interim period when a
year-to-date
loss exceeds the anticipated loss for the year. This update also (1) requires an entity to recognize a franchise tax (or similar tax) that is partially based on income as an income-based tax and account for any incremental amount incurred as a
non-income-based
tax, (2) requires an entity to evaluate when a
step-up
in the tax basis of goodwill should be considered part of the business combination in which goodwill was originally recognized for accounting purposes and when it should be considered a separate transaction, and (3) requires that an entity reflect the effect of an enacted change in tax laws or rates in the annual effective tax rate computation in the interim period that includes the enactment date. For public business entities, this update is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. Early adoption is permitted. The amendment related to franchise taxes that are partially based on income should be applied on either a retrospective basis for all periods presented or a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. All other amendments should be applied on a prospective basis. The Company is currently evaluating the impact to its consolidated financial statements of adopting this update and does not expect it to have a material impact.
Simplifying the Test for Goodwill Impairment
In January 2017, the FASB issued a new accounting update to simplify the test for goodwill impairment. The revised guidance eliminates the previously required step two of the goodwill impairment test, which required a hypothetical purchase price allocation to measure goodwill impairment. Under the revised guidance, a goodwill impairment loss will be measured at the amount by which a reporting unit’s carrying amount exceeds its fair value, not to exceed the carrying amount of goodwill. In addition, income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit should be considered when measuring the goodwill impairment loss, if applicable. The amendments also eliminate the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. A public business entity should adopt the amendments for its annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company adopted this update in the first quarter of 2020 and will apply it on a prospective basis.
Measurement of Credit Losses on Financial Instruments
In June 2016, the FASB issued a new accounting update on the measurement of credit losses for certain financial assets measured at amortized cost and
available-for-sale
debt securities. For financial assets measured at amortized cost, this update requires an entity to (1) estimate its lifetime expected credit losses upon recognition of the financial assets and establish an allowance to present the net amount expected to be collected, (2) recognize this allowance and changes in the allowance during subsequent periods through net income and (3) consider relevant information about past events, current conditions and reasonable and supportable forecasts in assessing the lifetime expected credit losses. For
available-for-sale
debt securities, this update made several targeted amendments to the existing other-than-temporary impairment model, including (1) requiring disclosure of the allowance for credit losses, (2) allowing reversals of the previously recognized credit losses until the entity has the intent to sell, is
more-likely-than-not
required to sell the securities or the maturity of the securities, (3) limiting impairment to the difference between the amortized cost basis and fair value and (4) not allowing entities to consider the length of time that fair value has been less than amortized cost as a factor in evaluating whether a credit loss exists. The Company adopted this update in the first quarter of 2020 and applied this update on a modified retrospective basis. The adoption did not have a material impact to the Company’s consolidated financial statements.
Disclosure requirements on fair value measurements
In August, 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. The Company adopted this update in the first quarter of 2020 and applied this update on a prospective basis. The adoption did not have a material impact to the Company’s consolidated financial statements.
Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract
In August 2018, the Financial Accounting Standards Board (“FASB”) issued a new accounting standard to address a customer’s accounting for implementation costs incurred in a cloud computing arrangement that is a service contract and also added certain disclosure requirements related to implementation costs incurred for
internal-use
software and cloud computing arrangements. The amendment aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain
internal-use
software (and hosting arrangements that include an
internal-use
software license). For public business entities, this update is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted. The Company adopted this update in the first quarter of 2020 and applied this update on a prospective basis. The adoption did not have a material impact to the Company’s consolidated financial statements.
v3.20.1
Restricted cash
12 Months Ended
Dec. 31, 2019
Restricted Cash [Abstract]  
Restricted cash
4.
Restricted cash
Restricted cash is restricted through legal contracts or regulations. Restricted cash at December 31, 2019, 2018 and 2017 principally relates to collateralized amounts related to operations with travel suppliers and service providers such as IATA.
The following table reconciles cash and cash equivalents and restricted cash reported in the consolidated balance sheets to the total amount shown in the consolidated statements of cash flows:
 
   
As of

December 31,

2019
   
As of

December 31,

2018
   
As of

December 31,

2017
 
As included in the consolidated balance sheets:
      
Cash and cash equivalents
   309,187    346,480    371,013 
Restricted cash
   4,457    5,709    39,764 
  
 
 
   
 
 
   
 
 
 
Total cash and cash equivalents and restricted cash as shown in the consolidated statements of cash flows:
  $313,644   $352,189   $410,777 
  
 
 
   
 
 
   
 
 
 
v3.20.1
Cash and Cash Equivalents
12 Months Ended
Dec. 31, 2019
Cash and Cash Equivalents [Abstract]  
Cash and Cash Equivalents
5.
Cash and cash equivalents
Cash and cash equivalents consist of the following:
 
   
As of December 31,

2019
   
As of December 31,

2018
 
Cash on hand
   42    20 
Bank deposits
   118,933    177,013 
Time deposits
   153,838    135,614 
Money market funds
   36,374    33,833 
  
 
 
   
 
 
 
  $309,187   $346,480 
  
 
 
   
 
 
 
v3.20.1
Accounts receivable, net
12 Months Ended
Dec. 31, 2019
Receivables [Abstract]  
Accounts receivable, net
6.
Accounts receivable, net
Accounts receivable, net of allowances consists of the following:
 
   
As of December 31,

2019
   
As of December 31,

2018
 
Accounts receivable
   216,756    230,513 
Allowance for doubtful accounts
   (3,205   (2,065
  
 
 
   
 
 
 
  $213,551   $228,448 
  
 
 
   
 
 
 
v3.20.1
Other Assets and Prepaid Expenses
12 Months Ended
Dec. 31, 2019
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]  
Other Assets and Prepaid Expenses
7.
Other assets and prepaid expenses
Other current assets and prepaid expenses consist of the following:
 
   
As of December 31,

2019
   
As of December 31,

2018
 
Tax credits
   37,067    33,042 
Prepaid expenses and advance to suppliers
   29,083    31,553 
Prepaid advertising
   1,483    1,934 
Others
   2,061    1,942 
  
 
 
   
 
 
 
  $69,694   $68,471 
  
 
 
   
 
 
 
Other
non-current
assets consist of the following:
 
   
As of December 31,

2019
   
As of December 31,

2018
 
Deferred tax assets
   25,351    12,751 
  
 
 
   
 
 
 
  $25,351   $12,751 
  
 
 
   
 
 
 
v3.20.1
Property and equipment, net
12 Months Ended
Dec. 31, 2019
Property, Plant and Equipment [Abstract]  
Property and equipment, net
8.
Property and equipment, net
Property and equipment, net consists of the following:
 
   
As of December 31,

2019
   
As of December 31,

2018
 
Computer hardware and software
   31,966    27,365 
Office furniture and fixture
   21,882    15,255 
Buildings
   2,086    2,018 
Land
   41    41 
  
 
 
   
 
 
 
Total property and equipment
   55,975    44,679 
  
 
 
   
 
 
 
Accumulated depreciation
  $(34,770  $(24,963
  
 
 
   
 
 
 
Total property and equipment, net
  $21,205   $19,716 
  
 
 
   
 
 
 
Depreciation expense for the years ended December 31, 2019, 2018 and 2017 was $6,659, $4,985 and $5,075, respectively.
 
For the year ended December 31, 2019, $4,001 is included in “Technology and product development” and $2,658 is included in “General and administrative”.
For the year ended December 31, 2018, $1,036 is included in “Technology and product development” and $3,949 is included in “General and administrative”.
For the year ended December 31, 2017, $958 is included in “Technology and product development” and $4,117 is included in “General and administrative”.
v3.20.1
Goodwill and intangible assets, net
12 Months Ended
Dec. 31, 2019
Goodwill and Intangible Assets Disclosure [Abstract]  
Goodwill and intangible assets, net
9.
Goodwill and intangible assets, net
Goodwill and intangible assets, net consists of the following:
 
   
As of December 31,

2019
   
As of December 31,

2018
 
Goodwill
   46,956    36,207 
Indefinite-lived intangible assets
    
Trademarks and domains
   13,882    13,882 
Definite-lived intangible assets
    
Software development costs
   72,532    54,406 
Licenses
   1,795    —   
Customer relationships
   3,663    —   
  
 
 
   
 
 
 
Total intangible assets
   91,872    68,288 
  
 
 
   
 
 
 
Accumulated amortization
(1)
   (42,253   (30,776
  
 
 
   
 
 
 
Total intangible assets, net
  $49,619   $37,512 
  
 
 
   
 
 
 
 
(1)
Accumulated amortization as of December 31, 2019 comprised of $41,605, $154 and $494, for software development costs, licenses and customer relationships, respectively. Accumulated amortization as of December 31, 2018 comprised of $30,776, for software development costs.
Amortization expense for the years ended December 31, 2019, 2018 and 2017 was $16,137, $10,140 and $8,751, respectively.
For the year ended December 31, 2019, $14,198 is included in “Technology and product development”, $1,523 is included in “General and administrative” and $416 is included in “Selling and marketing”.
For the year ended December 31, 2018, $9,495 is included in “Technology and product development” and $645 is included in “General and administrative”.
For the year ended December 31, 2017, $7,431 is included in “Technology and product development” and $1,320 is included in “General and administrative”.
 
The changes in the balance of goodwill for the years ended December 31, 2019 and 2018 consist of the following:
 
   
As of December 31,

2019
   
As of December 31,

2018
 
Balance, beginning of year
   36,207    38,733 
Acquisitions
(1)
   10,865    —   
Foreign currency translation adjustments
   (116   (2,526
  
 
 
   
 
 
 
Balance, end of year
  $46,956    36,207 
  
 
 
   
 
 
 
 
(1)
Goodwill relates to the acquisition of Viajes Falabella. See Note 13 for more information.
Goodwill is attributed $38,883 to the “Air” segment and $ 8,073 to the “Packages, Hotels and Other Travel Products” segment.
At December 31, 2019, the Company performed its annual goodwill impairment testing and concluded that there was no impairment of goodwill. In addition, the Company did not identify any impairment indicators for the Company’s other long-lived assets at December 31, 2019.
The annual estimated amortization expense for intangible assets for the next five years and thereafter, is as follows:
 
2020
   10,766 
2021
   10,766 
2022
   10,420 
2023
   1,582 
2024
   1,381 
Thereafter
   820 
  
 
 
 
Total
   35,735 
  
 
 
 
 
v3.20.1
Accounts Payable and Accrued Expenses
12 Months Ended
Dec. 31, 2019
Payables and Accruals [Abstract]  
Accounts Payable and Accrued Expenses
10.
Accounts payable and accrued expenses
Accounts payable and accrued expenses consist of the following:
 
   
As of December 31,

2019
   
As of December 31,

2018
 
Marketing suppliers
   29,957    25,484 
Unbilled suppliers
   10,742    8,513 
Other suppliers
   18,974    8,356 
  
 
 
   
 
 
 
  $59,673   $42,353 
  
 
 
   
 
 
 
v3.20.1
Travel Suppliers Payable
12 Months Ended
Dec. 31, 2019
Text Block [Abstract]  
Travel Suppliers Payable
11.
Travel suppliers payable
Travel supplier payables consist of the following
 
   
As of December 31,

2019
   
As of December 31,

2018
 
Hotels and other travel service suppliers
(1)
   179,397    151,393 
Airlines
   27,557    34,057 
  
 
 
   
 
 
 
  $206,954   $185,450 
  
 
 
   
 
 
 
 
(1)
Includes $ 140,987 and $ 132,863 as of December 31, 2019 and 2018, respectively, for deferred merchant bookings which will be due after the traveler has checked out.
v3.20.1
Other Liabilities
12 Months Ended
Dec. 31, 2019
Other Liabilities Disclosure [Abstract]  
Other Liabilities
12.
Other liabilities
Other current liabilities consist of the following:
 
   
As of December 31,

2019
   
As of December 31,

2018
 
Salaries payable
   25,196    22,030 
Taxes payable
   10,958    8,586 
Financed portion of acquisitions
   5,477    —   
Other
   5,091    2,654 
  
 
 
   
 
 
 
  $46,722   $33,270 
  
 
 
   
 
 
 
Other
non-current
liabilities consist of the following:
 
   
As of December 31,

2019
   
As of December 31,

2018
 
Financed portion of acquisitions
   5,219    —   
Taxes payable
   1,427    243 
  
 
 
   
 
 
 
  $6,646   $243 
  
 
 
   
 
 
 
v3.20.1
Business combinations
12 Months Ended
Dec. 31, 2019
Business Combinations [Abstract]  
Business combinations
13.
Business combinations
Viajes Falabella
On June 7, 2019, the Company obtained the regulatory approvals and acquired the outstanding capital stock of Viajes Falabella Argentina, Viajes Falabella Chile and Viajes Falabella Peru. The acquisition of Viajes Falabella Colombia was completed on July 31, 2019, after the regulatory approvals were obtained. The acquired entities are herein referred collectively as “Viajes Falabella”. The Company acquired the Viajes Falabella entities from Grupo Falabella. The Viajes Falabella entities are engaged in the travel agency business through their online and offline presence.
The acquisition purchase price totaled $23 million, of which the Company paid $11.5 million in cash at acquisition date and the remaining amount will be paid in two installments due in June 2020 and in June 2021.
 
Concurrent with the acquisition, the Company entered into a
10-year
commercial agreement with Grupo Falabella which provides for several marketing and promotional activities and other activities to promote future business. The agreement also provides for the use of the Viajes Falabella brand in Argentina, Chile, Peru and Colombia for an initial period of 4 years, renewable for
one-year
periods at the option of the Company. The Company accounted for the use of the brand as a prepaid asset and amortizes it under the straight-line basis over the term of the contract.
The Company acquired Viajes Falabella and entered into the commercial agreement to enhance the Company’s position as a leading travel agency providing customers with an enhanced travel and tourism product and service offerings through online, call center and physical stores.
The Company is required to allocate the purchase price to tangible and identifiable intangible assets acquired and liabilities assumed based on their fair values. The excess of the purchase price over those fair values is recorded as goodwill. In determining the fair value of assets acquired and liabilities assumed, the Company primarily used discounted cash flow analyses. Inputs to the discounted cash flow analyses and other aspects of the allocation of purchase price require judgment. The more significant inputs used in the discounted cash flow analyses and other areas of judgment include (i) future revenue growth or attrition rates (ii) projected margins (iii) discount rates used to present value future cash flows (iv) the amount of synergies expected from the acquisition and (v) the economic useful life of assets, among others.
The following table summarizes the final purchase price allocation as of December 31, 2019 and the reconciliation with “Payments for acquired business, net of cash acquired” line item of consolidated statements of cash flows:
 
   
Viajes Falabella
 
Cash and cash equivalent
   11,272 
Accounts receivable
   11,828 
Other assets
   34,611 
Property and equipment
   2,420 
Intangible assets
   3,663 
Travel suppliers payable
   (36,656
Other Liabilities
   (15,807
Goodwill
   10,865 
  
 
 
 
Fair value of purchase price
  
 
22,196
 
Financed portion of acquisition
   (10,696
Cash acquired
   (11,272
  
 
 
 
Payments for acquired business, net of cash acquired
  
 
228
 
Intangible assets primarily consist of customer relationships, with a weighted average useful life of 3.7 years.
The goodwill reflects the value to the Company of increasing its presence in the region through omnichannel alternatives.
 
The Company incurred $0.5 million of acquisition-related expenses which are included in the statement of income for the year ended December 31, 2019.
The following table summarizes the revenues and net income (including purchase accounting amortization and the impact of intercompany eliminations) of Viajes Falabella included in the Company’s consolidated statement of income for the year ended December 31, 2019 since the date of acquisition:
 
   
Viajes Falabella
 
Net revenue
   20,710 
Net loss
   (3,060
The following pro forma summary presents consolidated information of the Company as if the acquisition of Viajes Falabella had occurred on January 1, 2018:
 
   
For the years ended December 31,
 
   
2019
   
2018
 
Net revenue
   532,710    584,986 
Net (loss) / income
   (20,872   19,770 
These pro forma results include adjustments for purposes of consolidating the historical financial results of Viajes Falabella for the periods indicated. These pro forma results also include $ 0.8 million and $ 0.8 million for the years ended December 31, 2019 and 2018, respectively, to reflect the incremental amortization as a result of recording property, plant and equipment and intangible assets at fair value.
These pro forma results do not represent financial results that would have been realized had the acquisition actually occurred on January 1, 2018, nor are they intended to be a projection of future results.
v3.20.1
Income taxes
12 Months Ended
Dec. 31, 2019
Income Tax Disclosure [Abstract]  
Income taxes
14.
Income taxes
The following table presents a summary of U.S. and foreign income tax expense components:
 
   
As of December 31,

2019
   
As of December 31,

2018
   
As of December 31,

2017
 
Current:
      
Foreign
   (3,936   (10,289   (7,682
Federal
   1,177    (1,336   (36
Deferred:
      
Foreign
   12,425    8,749    2,063 
Withholding:
      
Foreign
   (4,299   (3,921   (6,339
Federal
   (142   (272   —   
  
 
 
   
 
 
   
 
 
 
Income tax expense
  
$
5,225
 
  
$
(7,069
  
$
(11,994
  
 
 
   
 
 
   
 
 
 
 
Below the classification of deferred tax assets/liabilities by current and
non-current:
 
   
As of December 31, 2019
   
As of December 31, 2018
 
Non-Current
deferred tax assets
   36,700    30,758 
  
 
 
   
 
 
 
Total deferred tax assets
  
 
36,700
 
  
 
30,758
 
  
 
 
   
 
 
 
Less valuation allowance
   (11,349   (18,007
Net deferred tax assets
  
 
25,351
 
  
 
12,751
 
Non-Current
deferred tax liabilities
   —      —   
  
 
 
   
 
 
 
Total deferred tax liabilities
  
 
—  
 
  
 
—  
 
  
 
 
   
 
 
 
Total deferred tax
  
$
25,351
 
  
$
12,751
 
  
 
 
   
 
 
 
As of December 31, 2019, consolidated loss carryforwards for income tax purposes were $81,324. If not utilized, tax loss carryforwards will begin to expire as follows:
 
Expiration Date
  
NOLs Amount
 
Expires 2022
   23 
Thereafter
   31,466 
Without expiration dates
   49,835 
  
 
 
 
TOTAL
(1)
   81,324 
 
(1)
A partial valuation allowance is booked as of December 31, 2019 in order to reserve $ 33,351 of the tax loss carryforwards detailed above.
NOLs Carryforwards expiration:
Brazil: $42,665. No expiration but offset limitation of 30% of the taxable income by fiscal year.
Argentina: $146. Five fiscal years expiration.
Colombia: $ 3,028. Twelve fiscal years expiration in general.
Peru: $4,564. No expiration, but offset limitation of 50% of the taxable income by fiscal year.
Mexico: $27,416. Ten fiscal years expiration.
Uruguay: $894. Five fiscal years expiration.
Chile: $2,606. No expiration.
Others: $5
Deferred tax assets and liabilities are recognized for the future tax consequences of differences between the carrying amounts of assets and liabilities and their respective tax bases using enacted tax rates in effect for the year in which the differences are expected to reverse. The Company has foreign subsidiaries with aggregated undistributed earnings of $ 70,494 as of December 31, 2019. We have not provided deferred income taxes on taxable temporary differences related to investments in certain foreign subsidiaries where the foreign subsidiary has or will invest undistributed earnings indefinitely outside of the United States. In the event we distribute such earnings in the form of dividends or otherwise, we may be subject to income taxes. Further, a sale of these subsidiaries may cause these temporary differences to become taxable. Due to complexities in tax laws, uncertainties related to the timing and source of any potential distribution of such earnings, and other important factors such as the amount of associated foreign tax credits, it is not practicable to estimate the amount of unrecognized deferred taxes on these taxable temporary differences.
The Company’s management considers the earnings of the foreign subsidiaries to be indefinitely reinvested, other than certain earnings the distributions of which do not imply withholdings or state income taxes, and for that reason has not recorded a deferred tax liability.
The following table summarizes the composition of deferred tax assets and liabilities as of the years ended December 31, 2019 and 2018:
 
   
December 31, 2019
  
December 31, 2018
 
Deferred Tax Assets
   
Tax loss carryforwards
   25,717   23,445 
Allowance for doubtful accounts
   462   175 
Royalties
   69   2,296 
Provisions and other assets
   11,319   6,037 
Property and equipment
   (438  (125
Others
   (429  (1,070
  
 
 
  
 
 
 
Total Deferred Tax Assets
  
$
36,700
 
 
$
30,758
 
  
 
 
  
 
 
 
Less valuation allowance
   (11,349  (18,007
  
 
 
  
 
 
 
Total Deferred Tax Assets, net
  
$
25,351
 
 
$
12,751
 
  
 
 
  
 
 
 
Deferred Tax Liabilities
  
 
—  
 
 
 
—  
 
  
 
 
  
 
 
 
Total Deferred Tax Liabilities
  
$
—  
 
 
$
—  
 
  
 
 
  
 
 
 
Total Deferred Tax
  
$
25,351
 
 
$
12,751
 
  
 
 
  
 
 
 
 
The following is a reconciliation of the difference between the actual provision for income taxes and the provision computed by applying the weighted average income tax rate for 2019, 2018 and 2017 to income / (loss) before taxes:
 
   
As of December 31,
2019
  
As of December 31,
2018
  
As of December 31,
2017
 
Net Income / (Loss) before Income Tax
  
$
(26,135 
$
26,223  
$
54,360 
Weighted average income tax rate
(3)
   29  39  33
  
 
 
  
 
 
  
 
 
 
Income tax expense at weighted average income tax rate
   (7,474  10,273   17,740 
Permanent differences:
    
(Non-Taxable
Income) /
Non-Deductible
Losses 
(1)
   (469  (1,448  (10,714
Foreign
non-creditable
withholding tax
(2)
   4,439   4,193   6,339 
Non-deductible
expenses
   1,054   1,346   2,223 
Currency translation adjustment
   1,891   1,902  
Tax credits recovery
   (157  —     —   
Others
   553   540   (651
True up
   (2,693  1,204  
Change in Valuation allowance
   (5,010  (10,941  (2,943
Change in tax rate
   2,641   —     —   
  
 
 
  
 
 
  
 
 
 
Income Tax expense
  
$
(5,225 
$
7,069  
$
11,994
 
  
 
 
  
 
 
  
 
 
 
 
(1)
Includes tax benefits/losses generated by operations located in the Uruguayan “Free Trade Zone” and the benefits from Promotion Software Law in Argentina.
(2)
Includes foreign withholding taxes on royalties and services.
(3)
The Company uses a weighted average rate for the income tax reconciliation, since most of the business operations are run by subsidiaries located outside the U.S. The calculation is performed based on an average between the enacted tax rates of the foreign jurisdictions.
The following table presents the changes in the Company’s valuation allowance as of December 31, 2019, 2018 and 2017:
 
   
Balance of beginning of period
   
Increase
   
(Decrease)
   
Balance at end of period
 
2019
   18,007    5,892    (12,550   11,349 
2018
   42,584    997    (25,574   18,007 
2017
   45,526    4,716    (7,658   42,584 
Tax Reform
Argentina
On December 23, 2019 the Argentine congress enacted a law which maintains corporate income tax rate of 30% for two more years, instead of reducing the rate to 25% as established under the previous law. The law also maintains the dividend withholding tax rate of 7% for two more years for profits accrued during fiscal year starting on January 1, 2020, instead of applying the 13% rate as previously established. In September 2018, the Argentine Government issued the Decree 793/2018 which established a temporary withholding on exports of 12% with a maximum limit of 4 Argentine Pesos per each US dollar of the amount of the export invoice. This withholding on exports is applicable for exports of years 2019 and 2020. A new Law modified reduced the percentage since 2020 from 12% to 5% without limit and extended the application of withholdings on exports until December 31, 2021.
On December 23th 2019 a new Tax (Tax for an Inclusive and Solidarity Argentina (PAIS)) was created in Argentina. New 30% Tax applies on the purchases by Argentinean residents of foreign services through credit/debit cards; acquisition by Argentinean residents of services to be provided outside the country, contracted through Travel and Tourism agencies - wholesale and / or retailers - of the country, acquisition of International passenger transport services (land, air, aquatic and road) provided that foreign currency is required to complete a transaction.    
Software Law & Knowledge-based-Economy Promotional regime
On August 18, 2017, the Argentine National Ministry of Production issued Disposition
82-E/2017,
accepting the registration of our Argentine subsidiary in the National Registry of Software Producers, created by Decree 1315/13. As a result of this registration and pursuant to Argentine National Law No. 25,922, as amended, and its corresponding regulations (the “Software Promotion Law”), our Argentine subsidiary has been granted several tax benefits through December 31, 2019. These benefits include (i) a fixed national tax rate, (ii) a fiscal bond equivalent to 70% of the value of 75,14% of the company’s social security tax contribution payments under Laws 19,032, 24,013 and 24,241, which can be used as a tax credit to offset national taxes; provided that not more than 13.83% of this tax credit may be used by the company to cancel Argentine corporate income tax; (iii) exemption from value-added tax withholding regimes; and (iv) a 60% reduction in the total amount of corporate income tax as applied to income from the activities of creation, design, development, production, implementation or adjustment (upgrade) of developed software systems and their associated documents.
On June 10, 2019, the Argentine government enacted Law No. 27,506 (knowledge-based economy promotional regime), which established a regime that provides certain tax benefits for companies that meet specific criteria, such as companies that derive at least 70% of their revenues from certain specified activities. Law No. 27,506 allows companies currently benefiting from the software development law, to apply for tax benefits under Law No. 27,506, which will be effective from January 1, 2020 to December 31, 2029. Eligible companies are entitled to i) a 15% corporate income tax rate (instead of the otherwise applicable 30% corporate income tax rate), ii) a freeze on the taxpayer’s overall federal tax burden, iii) a reduction in employer social security contributions and iv) a tax credit in the amount of 1.6 times the amount payable as social security contributions. The tax credit may be used to offset federal taxes, such as value-added tax and income tax. The mentioned regime was suspended on January 20, 2020 through a new resolution issued by Argentina’s Ministry of Productive Development until new rules for the application of the knowledge-based economy promotional regime are issued. The Company will analyze whether it will be eligible to benefit from the law and its related tax benefits once the new regulations are issued.
v3.20.1
Revenue
12 Months Ended
Dec. 31, 2019
Revenue from Contract with Customer [Abstract]  
Revenue
15.
Revenue
The following tables summarizes the Company’s revenues by segment and business model:
Segment
 
   
For the year ended December 31,
 
   
2019
   
2018
   
2017
 
Air
   201,638    214,804    241,015 
Packages, Hotels and Other Travel Products
   323,238    315,810    282,925 
  
 
 
   
 
 
   
 
 
 
  $524,876   $530,614   $523,940 
  
 
 
   
 
 
   
 
 
 
Business model
 
   
For the year ended December 31,
 
   
2019
   
2018
   
2017
 
Pre-pay
model
   407,258    415,812    412,679 
Pay-at-destination
model
   13,130    20,143    23,710 
Others
(1)
   104,488    94,659    87,551 
  
 
 
   
 
 
   
 
 
 
  $524,876   $530,614   $523,940 
  
 
 
   
 
 
   
 
 
 
 
(1)
Correspond to incentives and advertising revenues
v3.20.1
Commitments and contingencies
12 Months Ended
Dec. 31, 2019
Commitments and Contingencies Disclosure [Abstract]  
Commitments and contingencies
16.
Commitments and contingencies
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. ThIs compensation is recognized in “Other liabilities” in the consolidated balance sheets and in “General and administrative” in the consolidated statements of income.
Tax, legal and other
The Company is involved in disputes arising from its ordinary course of business. Although the ultimate resolution on these matters cannot be reasonably estimated at this time, management does not believe that they will have a material adverse effect on the financial condition or results of operations of the Company.
As of December 31, 2019 the Company had accrued liabilities approximately $1,500 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 $4,700. The Company evaluates the likelihood of probable and reasonably possible losses, if any, related to all known contingencies on an ongoing basis. As a result, future increases or decreases to its accrued liabilities may be necessary and will be recorded in the period when such amounts are determined to be probable and reasonably estimable.
 
Argentina
On June 28, 2017, the
Sindicato Empleados de Comercio de Capital Federal
 (Union for Employees of the Commercial Sector in the City of Buenos Aires, or “SECCF”) filed a lawsuit against our Argentine subsidiary, in which SECCF is demanding the application of its collective labor agreement to all of the employees of the subsidiary. SECCF is demanding payment of approximately AR$18 million.
On April 19, 2018 SECCF filed a new claim, similar to the previous one, but against La Inc S.A. - an Argentine subsidiary company that had already been merged with Despegar.com.ar several months before. In this new claim, SECCF is demanding an amount equal to the 0.5% of the gross monthly salaries of La Inc’s employees for certain periods.
The Argentine subsidiary filed both responses in a timely manner, rejecting all the claims, with similar defenses. Although we believe Despegar.com.ar has meritorious defenses to this lawsuit, we cannot assure you what the ultimate outcome of this matter will be. The final resolution of these claims, which could take several years, is not likely to have a material effect on our financial position or results of operations.
v3.20.1
Related party transactions
12 Months Ended
Dec. 31, 2019
Related Party Transactions [Abstract]  
Related party transactions
17.
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
Expedia, Inc., (“Expedia”) a subsidiary of Expedia Group, Inc., a Delaware corporation, is a shareholder of record of the Company. In March 2015, the Company entered into an outsourcing agreement (the “Expedia Outsourcing Agreement”) pursuant to which all hotel and other lodging reservations for countries outside of Latin America offered through the Company’s platforms are provided to the Company by Expedia on an exclusive basis. The Expedia Outsourcing Agreement was amended in 2019 to allow the Company to contract 10% of hotel inventory directly without using Expedia. Under the Expedia Outsourcing Agreement, Expedia is also the preferred provider of hotel and other lodging reservations in Latin America.
Under the Expedia Outsourcing Agreement, the Company is required to reach certain thresholds of marketing fees during specified periods. Failure to reach the thresholds may require the Company to pay a $125 million termination fee. Expedia may also unilaterally terminate the Expedia Outsourcing Agreement in the event of a change of control of the Company. Beginning March 2022, the Company may unilaterally terminate the Expedia Outsourcing Agreement upon payment of a $125 million termination fee. The Company is in compliance with the required thresholds as of December 31, 2019.
 
The term of the Expedia Outsourcing Agreement renews annually automatically unless terminated in certain cases.
In August 2016, the Company entered into another outsourcing agreement with Expedia (the “Despegar Outsourcing Agreement”) pursuant to which the Company is required to make the Company’s hotel reservations inventory available to certain affiliates of Expedia.
The Despegar Outsourcing Agreement has a three-year term that renews automatically for
one-year
periods unless either party elects not to renew.
As of December 31, 2019 and 2018, our net position with Expedia under the Expedia Outsourcing Agreement and the Despegar Outsourcing Agreement was a liability of $ 67,047 and $ 75,251, respectively, recognized under “Related party receivable” and “Related party payable”, respectively, in the consolidated balance sheets.
For the years ended December 31, 2019, 2018 and 2017, net revenue derived from the agreements with Expedia were $ 38,760, $ 43,975 and $ 37,000, respectively, which represented 7%, 8% and 7% of the Company’s consolidated net revenue respectively.
 
v3.20.1
Fair value measurements
12 Months Ended
Dec. 31, 2019
Fair Value Disclosures [Abstract]  
Fair value measurements
18.
Fair value measurements
Financial assets and liabilities carried at fair value at December 31, 2019 are classified in the categories described in the table below:
 
   
Level 1
   
Level 2
   
Level 3
   
Total
 
Assets
        
Cash equivalents
        
Money market funds
   36,374    —      —      36,374 
Time deposits
   153,838    —      —      153,838 
Derivatives
        
Foreign currency forwards
   —      454    —      454 
  
 
 
   
 
 
   
 
 
   
 
 
 
Total assets at fair value
   190,212    454    —      190,666 
Liabilities
        
Derivatives
        
Foreign currency forwards
   —      (1,271   —      (1,271
  
 
 
   
 
 
   
 
 
   
 
 
 
Total liabilities at fair value
   —      (1,271   —      (1,271
 
Financial assets and liabilities carried at fair value at December 31, 2018 are classified in the categories described in the table below:
 
   
Level 1
   
Level 2
   
Level 3
   
Total
 
Assets
        
Cash equivalents
        
Money Market funds
   33,833    —      —      33,833 
Time deposits
   135,614    —      —&