Consolidated Financial Statements as of and for the … · receivable are settled mainly through...

ConsolidatedFinancialStatementsasofandfortheyearsended

December31,2016and2015

Theaccompanyingnotesareanintegralpartoftheseconsolidatedfinancialstatements.

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Decolar.com,Inc.

ConsolidatedBalanceSheetsasofDecember31,2016and2015(inthousandsU.S.dollars)

AsofDecember31, AsofDecember31, 2016 2015

ASSETS Currentassets Cashandcashequivalents 75,968 102,116Restrictedcashandcashequivalents 22,738 19,075Shortterminvestments - 40,013Accountsreceivable,netofallowances 121,098 54,985Relatedpartyreceivable 2,240 1,947Othercurrentassetsandprepaidexpenses 27,184 34,434Totalcurrentassets $ 249,228 $ 252,570

Non-currentassets Restrictedcashandcashequivalents 20,459 14,697Propertyandequipment,net 13,717 15,168Intangibleassets,net 31,412 27,226Goodwill 38,894 38,554Totalnon-currentassets $ 104,482 $ 95,645

TOTALASSETS $ 353,710 $ 348,215

LIABILITIESANDSHAREHOLDERS’DEFICIT Currentliabilities Accountspayableandaccruedexpenses 25,335 37,117Travelsupplierspayable 102,237 112,495Relatedpartypayable 71,006 57,797Loansandotherfinancialliabilities 7,179 2,019DeferredRevenue 29,095 36,681Otherliabilities 49,686 34,625Contingentliabilities 3,613 2,761Totalcurrentliabilities $ 288,151 $ 283,495

Non-currentliabilities Otherliabilities 409 861Contingentliabilities 22,413 21,992Relatedpartyliability 125,000 125,000Totalnon-currentliabilities $ 147,822 $ 147,853

TOTALLIABILITIES $ 435,973 $ 431,348

SHAREHOLDERS’DEFICIT Commonstock(1) 6 6Additionalpaid-incapital 312,155 311,581Otherreserves (728) (728)Accumulatedothercomprehensiveincome 16,286 33,787Accumulatedlosses (409,982) (427,779)TotalDeficitattributabletoDecolar.com,Inc. $ (82,263) $ (83,133)

TOTALLIABILITIESANDSHAREHOLDERS’DEFICIT $ 353,710 $ 348,215

(1) 58,518sharesissuedandoutstandingatDecember31,2016and2015.


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Decolar.com,Inc.

ConsolidatedStatementsofOperations

fortheyearsendedDecember31,2016and2015

(inthousandsU.S.dollars)

YearendedDecember31, 2016 2015

Revenue(1) 411,162 421,711Costofrevenue (126,675) (154,213)Grossprofit $ 284,487 $ 267,498

Operatingexpenses Sellingandmarketing (121,466) (170,149)Generalandadministrative (64,683) (78,181)Technologyandproductdevelopment (63,251) (73,535)Totaloperatingexpenses $ (249,400) $ (321,865)

Operatingincome/(loss) $ 35,087 $ (54,367)

Financialincome 8,327 10,797Financialexpense(2) (15,079) (23,702)Income/(loss)beforeincometaxes $ 28,335 $ (67,272)

Incometaxexpense (10,538) (18,004)Netincome/(loss) $ 17,797 $ (85,276)

(1) Includes$27,008and$22,911forrelatedpartytransactionsfortheyears2016and2015,respectively.Seenote14.

(2) Includes10,516and17,218forfactoringofcreditcardreceivablesfortheyearsended2016and2015,respectively.

Earningspershareavailabletocommonstockholders: Basic 0.30 (1.49)Diluted 0.30 n/a

Sharesusedincomputingearningspershare

(inthousands):

Basic 58,518 57,078Diluted 58,609 57,186


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Decolar.com,Inc.

ConsolidatedStatementsofComprehensiveIncome/(Loss)

fortheyearsendedDecember31,2016and2015


YearendedDecember31, 2016 2015

Netincome/(loss) $ 17,797 $ (85,276)

Othercomprehensiveloss,netoftax Foreigncurrencytranslationadjustment(1) (17,501) (6,733)Comprehensiveincome/(loss) $ 296 $ (92,009)

(1) Notaximpact

Theaccompanyingnotesareanintegralpartoftheseconsolidatedfinancialstatements.5

Decolar.com,Inc.

ConsolidatedStatementsofChangesinShareholders’DeficitfortheyearsendedDecember31,2016and2015


Commonstock Additionalpaid-incapital

Otherreserves

Accumulatedother

comprehensiveincome

AccumulatedLosses TotalDeficitNumberof

shares(inthousands)

Amount

BalanceasofDecember31,2014 50,463 5 192,338 (728) 40,520 (321,713) (89,578) Stock-basedcompensationexpense - - 861 - - - 861Foreigncurrencytranslationadjustment - - - - (6,733) - (6,733)ExerciseofStockOptionsbyEmployees 63 - 63 - - - 63Shareholderscontributions(1)(2) 9,590 1 142,529 - - - 142,530Repurchaseofcommonstocks(2) (1,598) - (24,210) - - (20,790) (45,000)Netlossfortheyear - - - - - (85,276) (85,276)BalanceasofDecember31,2015 58,518 6 311,581 (728) 33,787 (427,779) (83,133) Stock-basedcompensationexpense - - 574 - - - 574Foreigncurrencytranslationadjustment - - - - (17,501) - (17,501)Netincomefortheyear - - - - - 17,797 17,797 BalanceasofDecember31,2016 58,518 6 312,155 (728) 16,286 (409,982) (82,263)

(1) Netofissuancecostsof$2,470.(2) Seenote14.


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Decolar.com,Inc.

ConsolidatedStatementsofCashFlowsfortheyearsendedDecember31,2016and2015


2016 2015 Cashflowsfromoperatingactivities: Netincome/(loss) $ 17,797 $ (85,276)Adjustmentstoreconcilenetincome/(loss)tonetcashflowsfromoperatingactivities:

Unrealizedforeigncurrencytranslationlosses 466 2,762Depreciationexpense 5,089 5,152Amortizationofintangibleassets 7,835 9,287Stockbasedcompensationexpense 574 861Interestandpenalties 1,494 2,439Incometaxes 3,846 8,340Allowancefordoubtfulaccounts 2,548 2,142Provisionforcontingencies 526 10,347

Changesinassetsandliabilities,netofnon-cashtransactions:

(Increase)/Decreaseinaccountsreceivable,netofallowances (71,389) (22,834)(Increase)/DecreaseRelatedpartyreceivables (293) (1,947)(Increase)/Decreaseinotherassetsandprepaidexpenses 3,591 (8,030)Increase/(Decrease)inaccountspayableandaccruedexpenses (13,895) 22,689Increase/(Decrease)intravelsupplierspayable (20,121) (15,079)Increase/(Decrease)inotherliabilities 10,440 (19,835)Increase/(Decrease)incontingencies 618 1,170Increase/(Decrease)inrelatedpartyliabilities 13,210 57,797Deferredrevenue (5,628) 5,766

Netcashflowsusedinoperatingactivities $ (43,292) $ (24,249)Cashflowsfrominvestingactivities:

Salesofshort-terminvestments 40,013 -Paymentsforshort-terminvestments - (40,013)Acquisitionofpropertyandequipment (4,419) (7,085)Increaseofintangibleassets,includinginternal-usesoftwareandwebsitedevelopment (12,159) (13,552)(Increase)inrestrictedcashandcashequivalents (9,051) (20,336)

Netcashflowsprovidedby/(usedin)investingactivities $ 14,384 $ (80,986)Cashflowsfromfinancingactivities:

Proceedsfromissuanceofshares(1) - 267,593Repurchaseofcommonstocks(2) - (45,000)Loansreceived(2) - 25,000Paymentsofloans(2) - (50,000)Increase/(decrease)inloansandotherfinancialliabilities 5,142 1,200

Netcashflowsprovidedbyfinancingactivities $ 5,142 $ 198,793Effectofexchangeratechangesoncashandcashequivalents (2,382) (12,478)Net(decrease)/increaseincashandcashequivalents $ (26,148) $ 81,080Cashandcashequivalentsasofbeginningoftheyear $ 102,116 $ 21,036Cashandcashequivalentsasofendoftheperiod $ 75,968 $ 102,116

Supplementalcashflowinformation Cashpaidforincomeandminimumnotionalincometaxes $ 6,111 $ 16,316Interestpaid $ 684 $ 1,519

(1) AsofDecember31,2015,netofissuancecostspaidof$2,470.Seenote14.(2) Seenote14

Decolar.com,Inc. NotestotheConsolidatedFinancialStatements


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1. OperationsoftheCompany

Decolar.com,Inc.(formerlyDespegar.com,Inc.),aDelawareholdingcompany("Decolar.com"orthe“Company") isanonlinetravelagency,whichprovides leisureandbusinesstravelersthetoolsandinformationtheyneedtomaketravelreservationswithprovidersoftravelproductsaroundtheworld.Decolar.com startedoperations in 1999under thenameDespegar.com, Inc. InOctober2012, theCompanyamendeditscertificateofincorporationtorenametheCompanyas“Decolar.com,Inc.”Decolar.comistheleadingonlinetravelagencyinLatinAmericaandincludesboththeDecolarandDespegarbrands.Withapresencein20countries,Decolar’swebsitesandmobileappshelpleisureandbusinesstravelerstobookhotelrooms,airlinetickets,packages,rentalcars,cruises,destinationservices and travel insurance around the world. The Company operates primarily under the“Despegar.com”brandforSpanishandEnglishspeakingcustomersandthe“Decolar.com”brandforPortuguesespeakingcustomers.TheCompanyalsogeneratesadditionalrevenuethroughthesaleofadvertisingonitswebsites.Decolar.com provides its customers with multiple ways to save on travel-related products andmultiplealternativestopayforsuchproducts.2. Basisofconsolidation

TheconsolidatedfinancialstatementsincludetheaccountsoftheCompanyanditssubsidiaries.ThefollowingaretheCompany’smainoperatingsubsidiaries(allwholly-owned):

NameoftheSubsidiary CountryofIncorporationDespegar.com.arS.A. ArgentinaLaIncS.A. ArgentinaDecolar.comLTDA. BrazilDespegar.comChileSpA ChileServiciosOnlineS.A.S. ColombiaDespegarColombiaS.A.S. ColombiaDespegarEcuadorDespegarEcuadorS.A. EcuadorDespegar.comMéxicoS.A.deC.V. MexicoDespegar.comPeruS.A.C. PeruDespegar.comUSA,Inc. UnitedStatesTravelReservationsS.R.L. Uruguay

The consolidated financial statements have beenprepared in accordancewith generally acceptedaccountingprinciplesintheUnitedStatesofAmerica("U.S.GAAP").Althoughthesubsidiariestransactthemajorityoftheirbusinessesintheirlocalcurrencies,theCompanyhasselectedtheUnitedStatesdollar("U.S.dollar")asitsreportingcurrency.Allsignificantintercompanyaccountsandtransactionshavebeeneliminated.



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ForeigncurrencytranslationThe Company’s foreign subsidiaries (except for Travel Reservations S.R.L in Uruguay and othersubsidiaries in the United States, Ecuador and Venezuela, which use the U.S. dollar as functionalcurrency)havedeterminedthelocalcurrencytobetheirfunctionalcurrency.Assetsandliabilitiesaretranslated from their local currencies intoU.S. dollars at the end-of-the-year exchange rates, andrevenueandexpensesaretranslatedataveragemonthlyratesineffectduringtheyear.Translationadjustmentsareincludedintheconsolidatedstatementofcomprehensiveincome/(loss).Gainsandlossesresultingfromtransactionsinnon-functionalcurrenciesarerecognizeddirectlyintheconsolidatedstatementsofoperationsunderthecaption“Financialincome/(expense)”.3. SummaryofsignificantaccountingpoliciesThe following is a summary of significant accounting policies followed by the Company in thepreparationoftheseconsolidatedfinancialstatements.UseofestimatesThe preparation of consolidated financial statements in conformity with U.S. GAAP requiresmanagement tomakeestimates andassumptions that affect the reported amountsof assets andliabilitiesanddisclosureofcontingentassetsandliabilitiesatthedateofthefinancialstatementsandthereportedamountsofrevenueandexpensesduringthereportingperiod.Actualresultscoulddifferfromestimates.ThesignificantestimatesunderlyingtheCompany´sconsolidatedfinancialstatementsincluderevenuerecognition,includingtheaccountingforcertainmerchantrevenues,allowancefordoubtful accounts, recoverability of intangible assets with indefinite useful lives and goodwill,contingencies, fair valueof stockbased compensationand fair valueof financial instruments. Theconsolidatedfinancialstatementsreflectalladjustmentsconsidered,intheopinionofmanagement,necessarytofairlypresenttheresultsfortheperiodspresented.ConcentrationofriskThe Company´s business is subject to certain risks and concentrations including dependence onrelationshipswithtravelsuppliers,primarilyairlines,dependenceonthird-partytechnologyproviders,exposuretorisksassociatedwithonlinecommercesecurityandpaymentrelatedfraud.Italsoreliesonglobaldistributionsystem(“GDS”)partnersandthird-partyserviceprovidersforcertainfulfillmentservices.Financialinstruments,whichpotentiallysubjecttheCompanytoconcentrationofcreditrisk,mainlyconsistof cashandcashequivalents, short-term investmentsandaccounts receivable (ie. clearinghouseforcreditcards).TheCompanymaintainscash,cashequivalentsandshort-terminvestmentsbalances in financial institutions that management believes are high credit quality. Accountsreceivablearesettledmainlythroughcustomercreditcardsanddebitcards;thecompanymaintainsallowancefordoubtfulaccountsbasedonmanagement'sevaluationofvariousfactors,includingthecreditriskofcustomers,historicaltrendsandotherinformation.



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RevenuerecognitionTheCompany generates revenue as a result of the booking of travel products and services on itswebsitesandmobileapps.TheCompanyprovidescustomerstheabilitytobooktravelproductsandservicesonbotha stand-alonebasisorasavacationpackage,primarily through itsmerchantandagencybusinessmodels.TheCompanyderivesitsrevenuemainlyfrom:

- Commissionsearnedfromintermediatingservices,includingfacilitatingreservationsofflighttickets,hotelaccommodations,carrentalsandothertravel-relatedproductsandservices;

- Service fees charged to customers for processing air tickets, hotel accommodations, carrentalsandothertravel-relatedproductsandservices;

- OverridecommissionsorincentivesfromsuppliersandGDSprovidersiftheCompanymeetscertainvolumethresholds;and

- AdvertisingrevenuesfromthesaleofadvertisingplacementsontheCompany´swebsites.

Revenue is recognized when earned and realizable based on the following criteria: persuasiveevidence of an agreement exists, the fee is fixed or determinable and collectability is reasonablyassured.The Company also evaluated the presentation of revenue on a “gross” versus a “net” basis. Theconsensusoftheauthoritativeaccountingliteratureisthatthepresentationofrevenueas“thegrossamountbilledtoacustomerbecauseithasearnedrevenuefromthesaleofgoodsorservices”or“thenetamountretained(i.e.,theamountbilledtoacustomerlesstheamountpaidtoasupplier)becauseithasearnedacommissionorfee”isamatterofjudgmentthatdependsontherelevantfactsandcircumstances.Decolar.comhasdeterminednetpresentation isappropriate for themajorityof itstransactions.Inmakinganevaluationofthisissue,someofthefactorsthatwereconsideredareasfollows: (i) the Company is not the primary obligor in the arrangement (strong indicator); (ii) theCompanyhasnogeneralsupplyrisk(beforecustomerorderisplacedoruponcustomerreturn)(strongindicator);and(iii)theCompanyhaslatitudeinestablishingprice.Theguidanceclearlyindicatesthatthe evaluations of these factors, which at times can be contradictory, are subject to significantjudgmentandsubjectivity.TheCompanyconcludesthatitperformsasanagentwithoutassumingtherisksandrewardsofownershipofgoods,andthereforerevenueisreportedonanetbasis.The Company offers travel products and services through the following business models: thePrepay/Merchant Model, which represents approximately 75% of total revenue and the Pay-at-destination/AgencyModel,whichrepresentsapproximately5%oftotalrevenue.UnderthePrepay-MerchantModel,theCompanyisthemerchantofrecord.Prepay/MerchantBusinessModelThroughthismodeltheCompanyprovidescustomerstheabilitytobookairtravel,hotels,carrentals,cruises,destinationservicesandvacationpackages.TheCompanygeneratesrevenuebasedonthedifferencebetweenthetotalamountthatthecustomerpaysforthetravelproductandthenetrateowedtothesupplierplusestimatedtaxes.Decolar.comalsoearnsrevenuebychargingcustomersaservicefeeforbookingtheirtravelreservation.Customersgenerallypayatthetimeofbookingand



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theCompanygenerallypaystothesupplieratalaterdate,whichisnormallyatthetimethecustomerusesthetravelreservation.Decolar.comrecordsthepaymentsasdeferredmerchantbookingsintravelsupplierpayablesinthebalancesheetuntilthetraveloccurs;atthatpoint,theCompanyrecognizestherevenueforthoserefundabletransactionsonanetbasis.Fortravelproductsthatarecancelledbythecustomerafteraspecifiedperiodoftime,theCompanymaychargeacancellationfeeorpenaltysimilartotheamountthatthesupplierchargesforthecancellation.Innonrefundabletransactions,andwhentheCompanydoesnothavesignificantpost-deliveryobligations,therevenueisrecordedonanetbasiswhenthecustomercompletesthereservationprocessintheCompany´splatform.Packages and sales transactions performed by customers to affiliated agencies are recognizedfollowing the revenue recognition policy described above for refundable / non refundabletransactions.PursuanttothetermsoftheCompany'smerchantsupplieragreements,theCompany’stravelservicesuppliersarepermittedtobillitfortheunderlyingcostoftheserviceduringaspecifiedperiodoftime.IntheeventthattheCompanyisnotbilledbythetravelsupplierwithina12-monthperiodfromthecheck-outdate,theCompanyrecognizesincrementalcommissionsintheunbilledamounts.Pay-at-Destination/AgencyBusinessModelThroughthismodel,theCompanyprovidescustomerstheabilitytobookhotels,carrentalsandothertravel-relatedproductsandservicestobepaidatdestination.Decolar.comearnsacommissionpaiddirectlybysuppliers.TheCompanygenerallycollectsthesecommissionsafterthecustomerusesthetravel reservation. In certain circumstances, the Company may also earn revenue by chargingcustomerswithaservicefeeforbookingtheirtravelreservation.TheCompanygenerallyrecordsrevenueonanaccrualbasiswhenthetraveloccursandispresentedonanetbasis.Inaddition,theCompanyrecordsanallowanceforcollectionriskonthisrevenuebasedonhistoricalexperience.IncentivesTheCompanymay receiveoverridecommissions fromair,hotelandother travel service supplierswhenitmeetscertaincontractualvolumethresholds.Thesecommissionsarerecognizedwhentheamount of the commission becomes fixed or determinable, which is generally when collection isreasonablyassured(i.e.uponnotificationoftherespectiveairsupplier).Additionally theCompanyusesGDS servicesprovidedby recognized suppliers.UnderGDS serviceagreements, the Company earns revenue in the form of an incentive payment for sales that areprocessedthroughaGDSifcertaincontractualvolumethresholdsaremet.Revenueisrecognizedfortheseincentivepaymentsonamonthlyaccruedbasisinaccordancewithratablevolumethresholds.AdvertisingTheCompany records advertising revenue ratably over the advertising periodor upondelivery ofadvertisingmaterial,dependingonthetermsoftheadvertisingagreement.



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SalestaxTheCompany’ssubsidiariesinBrazil,ArgentinaandColombiaaresubjecttocertainsalestaxes,whichareclassifiedascontra-revenue.CashandcashequivalentsCashandcashequivalentsincludeinvestmentswithanoriginalmaturityofthreemonthsorless.Allresultsgeneratedfromtheseinvestmentesarerecordedasfinancialresultswhenearned.RestrictedcashandcashequivalentsThe primary purpose of restricted cash and cash equivalents is to collateralize operations withsuppliers of travel products and services. In addition, theCompanymantains $ 10,000as securitydepositinExpedia,asestablishedintheExpediaOutsourcingAgreement(seenote16).Short-terminvestmentsShort-terminvestmentsareprimarilyinvestmentswithoriginalmaturitiesbetweenthreetotwelvemonths.Accountsreceivable,netofallowancesfordoubtfulaccountsAccounts receivables are recorded net of an allowance for doubtful accounts. The Companydetermines its allowance based on the aging of its receivables. While management uses theinformationavailabletomakeevaluations,futureadjustmentstotheallowancemaybenecessaryiffutureeconomicconditionsdiffersubstantiallyfromtheassumptionsusedinmakingtheevaluations.Managementhasconsideredalleventsand/ortransactionsthataresubjecttoreasonableandnormalmethodsofestimations,andtheconsolidatedfinancialstatementsreflectthatconsideration.Propertyandequipment,netPropertyandequipmentarestatedatacquisitioncost,lessaccumulateddepreciation.Depreciationexpense is calculated using the straight-line method, based on rates determined in light of theestimatedusefullivesoftherelatedassets.Theestimatedusefullives(inyears)ofthemaincategoriesoftheCompany'spropertyandequipmentareasfollows:

Asset Estimatedusefullife(years)

Computerhardware 3Cars 5Officefurnitureandfixture 10Buildings 50

Expendituresforrepairsandmaintenancearechargedtoexpenseasincurred.Thecostofsignificantrenewalsandimprovementsisaddedtothecarryingamountoftherespectiveasset.



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Whenassetsareretiredorotherwisedisposedof,thecostandrelatedaccumulateddepreciationareremovedfromtheaccounts,andanyresultinggainorlossisreflectedintheconsolidatedstatementofoperations.GoodwillandIntangibleassets,netGoodwill represents the excess of the purchase price over the fair value of the net tangible andintangibleassetsacquiredinabusinesscombination.Goodwillisnotsubjecttoamortization,butissubject to anannual assessment for impairment, ormore frequently, if events and circumstancesindicateimpairmentmayhaveoccurred,applyingafair-valuebasedtest.Intangibleassetsresultingfromtheacquisitionofcompanieswereestimatedbymanagementbasedonthefairvalueofassetsreceived.Identifiableintangibleassetsarecomprisedoftrademarksandinternetdomains.Trademarksanddomainsarenotsubjecttoamortization,butsubjecttoanannualimpairmentassessment.Certain costs incurred related to the development of internal-use software are capitalized.Development costs incurred during the application development stage and upgrades andenhancementtoexistingsoftwarethatprovidesadditionalfunctionalityarecapitalized.Costsincurredrelatedtothepreliminaryprojectandpost-implementationphasesareexpensedasincurred.Software internallydeveloped is amortizedover aperiodof three years according to its expectedusefullife,usingthestraight-linemethod.Inaddition,theassetvalueofthesoftwareisevaluatedforimpairmentperiodically.Financialsystemsareamortizedoveraperiodof10years,usingthestraight-linemethod.ImpairmentofLong-LivedAssetsTheCompanyreviewslong-livedassetsforimpairmentswhenevereventsorchangesincircumstancesindicatethatthecarryingvalueofanassetmaynotberecoverable.Recoverabilityofassetstobeheldandusedismeasuredbyacomparisonofthecarryingamountofanassettoundiscountedfuturenetcashflowsexpectedtobegeneratedbytheasset.Ifsuchassetsareconsideredtobeimpairedonthisbasis,theimpairmentlosstoberecognizedismeasuredbytheamountbywhichthecarryingamountoftheassetsexceedsthefairvalueoftheassets.Goodwill and intangibleassetswith indefinite livesare reviewedat leastannually for impairment,generallyasofDecember31,ormorefrequentlyifeventsandcircumstancesindicateimpairmentmayhaveoccurred.Impairmentofgoodwillistestedatthereportingunitlevelbycomparingthereportingunitscarryingamount,includinggoodwill,tothefairvalueofthereportingunit.Thefairvaluesofthereportingunitsareestimatedusingacombinationoftheincomeordiscountedcashflowsapproachandthemarketapproach,whichutilizescomparablecompanies’data.Ifthecarryingamountofthereportingunitexceedsitsfairvalue,goodwillisconsideredimpairedandasecondstepisperformedto measure the amount of impairment loss, if any. No impairments were recognized during thereportingyearsforgoodwillorintangibleassetswithindefinitelife.



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PensioninformationTheCompanydoesnotmaintainanypensionplans.ThelawsinthedifferentcountriesinwhichtheCompanycarriesoutitsoperationsprovideforpensionbenefitstobepaidtoretiredemployeesfromgovernment pension plans and/or private pension plans. Amounts payable to such plans areaccountedforonanaccrualbasis.SeverancepaymentsTheCompanymay register a liability for severancepayments if the following criteria aremet: (a)management,havingtheauthoritytoapprovetheaction,commitstoaplanoftermination;(b)theplanidentifiesthenumberofemployeestobeterminated,theirjobclassificationsorfunctionsandtheirlocations,andtheexpectedcompletiondate;(c)theplanestablishesthetermsofthebenefitarrangement,includingthebenefitsthatemployeeswillreceiveupontermination,insufficientdetailto enable employees to determine the type and amount of benefits theywill receive if they areinvoluntarily terminated; (d) actions required to complete theplan indicate that it is unlikely thatsignificantchangestotheplanwillbemadeorthattheplanwillbewithdrawn;and(e)theplanhasbeencommunicatedtoemployees. ContingentliabilitiesTheCompanyhascertainregulatoryandlegalmattersoutstanding,asdiscussedfurtherinnote13“CommitmentsandContingencies.”Periodically, thestatusofall significantoutstandingmatters isreviewedtoassessthepotential financialexposure.When(i) it isprobablethatanassethasbeenimpairedoraliabilityhasbeenincurredand(ii)theamountofthelosscanbereasonablyestimated,theCompanyrecordstheestimatedlossintheconsolidatedstatementsofoperations.Additionally, disclosure in the notes to the consolidated financial statements is provided for losscontingenciesthatdonotmeetbothoftheseconditionsifthereisareasonablepossibilitythatalossmayhavebeenincurredthatwouldmateriallyimpactthefinancialpositionandresultsofoperations.Significant judgment isrequiredtodeterminetheprobabilitythata liabilityhasbeen incurredandwhethersuchliabilityisreasonablyestimable.TheCompanyrecordsaccrualsrelatedtocommercial,laborandtaxcontingenciesthatmaygenerateanobligationfortheCompany.Accrualsaremadeonthebestinformationavailableatthetime;suchanalysismaybehighlysubjective.Thefinaloutcomeofthesematterscouldvarysignificantlyfromtheamountsincludedintheaccompanyingconsolidatedfinancialstatements.DerivativeinstrumentsDerivativeinstrumentsarecarriedatfairvalueontheconsolidatedbalancesheets.ThefairvaluesofthederivativefinancialinstrumentsgenerallyrepresenttheestimatedamountstheCompanywouldexpecttoreceiveorpayuponterminationofthecontractsasofthereportingdate.As of December 31, 2016 the Company maintained derivative instruments consisting of foreigncurrencyforwardcontracts.TheCompanyusesforeigncurrencyforwardcontractstohedgeexposureincurrenciesdifferentfromthereportingcurrency.Thegoalinmanagingtheforeignexchangeriskisto reduce, to the extent practicable, the potential exposure to exchange rate fluctuations and itsresultingeffectonearnings,cashflowsandfinancialposition.Theforeigncurrencyforwardcontracts



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aretypicallyshort-termanddonotqualifyforhedgeaccountingtreatment.Changesinfairvaluearerecordedinfinancialresults.FollowingisthederivativespositionasofDecember31,2016:

CurrencyNotionalamount Type Due

AvgPrice(1) Fairvalue

BrazilianReais $15,000 Sell Jan-17 3.37 457Argentinepesos $5,000 Purchase Jan-17 16.17 (49)

(1) Ineachrespectivecurrency.ThechangesinfairvalueofderivativeshasbeenaccountedforunderFinancialincome/(expense)intheconsolidatedstatementofoperations.Comprehensiveincome/(loss)Comprehensiveincome/(loss)includesnetincome/(loss)ascurrentlyreportedunderU.S.GAAPandalso considers the effect of additional economic events that are not required to be recorded indeterminingnetincome,butareratherreportedasaseparatecomponentofshareholders'deficit.Othercomprehensiveincome/(loss)includesthecumulativetranslationadjustmentrelatingtothetranslationof the financial statementsof theCompany´s foreign subsidiaries (seeNote2 “Foreigncurrencytranslation”).Stock-basedcompensationCompensationcostrelatedtostock-basedemployeecompensationarrangementsareaccountedforatfairvalueatthetimeofgrant.ThecalculationoffairvalueisaffectedbytheCompany'sstockpriceestimationaswellasassumptionsregardinganumberofhighlycomplexandsubjectivevariablesatthe time of the grant. Compensation cost is recognized on a straight-line basis over the requisiteserviceperiodwhichcommencesonthegrantdateasthereexistsamutualunderstandingofthekeyterms and conditions at the date the award is approved by the board of directors or othermanagementwithrelevantauthorityandthefollowingconditionsaremet:•Theawardisaunilateralgrantand,therefore,therecipientdoesnothavetheabilitytonegotiatethekeytermsandconditionsoftheawardwiththeemployer.•Thekeytermsandconditionsoftheawardhadbeencommunicatedtoanindividualrecipientwithinarelativelyshorttimeperiodfromthedateofapproval. RepurchaseofsharesThe Company repurchased stock held by shareholders at a price which exceed its fair value, asdescribed in note 14 “Transaction with Expedia Inc.“ All shareholders (including founders andemployees)otherthanthecontrollingshareholderparticipatedintherepurchaseofshares(onaproratabasis).TheCompanyfollowedtheguidelineinASC718andconsideredpremiumpaidbyExpediaas a deemed dividend. The repurchase of shares is reflected in the statement of changes inshareholder´sdeficitfortheyearendedDecember31,2015.



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MarketingandadvertisingexpensesThe Company incurs advertising expense consisting of offline costs, including television and radioadvertising, and online advertising expense to promote the business. The Company expenses theproductioncostsassociatedwithadvertisementsintheperiodinwhichtheadvertisementfirsttakesplace. The Company expenses the costs of advertisement in the period during which theadvertisementspaceorairtimeisconsumed.Internetadvertisingexpensesarerecognizedbasedonthe termsof the individual agreements,which is generally over the greater of (i) the ratio of thenumberofclicksdeliveredoverthetotalnumberofcontractedclicks,onapay-per-clickbasis,or(ii)onastraight-linebasisoverthetermofthecontract.Advertisingexpensesfor2016and2015amounted$102,770and$149,814,respectively.AccountingforincometaxesTheCompany is subject toU.S.and foreign incometaxes.Theprovision for incometaxes includesfederal and foreign taxes. Income taxes are accounted for under the asset and liabilitiesmethod.Under this method, deferred income tax assets and liabilities are recognized for the future taxconsequences attributable to differences between the consolidated financial statement carryingamountsofexistingassetsandliabilitiesandtheirrespectivetaxbases.Deferredincometaxassetsandliabilitiesaremeasuredusingenactedtaxratesexpectedtoapplytotaxableincomeintheyearsinwhichthosetemporarydifferencesareexpectedtoberecoveredorsettled.Theeffectondeferredtaxassetsandliabilitiesofachangeintaxratesisrecognizedinincomeintheperiodthatincludestheenactmentdate.TheCompanysetupavaluationallowanceforthatcomponentofnetdeferredtaxassetswhichdoesnotmeetthemore-likely-than-notcriterionforrealization.Avaluationallowanceisrecognizedforacomponent of net deferred tax assets, including tax loss carryforward, which is assessed as notrecoverable.AsofDecember31,2016and2015thevaluationallowanceamountedto$45,526and$46,189,respectively.DuetoinherentcomplexitiesarisingfromthenatureoftheCompany’sbusiness,futurechangesinincome tax law, transfer pricing new regulations or variances between actual and anticipatedoperating results, theCompanymakescertain judgmentsandestimates.Therefore,actual incometaxescouldmateriallyvaryfromthoseestimates.ExpediatransactionAsfurtherdiscussedinnote14,theCompanyenteredintoa$270,000equitytransactionwith(saleofcommonstockto)Expedia, Inc. (“Expedia”)whileatthesametimeanagreement(the“ExpediaOutsourcingAgreement”arevenuearrangementfortheCompanytoactasanagentforExpediaincertaincountries)wassignedwhichincludesa$125,000terminationfeeifcertainminimumrevenuethresholdsarenotachievedorifandwhentheCompanyultimatelyterminatestheagreement.Atthesame time as these transactions occurred, the Company repurchased common stock of certainshareholdersseekingliquidityatthesamepurchasepricepersharepaidbyExpediatotheCompanyundertheStockPurchaseAgreement.



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The terminationprovisionsof theExpediaOutsourcingAgreementneverexpireandalso couldbetriggeredbyExpediaiftheCompanydoesnotmeetcertainminimumvolumecommitments,whichisnotwithintheCompany’scontrol.Eventually, theCompanywill terminatetheagreementortheremaybeachangeofcontrolandwillneedtorefund$125,000toExpedia.Accordingly,thispaymentisnotconsideredasacontingentpaymentbutratheraknownpaymentwithjustacontingencyastotimingofpayment. Accordingly,astherewouldbealinkbetweentheindemnificationclauseandtheExpediaOutsourcingAgreement(andeffectivelythe”minimumbookingguarantee“),sothereexistscontingentrevenueof$125,000which, according to the current revenue guidance under ASC 605, is not allowed to beconsideredasearned.Following the guidance inASC505 andASC605-50, equitywas credited at its fair valuewith anyremainingamountspaidattributabletootherelementsofthearrangement.Management has determined the fair value of the equity issued to Expedia taking into accountindependent valuations, resulting in an amount of approximately $145,000. Therefore, it wasconcludedthattheExpediatransactionwasissuedatapremiumofapproximately$125,000,whichwasrecordedasaliabilitytoreflecttherefundableterminationfee.AccordingtotheExpediaOutsourcingAgreement,theCompanymustconsistentlygenerateacertainminimumvolumeof paid customer activity for Expediaover the termof the ExpediaOutsourcingAgreementorExpediawouldhavetherighttoterminatetheagreementandtheCompanywouldbesubjecttopay$125,000inliquidateddamagestoExpedia.Inaddition,ifinthefuturemanagementand the Company’s directors determine that the Company should exit the Expedia OutsourcingAgreementaftertheminimumtermofsevenyears,whichtheCompanyhasnopresentintentionofdoing,itwouldberequiredtopay$125,000todoso.AstheagreementwithExpediaautomaticallyrenewsindefinitelyandthereisnowayfortheCompanytoexittheagreementandavoidthispaymentwithoutagreementfromExpedia,theobligationtoultimatelypayExpediauponterminationofthearrangement (even if delayed) represents a long-term liability in the amount of the $ 125,000terminationfee.TherevenuederivedfromExpediaLodgingoutsourcingagreementisfixedanddeterminableandisnotsubjecttoanyrefundbeyondthe$125,000terminationfeethathasbeenfullyaccrued.Stockissuancecoststotaling$2,470wererecordedasareductionofstockpurchaseprice.RecentlyissuedaccountingpronouncementsTheCompanyprovidesbelowadescriptionofthosestandardswhicharerelevanttotheCompany´sbusinessonlyandtheimpactoftheiradoptionifany.In May 2014, the Financial Accounting Standards Board (“FASB”) issued an Accounting StandardUpdate(“ASU”)amendingrevenuerecognitionguidanceandrequiringmoredetaileddisclosurestoenableusersof financial statements tounderstand thenature,amount, timinganduncertaintyofrevenueandcashflowsarisingfromcontractswithcustomers. InAugust2015,theFASBissuedanASUdeferring the effective date of the revenue standard so itwould be effective for annual andinterimreportingperiodsbeginningafterDecember15,2017.Inaddition,theFASBhasalsoissuedseveralamendmentstothestandardwhichclarifycertainaspectsoftheguidance,includingprincipal



17

versusagentconsiderationandidentifyingperformanceobligations.TheCompanyhasmadeprogresstowardcompleting itsevaluationofpotentialchangesfromadoptingthenewstandardon itscorerevenuesandcontinuestoevaluatetheimpactoftheadoptionofthisnewrevenueguidanceonitsconsolidatedfinancialstatements.TheCompanyexpectstohaveitspreliminaryevaluation,includingthe selection of an adoption method, internal control implications and disclosure requirements,completedbytheendofthesecondquarterof2017.TheCompanyisnotplanningonearlyadoptingandcurrentlyexpectstoadoptthenewrevenuerecognitionguidanceinthefirstquarterof2018.InNovember2015,theFASBissuedASUNo.2015-17,BalanceSheetClassificationofDeferredTaxes,whichrequiresentitiestopresentdeferredtaxassetsanddeferredtaxliabilitiesasnoncurrentinaclassifiedstatementoffinancialposition.TheamendmentsinthisUpdateareeffectiveforfiscalyearsbeginningafterDecember15,2016,includinginterimperiodswithinthosefiscalyears.TheadoptionofthisstandardisnotexpectedtohaveamaterialimpactontheCompany’sfinancialstatements.InMarch,2016theFASBissuedtheASUNo.2016-09.TheFASBisissuingthisUpdateaspartofitsinitiative to reducecomplexity inaccountingstandards.Theareas for simplification in thisUpdateinvolveseveralaspectsoftheaccountingforemployeeshare-basedpaymenttransactions,includingtheincometaxconsequences,classificationofawardsaseitherequityorliabilities,andclassificationonthestatementofcashflows.Someoftheareasforsimplificationapplyonlytononpublicentities.Forpublicentities,theamendmentsareeffectiveforannualperiodsbeginningafterDecember15,2016,and interimperiodswithinthoseannualperiods.Forallotherentities,theamendmentsareeffectiveforannualperiodsbeginningafterDecember15,2017,andinterimperiodswithinannualperiodsbeginningafterDecember15,2018.Earlyadoptionispermitted.TheadoptionofthisstandardisnotexpectedtohaveamaterialimpactontheCompany’sfinancialstatements.InNovember2016,theFASBissuedASUNo.2016-18.Theamendmentsrequirethatastatementofcashflowsexplainthechangeduringtheperiodinthetotalofcash,cashequivalents,andamountsgenerallydescribedasrestrictedcashandrestrictedcashequivalentsshouldbeincludedwithcashand cash equivalents when reconciling the beginning-of-period and end-of-period total amountsshownonthestatementofcashflow.TheamendmentsareeffectiveforpublicbusinessentitiesforfiscalyearsbeginningafterDecember15,2017.Forallotherentities,theamendmentsareeffectivefor fiscal yearsbeginningafterDecember15,2018.Earlyadoption ispermitted.Theamendmentsshouldbeappliedusingaretrospectivetransitionmethodtoeachperiodpresented.TheadoptionofthisstandardisnotexpectedtohaveamaterialimpactontheCompany’sfinancialstatements.In January 2017, the FASB issued ASU No. 2017-04. To simplify the subsequentmeasurement of

goodwill,theamendmentseliminateStep2fromthegoodwillimpairmenttest.Theannual,orinterim,goodwillimpairmenttestisperformedbycomparingthefairvalueofareportingunitwithitscarrying

amount.Animpairmentchargeshouldberecognizedfortheamountbywhichthecarryingamountexceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total

amount of goodwill allocated to that reporting unit. In addition, income tax effects from any taxdeductible goodwill on the carrying amount of the reporting unit should be considered whenmeasuring the goodwill impairment loss, if applicable. The amendments also eliminate therequirementsforanyreportingunitwithazeroornegativecarryingamounttoperformaqualitative

assessmentand,ifitfailsthatqualitativetest,toperformStep2ofthegoodwillimpairmenttest.Anentitystillhastheoptiontoperformthequalitativeassessmentforareportingunittodetermineif



18

thequantitativeimpairmenttestisnecessary.ApublicbusinessentityshouldadopttheamendmentsforitsannualoranyinterimgoodwillimpairmenttestsinfiscalyearsbeginningafterDecember15,2019.ApublicbusinessentitythatisnotanSECfilershouldadopttheamendmentsforitsannualorany interimgoodwill impairmenttests in fiscalyearsbeginningafterDecember15,2020.AllotherentitiesshoulddosofortheirannualoranyinterimgoodwillimpairmenttestsinfiscalyearsbeginningafterDecember15,2021.EarlyadoptionispermittedforinterimorannualgoodwillimpairmenttestsperformedontestingdatesafterJanuary1,2017.TheadoptionofthisstandardisnotexpectedtohaveamaterialimpactontheCompany’sfinancialstatements.

4. CashandcashequivalentsCashandcashequivalentsconsistofthefollowing:

AsofDecember31,2016

AsofDecember31,2015

Cash 10 13Banks 22,681 23,180Timedeposits 50,000 60,029Moneymarketfunds 3,277 18,894 $ 75,968 $ 102,116

5. Accountsreceivable,netofallowancesAccountsreceivable,netofallowancesconsistofthefollowing:

AsofDecember31,2016

AsofDecember31,2015

Accountsreceivable 123,267 58,370Others 1,344 16Allowancefordoubtfulaccounts (3,513) (3,401) $ 121,098 $ 54,985

6. OthercurrentassetsandprepaidexpensesOthercurrentassetsandprepaidexpensesconsistofthefollowing:

AsofDecember31,2016

AsofDecember31,2015

Taxcredits(1) 20,582 20,412Cashmanagedbythirdparties 4,337 5,808Advertisingpaidinadvance 715 5,214Others 1,550 3,000 $ 27,184 $ 34,434

(1) Mainlyincludes$3,093ofVATcredits,$11,432ofincometaxcredits(includingnetdeferredtaxassets),$4,581ofsalestaxcreditsand$1,476ofother taxcreditsasofDecember31,2016;and$5,246ofVATcredits,$6,305of incometaxcredits(includingnetdeferredtaxassets),$3,364ofsalestaxcreditsand$5,497othertaxcreditsasofDecember31,2015.



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7. Propertyandequipment,netPropertyandequipment,netconsistsofthefollowing:

AsofDecember31,2016

AsofDecember31,2015

Computerhardwareandsoftware 22,334 19,447Officefurnitureandfixture 9,071 8,074Buildings 2,298 2,594Cars - 123Land 75 92Totalpropertyandequipment 33,778 30,330Accumulateddepreciation $ (20,061) $ (15,162)Totalpropertyandequipment,net $ 13,717 $ 15,168

Totaldepreciationexpensefortheyears2016and2015is$5,089and$5,152,respectively.8. Goodwillandintangibleassets,netGoodwillandintangibleassets,netconsistsofthefollowing:

AsofDecember31,2016

AsofDecember31,2015

Goodwill(1) 38,894 38,554 Intangibleassetswithindefinitelives

Brandsanddomains 13,882 13,837AmortizableIntangibleassets

Internal-usesoftwareandsiteinternallydeveloped

35,217

23,241

Totalintangibleassets 49,099 37,078Accumulatedamortization(2) (17,687) (9,852)Totalintangibleassets,net $ 31,412 $ 27,226



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(1) FollowingisthebreakdownofGoodwillperreportingunitasofDecember31,2016and

2015: Balanceofbeginning

ofperiodOthercomprehensive

Income/(Loss)Balanceatendof

period2015

Argentina 4,062 (1,397) 2,665Brazil 15,901 (5,085) 10,816Mexico 9,690 (1,456) 8,234Uruguay 16,839 - 16,839

46,492 (7,938) 38,5542016

Argentina 2,665 (478) 2,187Brazil 10,816 2,143 12,959Mexico 8,234 (1,325) 6,909Uruguay 16,839 - 16,839

38,554 340 38,894

GoodwillisfullyattributabletotheAiroperatingsegment.

(2) Totalamortizationexpensefortheyears2016and2015is$7,835and$9,287,respectively.TheestimatedfutureamortizationexpenserelatedtointangibleassetswithdefinitelivesasofDecember31,2016,assumingnosubsequentimpairmentoftheunderlyingassets,isasfollows:

2017 7,2412018 3,5142019 3,5142020 5442021andbeyond 2,717 17,530

9. AccountspayableandaccruedexpensesAccountspayableandaccruedexpensesconsistofthefollowing:

AsofDecember31,2016

AsofDecember31,2015

Marketingsuppliers 15,723 16,488Provisionforinvoicestobereceived 3,353 5,130Affiliatedagencies 690 799Othersuppliers 5,569 14,700 $ 25,335 $ 37,117



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10. TravelSupplierpayablesTravelSupplierpayablesconsistofthefollowing

AsofDecember31,2016

AsofDecember31,2015

Hotelsandothertravelservicesuppliers(1)

96,357

103,152

Airlines 5,880 9,343 $ 102,237 $ 112,495

(1) Includes$84,477and$90,577asofDecember31,2016and2015,respectively,fordeferredmerchantbookings

whichwillbedueafterthetravelerhascheckedout.

11. OtherliabilitiesOthercurrentliabilitiesconsistofthefollowing:

AsofDecember31,2016

AsofDecember31,2015

Salariespayable(1) 33,266 24,248Taxespayable(2) 14,914 8,234Others 1,506 2,143 $ 49,686 $ 34,625

(1) Includessettlementspayableswithcertainmanagementstockholders(note14)

(2) Includesdeferredtaxliabilities.Seenote12.

Othernon-currentliabilitiesconsistofthefollowing:

AsofDecember31,2016

AsofDecember31,2015

Taxespayable 409 861 $ 409 $ 861

12. IncometaxesThefollowingtablepresentsasummaryofU.S.andforeignincometaxexpensecomponents:

AsofDecember31,2016

AsofDecember31,2015

Current: Foreign (4,459) (9,879)Federal (50) 14Deferred: Foreign 663 (220)Withholding: Foreign (6,692) (7,919)Incometaxexpense $ (10,538) $ (18,004)

Belowtheclassificationofdeferredtaxassets/liabilitiesbycurrentandnon-current:



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AsofDecember31,2016 AsofDecember31,2015

Currentdeferredtaxassets 9,173 26,843Non-Currentdeferredtaxassets 39,950 22,376 Totaldeferredtaxassets 49,123 49,219Lessvaluationallowance (45,526) (46,189)Netdeferredtaxassets 3,597 3,030Currentdeferredtaxliabilities (1,002) (1,098)Non-Currentdeferredtaxliabilities - -

Totaldeferredtaxliabilities (1,002) (1,098)AsofDecember31,2016,consolidatedlosscarryforwardsforincometaxpurposeswere$121,224.Ifnotutilized,taxlosscarryforwardswillbegintoexpireasfollows:

ExpirationDate NOLsAmount

Expires2018 25Expires2019 12,026Expires2020 4,531Expires2021 22Expires2022 20Thereafter 32,667Withoutexpirationdates 71,933

TOTAL(1) 121,224(1)ThesetaxlosscarryforwardsdetailedabovearefullyreservedatDecember31,2016.NOLsCarryforwardsexpiration:

- Brazil:$71,710.Noexpirationbutoffsetlimitationof30%ofthetaxableincomebyfiscal

year.- USA:$30,302.Expirationafter20yearsbutoffsetlimitationof90%ofthetaxableincome

byfiscalyear.- Argentina:$14,650.Fivefiscalyearsexpiration.- Colombia:$2,707.Threefiscalyearsexpiration.- Venezuela:$1,541.Threefiscalyearsexpirationbutoffsetlimitationof25%ofthetaxable

incomebyfiscalyear.- Peru:$222.Noexpirationbutoffsetlimitationof50%ofthetaxableincomebyfiscalyear.- Mexico:$92.Tenfiscalyearsexpiration.

Deferred tax assets and liabilities are recognized for the future tax consequences of differencesbetweenthecarryingamountsofassetsandliabilitiesandtheirrespectivetaxbasesusingenactedtaxrates ineffectfortheyear inwhichthedifferencesareexpectedtoreverse.TheCompanyhasforeignsubsidiarieswithaggregatedundistributedearningsof$1,554asofDecember31,2016.Wehavenotprovideddeferredincometaxesontaxabletemporarydifferencesrelatedtoinvestmentsin



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certain foreign subsidiarieswhere the foreign subsidiary has orwill invest undistributed earningsindefinitely outside of theUnited States. In the eventwe distribute such earnings in the form ofdividendsorotherwise,wemaybesubjecttoincometaxes.Further,asaleofthesesubsidiariesmaycausethesetemporarydifferencestobecometaxable.Duetocomplexitiesintaxlaws,uncertaintiesrelatedtothetimingandsourceofanypotentialdistributionofsuchearnings,andotherimportantfactors such as the amount of associated foreign tax credits, it is not practicable to estimate theamountofunrecognizeddeferredtaxesonthesetaxabletemporarydifferences.ThefollowingtablesummarizesthecompositionofdeferredtaxassetsandliabilitiesasoftheyearsendedDecember31,2016and2015:

December31,2016December31,2015

DeferredTaxAssets Taxlosscarryforwards 39,950 22,376Allowancefordoubtfulaccounts 515 164Royalties 1,249 2,950Allowances - 4,722Provisionsandotherassets 7,409 19,007

TotalDeferredTaxAssets 49,123 49,219Lessvaluationallowance (45,526) (46,189)

TotalDeferredTaxAssets,net 3,597 3,030 DeferredTaxLiabilities Propertyandequipment (54) (101)Payrollandsocialsecuritypayable - (997)Others (948) -

TotalDeferredTaxLiabilities (1,002) (1,098)

TotalDeferredTax 2,595 1,932Thefollowingisareconciliationofthedifferencebetweentheactualprovisionforincometaxesandtheprovisioncomputedbyapplyingtheblendedincometaxrate(30%)for2016and2015toincome/(loss)beforetaxes:



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AsofDecember31,2016

AsofDecember31,2015

NetIncome/(Loss)beforeIncomeTax 28,335 (67,272)Weightedaverageincometaxrate(3) 30% 30%Incometaxexpenseatweightedaverage incometaxrate

8,501

(20,182)

Permanentdifferences:

(Non-TaxableIncome)/Non-DeductibleLosses(1) (6,826) 2,151Foreignnon-creditablewithholdingtax(2) 6,692 7,919Non-deductibleexpenses 2,928 26,698Others (94) 1,198ChangeinValuationallowance (663) 220

IncomeTaxexpense 10,538 18,004

(1) Includestaxbenefits/non-deductiblelossesonexportservicestonon-freeUruguayanterritoriesfrom“FreeTradeZone”inUruguay.

(2) Includesforeignwithholdingtaxesonroyaltiesandservices.(3) TheCompanyusesablendedratefortheincometaxreconciliation,sincemostofits

businessoperationsarerunbysubsidiarieslocatedoutsidetheU.S.,wheretheenactedtaxrateislowerthantheU.S.federalstatutoryrate.Thecalculationisperformedbasedonanaverageoftheenactedtaxratesoftheforeignjurisdictions.

ThefollowingtablepresentsthechangesintheCompany’svaluationallowanceasofDecember31,2016and2015:

Balanceofbeginningofperiod Increase (Decrease) Balanceatendofperiod

2016 46,189 1,897 (2,560) 45,5262015 45,969 9,039 (8,819) 46,189

13. Commitmentsandcontingencies

LeasesTheCompanyleasesofficespaceunderoperatingleaseagreementswithoriginaltermsrangingfrom2to5years.Rentexpenseamountedto$2,348and$3,107fortheyearsendedDecember31,2016and2015,respectively.TheCompany'sleaseobligationsundernon-cancellableoperatingleasesareasfollows:

YearendedDecember31,2016 Amount2017 3,7202018 3,2762019 2,9862020 2,3102021 1,1242022 110Total 13,526



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EmploymentagreementsThe Company has entered into employment agreements with certain key employees providingcompensationguidelinesforeachemployee.Pursuanttothetermsoftheemploymentagreements,the executives are generally entitled to receive compensation in the form of (i) an annual salarypayable in cash on a monthly basis and (ii) a yearly bonus subject to the fulfillment of certainperformancetargets.

Tax,legalandotherTheCompanyisinvolvedindisputesarisingfromitsordinarycourseofbusiness.Althoughtheultimateresolution on thesematters cannot be reasonably estimated at this time,management does notbelievethattheywillhaveamaterialadverseeffectonthefinancialconditionorresultsofoperationsoftheCompany.As of December 31, 2016 the Company had accrued liabilities of $ 9,828 for the tax contingencydiscussedbelowandapproximately$11,700relatedtounassertedtaxclaims.TheCompanycurrentlyestimatesunassertedpossiblelossesrelatedtomattersforwhichithasnotaccruedliabilities,astheyare not deemed probable and reasonably estimable, to be approximately $33,000. The Companyevaluates the likelihood of probable and reasonably possible losses, if any, related to all knowncontingenciesonanongoingbasis.Asaresult,futureincreasesordecreasestoitsaccruedliabilitiesmay be necessary and will be recorded in the period when such amounts are determined to beprobableandreasonablyestimable.

BrazilianTaxAuthorityClaimInMarch 2013, São Paulo tax authorities have asserted taxes (Brazilianmunicipal taxes “ImpostoSobreServiço”)andfinesagainsttheCompany’sBraziliansubsidiaryrelatingtotheperiodfrom2008to 2011 in an approximate updated amount of $ 21,500, including ordinary taxable services oncommissions earned. On April 2, 2013, the Company´s Brazilian subsidiary filed an administrativedefenseagainsttheauthorities’claim.InadecisionpublishedonAugust30,2014theSãoPaulotaxauthoritiesruledagainsttheBraziliansubsidiaryupholdingtheclaimedtaxesandthefinespreviouslyimposed.AnappealtotheSãoPauloCityAdministrativeCourtwasfiledonSeptember30,2014.OnDecember4,2015,theAdministrativeCourtruledpartiallyagainsttheBraziliansubsidiaryupholdingtheclaimedtaxesandthefinespreviouslyimposed.TheBraziliansubsidiaryhasgraduallymoveditsoperationstoGuarulhosCity,Brazil;andpaystaxesinsuchjurisdiction.Company’smanagementanditslegalcounselbelievethattheestimatedprobablelossis$9,828;whichhasbeenprovisionedforintheconsolidatedfinancialstatementsasofDecember31,2016withinnon-currentcontingentliabilities.



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14. Relatedpartytransactions

SettlementwithCertainManagementStockholders

Inthelasttwomonthsof2016,theCompanyenteredintosettlementagreementsandterminatedtheemploymentoftwomanagementstockholders(“Founders”).Thesettlementagreementsincludesapayablecashamountof$5,800,asaresultofanemployeerelationshipbenefitandnoncompetitionand non disclosure agreement, out of which a 50%will be payable on July 1, 2018 or upon theoccurrenceofaliquidityevent,whichmayresultfromtheconsummationofaninitialpublicoffering,oracapitalinjectionamongotherconditions,andtherestwillbepaidduring2017.In2015, theCompanyterminatedtheemploymentof twomanagementstockholdersandenteredintosettlementagreementswitheachofthem.Thesettlementagreementincludedthepaymentofacashamount for approximately$5,400and the repurchaseby theCompanyof aportionof theirshares.

TransactionwithExpedia,Inc.

CommonstockagreementOnMarch3,2015(“TransactionDate”),Expediainvested$270,000topurchase9,590,623ofcommonstock,representing16.36%oftheCompany´sissuedandoutstandingsharesonabasicsharescountbasisasofthatdate.Seenote3–Expediatransaction,foranexplanationoftheaccountingforthistransaction.In order to facilitate the transaction, the Company issued common shares to Expedia on theTransactionDateandthen,asmandatedintheagreement,repurchased1,598,434sharesfromsellingshareholders.TherepurchaseofshareswasmadeabovethefairvalueattheTransactionDate.Theagreementspecificallyindicatesthefollowinguseoftheproceeds:(i)$50,000torepaycertainLoans furnished by the shareholders; (ii) $ 45,000 to repurchase shares from all shareholders(including foundersandemployees)other than thecontrolling shareholder;and (iii)$175,000 forgeneralcorporatepurposes.ExpediaOutsourcingAgreementIn conjunction with the Stock Subscription Agreement, the Company entered into a LodgingOutsourcing Agreement (the “Expedia Outsourcing Agreement”) with Expedia expanding theircommercial relationship. The Expedia Outsourcing Agreement broadened Expedia´s powering ofDecolar.com’shotelsupply,includingthedesignationofExpediaasproviderofhotelinventoryoutsideof Latin America as from April 1, 2015. During the term of the agreement, Expedia will payDecolar.com a marketing fee for each booking of Expedia’s inventory. The Expedia OutsourcingAgreementincludescustomarytermsforthistypeoflong-termpartnerships,andalsoincludes:(a)theobligation to generate aminimumvolumeof transactions; and (b) a terminationpenalty of $125,000;(seecommentinnote3–Expediatransaction),and(c)unilaterallybyExpediaintheeventofachangeofcontroloftheCompany.Inaddition,theExpediaOutsourcingAgreementprovidedtheopportunityforExpediatoaccessDecolar’shotelsupplyinventoryinLatinAmerica.



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UndertheExpediaOutsourcingAgreement,“ChangeofControl”means(a)thesale,leaseortransfer,inoneoraseriesofrelatedtransactions,ofallorsubstantiallyalltheassetsoftheCompanyanditssubsidiaries,takenasawhole,toanyStrategicPartyor(b)theacquisitionbyanyStrategicParty,inasingle transaction or in a related series of transactions, byway ofmerger, consolidation or otherbusinesscombinationorpurchaseofbeneficialownership,ofmorethan50%ofthetotalvotingoreconomicpowerofthesecuritiesoftheCompanyoranydirectorindirectparentoftheCompany.“StrategicParty”meansanyPersonotherthanasingleindividualwhichdoesnotdirectlyorindirectlyownorcontrolanyassetsorcompaniesoperating(x)intheconsumerorcorporatetravelindustry,or(y)asanInternet-enabledprovideroftravelsearchorinformationservices.Unilateral termination of the Expedia Outsourcing Agreement by the Company, in addition totriggering the penalty described above, also gives Expedia the right to sell its shares back to theCompanyforfairmarketvalue.

BalancesandoperationswithExpedia

StartinginMarch2015,asaresultoftheexecutionoftheExpediaOutsourcingAgreementexecutedwithExpedia,theCompanyrecognizedbalancesandoperationswithExpediaasarelatedparty.ThebalancesbetweentheCompanyandExpediaare:$2,240and$1,947asofDecember31,2016and2015,respectively,recordedinAccountsreceivable,netofallowances;and$71,006and$57,797asofDecember31,2016and2015,respectively,recordedinTourismsupplierpayables.Thenetrelatedpartytransactionsare$27,008and$22,911fortheyearendedDecember31,2016and2015,respectively,recordedinRevenue.Inaddition, theCompanyhasprovidedExpediawithaguaranty in formof securitydeposits inanaggregated amount of $ 10,000. They are recorded in restricted cash and cash equivalents non-current.

Shareholders’loansIn2013,Decolar.comInc.receivedloans(the“Loans”)fromthefollowingshareholders:TigerGlobalPrivateInvestmentPartnersIV,L.P.,TigerGlobalInvestments,L.P.,ScottShleifer2011Descendants’Trust, Ventoux V LLC and Metal Monkey Trust (the Lenders) for $ 25,000. The Loans wereinstrumentedthroughpromissorynotes,whichincludedthefollowingconditions:

- Interestrate:nointerestshallaccrueorbepayable- Voluntaryprepayment:attheoptionoftheCompany,inwholeorinpart,atanytime,without

premiumorpenaltyIn February 2015, Decolar.com Inc. received a loan (the “February loan”) from the followingshareholders:TigerGlobalPrivateInvestmentPartnersIV,L.P.,TigerGlobalInvestments,L.P.,ScottShleifer2011Descendants’Trust,VentouxVLLCandMetalMonkeyTrust(theLenders)for$25,000.TheFebruaryloanwasinstrumentedthroughapromissorynote.OnMarch2015,theLoansandtheFebruaryloanwereprepaidinfullwiththeproceedsoftheExpediatransaction.



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15. Fairvaluemeasurements

ThefollowingtablesummarizestheCompany’sfinancialassetsandliabilitiesmeasuredatfairvalueonarecurringbasisasofDecember31,2016and2015:

Description

Balancesasof

December31,2016

Quotedpricesinactive

marketsfor(Level1)

Significantother

(Level2)

BalancesasofDecember31,2015

Quotedpricesinactive

marketsfor(Level1)

Significantother

(Level2)Assets Derivatives Foreigncurrencyforwardcontract

408

408

-

-

-

Totalfinancialassets

408

408

-

-

-

AsofDecember31,2016and2015,theCompany’sfinancialassetsvaluedatfairvalueconsistedofassetsvaluedusing;(i)Level1inputs:unadjustedquotedpricesinactivemarkets(Level1instrumentvaluationsareobtainedfromobservableinputsthatreflectquotedprices(unadjusted)foridenticalassets inactivemarkets); and (ii) Level2 inputs,whichareobtained from readily-availablepricingsourcesforcomparableinstrumentsaswellasinstrumentswithinactivemarketsatthemeasurementdate.AsofDecember31,2016and2015,theCompanydidnothaveanyassetswithoutmarketvaluesthatwouldrequireahighlevelofjudgmenttodeterminefairvalue(Level3).AsofDecember31,2016and2015,thecarryingvalueoftheCompany’sfinancialassetsandliabilitiesmeasuredatamortizedcostapproximatedtheirfairvaluebecauseofitsshorttermmaturity.Theseassetsandliabilities includedcashandcashequivalents;restrictedcash;accountsreceivables,net;other receivables and prepaid expenses; other non-current assets; accounts payable and accruedexpenses; hotel suppliers payable; loans and other financial liabilities; salaries and social securitypayable;taxespayableandotherliabilities.Loanspayableapproximatetheirfairvaluebecausetheinterestratesarenotmateriallydifferentfrommarketinterestrates.ThefairvaluesforthosefinancialassetsandliabilitiesoftheCompanymeasuredatamortizedcost,isequaltotheirrespectivebookvaluesasofDecember31,2016and2015.Inaddition,asofDecember31,2016and2015,theCompanyhad$93,197and$118,294ofcashandcash equivalents, short-term investments and restricted cash and cash equivalents, respectively,whichconsistedoftimedeposits.Thoseinvestmentsareaccountedforatamortizedcost,which,asofDecember31,2016and2015,approximatestheirfairvalues.Therehavebeennoreclasificationsamongfairvaluelevels.



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16. Earningspershare

EarningspershareBasicearningspershareBasicsearningspersharewascalculatedfortheyearendedDecember31,2016and2015usingtheweightedaveragenumberofcommonsharesoutstandingduringtheperiod.DilutedearningspershareFortheyearendedDecember31,2016,theCompanycomputeddilutedearningspershareusing(i)thenumberofsharesofcommonstockusedinthebasicearningspersharecalculationasindicatedabove(ii)ifdiluted,theincrementalcommonstockthattheCompanywouldissueupontheassumedexerciseofrestrictedstockunits.AtDecember31,2016,stockoptionsareout-of-the-moneyasthestrikepriceexceedscurrentshareprice;thereforetheyarenotincludedinthecomputationofdilutedearningspershare.Antidilutiveeffectin2016:270shares(noeffectin2015).Thefollowingtablepresentsbasicanddilutedearningspershare: 2016 2015 Netincome/(loss)attributabletoDecolar.comInc. 17,797 (85,276)EarningspershareattributabletoDecolar.comInc. Basic 0.30 (1.49)Diluted 0.30 n/aWeightedaveragenumberofsharesoutstanding Basic 58,518 57,078Dilutiveeffectofrestrictedstockunits 90 n/a

17. Stockbasedcompensation

2015RestrictedStockUnitPlanOnMarch 6, 2015, the shareholders of the Company approved a new restricted stock unit planincluding the issuance of 90,626 restricted stock unit (the “RSUs”) in favor of an officer of theCompany.TheRSUsincludethefollowingconditions:

• Time-basedcondition:satisfiedwithrespectto

- 40,626RSUsonJanuary1,2016;- 20,000RSUsonJanuary1,2017;- 20,000RSUsonJanuary1,2018;and- 10,000RSUsonJuly1,2018;providedthattheofficerremainsincontinuousservicethrougheachapplicabledate.



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• LiquidityEventRequirement:satisfiedontheearliertooccurof- anInitialPublicOfferingoftheCompany’scommonstock,or - achangeofcontroltransaction(saleevent).

• Noadditionalvestingexistsuponcompletionofaliquidityevent.• Restrictions:

- Repurchaserights:intheeventofachangeofcontrol,theCompanyhastherighttorepurchase certain shares contingent upon the valuation of the Company at suchtime,and

- Transfer restrictions:after theconsummationofan InitialPublicOffering transferrestrictionsapplylimitingtheabilitytotransfercertainsharessubjecttothevaluationoftheCompanyatsuchtime.

The Company has used the Fair Value Method for determining the value of the RSU plan. TheremainingvestingperiodasofDecember31,2016is18months.

RSU´sWeightedAverageGrant

DateFairValuepershare

BalanceasofJanuary1,2015 - -Granted 90,626 7.47BalanceasofDecember31,2015 90,626 7.47GrantedVested/Cancelled

--

--

BalanceasofDecember31,2016 90,626 7.47

2016StockOptionPlanOnNovember2016,theBoardofDirectorsoftheCompanyapproved,subjecttotheapprovaloftheCompany’s Stockholders (which occurred in March 2017), to adopt a stock plan and reserve forissuanceupto4,000,000stockoptions,fromwhich3,175,000stockoptionswereeffectivelygrantedinfavorofsomeofficersoftheCompany.Theplanincludesthefollowingconditions:

• Time-basedcondition:satisfiedwithrespectto:- 5%stockoptionsonDecember1,2017;- 10%stockoptionsonDecember1,2018;- 15%stockoptionsonDecember1,2019;- 20%stockoptionsonDecember1,2020;- 25%stockoptionsonDecember1,2021;and- 25%stockoptionsonDecember1,2022;

iftheofficerremainsincontinuousservicethrougheachapplicabledate.

• LiquidityEventRequirement:satisfiedontheearliertooccurof- (i)anInitialPublicOfferingoftheCompany’scommonstock,or- (ii)achangeofcontrolevent.

• Noadditionalvestingexistsuponcompletionofaliquidityevent.



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TheCompanyhasusedtheFairValueMethodfordeterminingthevalueofthestockoptionsplan.TheremainingvestingperiodasofDecember31,2016is71months.ThefairvalueofstockoptionsgrantedduringtheyearendedDecember31,2016,wasestimatedatthedateofgrantusingtheincomeapproachvaluationtechniques, includingtheBlack-ScholesandMonteCarlooption-pricingmodels,assumingthefollowingweightedaverageassumptions:Risk-freeinterestrate 1.84%Expectedvolatility 39.9%Expectedlife(inyears) 6Weighted-averageestimatedfairvalueofoptionsgrantedduringtheyear $ 6.90ThefollowingtablepresentsasummaryoftheCompany’sstockoptionactivity:

Options

WeightedAverage

ExercisePricepershare

RemainingContractual

Life

BalanceasofJanuary1,2015 63,000 1.00 -Exercised (63,000) 1.00 -BalanceasofDecember31,2015 - Granted 3,175,000 26.02 BalanceasofDecember31,2016 3,175,000 26.02 6 As of December 31, 2016, there was approximately $ 22,000 of unrecognized stock-basedcompensationexpenserelatedtounvestedstock-basedawards,whichisexpectedtoberecognizedinexpenseoveraweighted-averageperiodof5.8years.Compensationcostwillnotbeimpacteduponcompletionofaliquidityevent.18. GuaranteesTheCompanyisrequiredtobeaccreditedbytheInternationalAirTransportAssociation(“IATA”)inordertopromoteandsellinternationalairpassengertransportationofairlinesconnectedtoIATA.During2016,certainDecolar.comsubsidiariesgrantedguaranteesfor$43,197forthebenefitoftheIATA,Expediaandother suppliers in the formof timedepositsorbankand insuranceguarantees,whichwere recordedasRestricted cash and cashequivalent in the consolidatedbalance sheet atDecember31,2016andalsograntedamortgageinfavorofIATAonabuildinginArgentina.



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19. ValuationandqualifyingaccountsThefollowingtablepresentsthechangesintheCompany’svaluationandqualifyingaccounts.

Balanceofbeginningof

period

Increase/(Decrease) Utilization

OthercomprehensiveIncome/(Loss)

Balanceatendofperiod

2016 Allowancefordoubtfulaccounts 3,401 2,548 (2,515) 79 3,513

2015 Allowancefordoubtfulaccounts 7,493 2,142 (5,388) (846) 3,401

20. SegmentinformationInordertomakeoperatingdecisionsandassessperformance,theCompany’schiefoperatingdecisionfunction organized the Company’s business between two operating segments, namely “Air” and“Packages, Hotels and Other travel products”, each of them having their respective segmentmanagement.The “Air” operating segment derives its revenue from commissions earned from facilitatingreservations of flight tickets, service fees charged to customers for processing flight tickets andoverride commissionsor incentives fromsuppliersandGDS if theCompanymeets certainvolumethresholds.The “Packages, Hotels and Other travel products” operating segment derives its revenue fromcommissionsearned fromfacilitating reservationsofhotelaccommodations, car rentalsandothertravel related products and services, service fees charged to customers for processing bookings,advertisingrevenuefromthesaleofadvertisingplacementsontheCompany´swebsitesandoverridecommissionsorincentivesfromsuppliersiftheCompanymeetscertainvolumethresholds.Packagesare bundle dealswhere the customer selects and buysmultiple products,whichmay include airtickets,withinthesamesession,whileinthesetransactionstheCompanyactsasintermediaryasinothersales.Theairportionofthesepackagesisincludedwithinthe“Packages,HotelsandOthertravelproducts”operatingsegment.The Company’s primary measure of segment’s profit or loss is Adjusted EBITDA, which includesallocationsofcertainexpensesbasedontransactionvolumesandotherusagemetrics.TheCompanydoes not allocate certain shared expenses such as accounting, human resources and legal to itsreportable segments. The Company includes these expenses as Unallocated. The Company’sallocationmethodologyisperiodicallyevaluatedandmaychange.TheCompanydoesnothave:

- transactionsbetweenreportablesegments- assetsallocatedbysegment,or- revenue from transactions with a single customer amounting to 10 percent or more of

revenue.The following tables present the Company’s segment information for 2016 and 2015. Whiledepreciationandamortizationisallocatedtooperatingsegmentsbasedonoperationalmeasuressuchas relative headcount and IT investment, property and equipment is not allocated to operating



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segments,andtheCompanydoesnotreporttheassetsbysegmentasitwouldnotbemeaningful.TheCompanydoesnotregularlyprovidesuchinformationtoitschiefoperatingdecisionmakers.

2016 Air Packages,Hotelsand

OthertravelproductsUnallocated Total

Revenue 205,721 205,441 - 411,162AdjustedEBITDA 27,940 20,643 2 48,585Depreciationandamortization (4,099) (3,842) (4,983) (12,924)Stock-basedcompensation - - (574) (574)Operatingincome/(loss) 23,841 16,801 (5,555) 35,087Financialincome 8,327Financialexpense (15,079)Income/(loss)beforeincometax 28,335Incometaxexpense (10,538)Netincome/(loss) 17,797

2015 Air Packages,Hotelsand

othertravelproductsUnallocated Total

Revenue 219,817 201,894 - 421,711AdjustedEBITDA 8,259 (34,383) (12,943) (39,067)Depreciationandamortization (6,350) (1,872) (6,217) (14,439)Stock-basedcompensation - - (861) (861)Operatingincome/(loss) 1,909 (36,255) (20,021) (54,367)Financialincome 10,797Financialexpense (23,702)Income/(loss)beforeincometax (67,272)Incometaxexpense (18,004)Netincome/(loss)

(85,276)

GeographicinformationIn2016,27%ofrevenuewasoriginatedintransactionsinvoicedbythesubsidiaryinArgentina,28%bythesubsidiary inBraziland27%bysubsidiaries inUruguay(32%,30%and19%,respectively, in2015).Subsidiariesinnoindividualcountryotherthanthosedetailedaboveaccountedformorethan10%ofrevenue.

21. SubsequentEventsOnMay3,2017,thestockholdersofDecolar.com,Inc.,exchangedtheirsharesforordinarysharesofDespegar.com,Corp.tocreateanewBritishVirginIslandsholdingcompany.Followingtheexchange,theCompany’sshareholdersownsharesofDespegar.com,Corp.andDecolar.com,Inc. isawholly-ownedsubsidiaryofDespegar.com,Corp.

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