Vacasa Inc. Q1 2023 Earnings Call

I will be your conference operator today at this time I would like to welcome everyone to the <unk> first quarter 2023 earnings conference call all.

All lines have been placed on mute to prevent any background noise.

After the Speakers' remarks, there will be a question and answer session. If you'd like to ask a question. During this time simply press star followed by the number one on your telephone keypad.

Certainties. Please read the forward looking statements section in a shareholder letter we issued earlier today.

Forward looking statements and risk factor section inner filings with the SEC.

During the call, we will discuss certain non-GAAP financial measures information regarding our non-GAAP financial results, including a reconciliation of non-GAAP results.

Directly comparable GAAP financial measures, maybe <unk> and our shareholder letter.

It was non-GAAP measures should be considered an addition to our GAAP results and are not intended to be a substitute for GAAP results and now I'd like to have a corporate Iraq labor Rob.

Good afternoon, everyone and thank you for joining us I'm pleased to be with you all today to discuss the latest progress we've made it for <unk> and to discuss our first quarter financial results.

Since we last spoke in March our team has been focused on getting the business ready for our peak season, which kicks off in June .

Across the organization from local market operations through our central cheese, we have been positioning of the cost to deliver for homeowners and gas during our busiest summer months.

Over the past several months I and members of our leadership team have also taken several opportunities to visit local costume markets meeting with homeowners and colleagues.

Spending time in these markets and speaking with the teams in the field helps us understand firsthand, where we can improve in the opportunities ahead.

We've done three of these in market visits so far and each time I am truly impressed with our local teams inspired by their commitment to our owners and guests and energized about what's ahead for the <unk>.

Does that previously shared with you we are focused on four priorities in the year ahead, which include ruthlessly prioritizing our business needs to drive profitable growth improving execution in local markets and customer support functions.

Unlocking the potential of the individual sales approach and developing the right technology product and service offerings.

We believe that executing against these priorities will position us for sustainable long term profitable growth in future years.

I am not satisfied yet nor is our team, but we are on the right path and I believe our focus is on the right things.

During the first quarter, we made games on improving the execution in our local markets from customer support functions recall throughout 2022, we were staffing our local markets in anticipation of stronger demand and increasing homes under management.

As the traveller demand environment changed in the third and fourth quarters, we did not adjust staffing levels as quickly as we would've liked.

We took structural actions during the fourth quarter.

Getting with splitting our local operations teams in national sales teams into separate groups, enabling us to have more dedicated senior leadership for each team.

We also implemented new processes to better lying fields staffing with the number of reservations in each period and to share best practices across regions.

These learnings we may further market level head count adjustments in January .

Combination of these actions resulted in because of exiting the first quarter with staffing levels that better match demand and that contributed to our adjusted EBITDA outperformance during the first quarter.

I am cautiously optimistic that we can maintain these improvements and the resulting effects on our cost structure as we approach our seasonally stronger summer months.

We continue to refine and optimize how we add homes to our platform to the individual sales approach on the one hand encouragingly March represented our highest per rep productivity over the past year and I believe there is more progress to be made.

On the other hand, we continued to experience elevated levels of homeowner churn, which we believe is primarily due to concerns about levels of homeowner income is the industry comes off to record years.

We are monitoring this closely and the churn rate hasn't increased since we last spoke in March as we look at the data points from third party firms that cover our industry. It's very clear that others are also experiencing declines in bookings and that we are in a very different demand environment and we were a year ago.

We are actively communicating through our homeowners what we in the broader industry are experiencing in an effort to address their concerns and manage their expectations for the balance of the year given our expectations for continued year over year declines in bookings, it's difficult to predict when we expect churn to return back to normalize levels, but we are focused on.

The issue and taking what we believe are the appropriate steps.

The technology team is also executing well against both it's near term and long term priorities. We recently launched the homecare dashboard, which provides homeowners more detailed insight into how the cost is caring for their home.

With the tool we are now conveying much of the behind the scenes work that goes into caring for home, including when their home was last Queen with the average clean score by guest clean inspection checklists and the status of maintenance tickets directly to the owners through the mobile app.

We believe this tool will provide peace of mind and transparency into the work we do to maintain their properties. We also continued to release, new and refine existing field tools to improve their functionality and ease of use and increase the efficiency of local teams as they care for our homes.

It's crucial that we leverage our scale to invest in these types of accustomed integrated product solutions to create enduring competitive advantage.

Finally, we announced today that Bruce Schulman will join Bokassa as our Chief Financial Officer effective June 1st succeeding Jamie Cohen, who will be stepping down from that role to pursue new endeavors.

<unk> joins because with nearly 30 years of financial leadership experience, including over 25 years at Intel for his roles included serving as a divisional CFO with piano responsibilities I'm excited to welcome Bruce to the Casa and the executive team next month.

Over the past two years, Jamie has helped lead the cost us through some of its more formative milestones, including integrating turnkey financial operations and leading the cost is business combination with TPG base Solutions Corporation, which resulted in the cost of becoming a publicly traded company I'm extremely grateful for jamie's lasting contributions to.

<unk> Jamie.

Jamie will remain available to consult with the cost until October 1st 2000 twenty-three to ensure a smooth transition of our responsibilities to Bruce.

With that I'll turn the call over to Jamie to review, our first quarter results and latest outlook Jamie.

Thank God.

Our first quarter financial results wherever Avenue Casted EBITA finished ahead of our data.

Then I'll spend some time reviewing the latest <unk> in the business.

Unless noted otherwise I'll be comparing our first quarter results to the first quarter of 2022 and all the referencing the operating expense line Excreting the impact of stock based compensation restructuring costs.

Combination cough, but you can find out like an extra hold on <unk>.

But the first quarter gross looking value, which is a combination of nightfall looking value per night salt reached $521 million.

5% year over year.

<unk> sold over $1.4 million in the first corner at six per cent year over year, but the increase primarily driven by the addition of new homes to the platform.

I was looking value per night solid reached $364 in the first corner and 1% year over year and the first year over year decline following up 11 consecutive quarters of grass.

Over the past couple of quarters, we've talked about the reduction average gross looking value per home as the industry normalizes off of the record highs from the past few years.

This tiny continued in the first quarter.

Every year growth, an average home in the quarter higher than Nebraska at night sold.

You're already declining stuck in value per night cold.

Remember there is a strong relationship between <unk> and gross looking to how you pronounce <unk> difficult.

Difficult to look at either in isolation.

Revenue management algorithms and team are constantly evaluating the tradeoff between price and occupancy to optimize the next at night totalled looking value per night filled.

Optimizing homeowner income.

Revenue, which.

Similarly of our connection on the rents we generate for homeowners and that's easy collect from gas that's $257 million in the first quarter.

4% year over year and above our guidance at 230 to $249.

As we noted during our fourth quarter earnings call in March we continue to experience variability in looking pattern severe weather in our ski market, which led us to be more cautious with our first quarter guidance.

Now turning to accented.

Cost of revenue was 48% of revenue in the first quarter versus sticky two per cent of revenue in the same period last year my excluding the 15 million dollar benefit from teachers stay credit.

Operations and support expense was 23% of revenue in the first quarter consistent with the same period last year throwing 3% year over year.

<unk>. These two expense lines, primarily consist of our local market and customer support costs.

Favorable year over year trend in both these cost lines represents the initial progress we are making to better match local market resources with demand to create more efficient operation.

We achieved you over your elaborate across our three operating expense lines in the first quarter largely due to the workforce reduction that took place in January .

Typically on a year over year basis technology and development expense declined 7%.

Sales and marketing expense declined four per cent in general and administrative expense declined five per cent.

Adjusted EBITDA was negative $12 million for the first quarter higher.

Higher revenue combined with our ability to drive efficiency in the local market operations faster than expected. It resulted in the deep versus the expectations reset on our last earnings call.

Now turning to the outlook.

That'd be indicated in March we're not issuing explicit quarterly guidance, given we are still adjusting to the emerging booking patterns.

The industry comes off to record years.

As Rob alluded, we've been seeing some renewed looking softening recently, especially in the clothes in part of the book in curve. As a result, we are reiterating our full year 2023 revenue growth guidance are they low double digit to high single digit percentage decline you're over here.

Ah Directionally, we currently expect to earn the majority of for your revenue in the first half of the year, we expect to provide a more informed via a full year revenue during our second quarter earnings call. Once we are well into the season.

For for your adjusted EBITDA, We're pleased with the progress we made during the first quarter and controlling local market costs and continue to strive for adjusted EBITDA profitability in 2023.

But a second quarter, we expect adjusted EBITDA to be near breakeven consistent with prior years.

Does that conclude my last earnings call I want to extend a thank you to Rob the board of directors and the entire team at the call Sir.

It's been an absolute privilege to work alongside them and to help guide the cost of during the period of transformational grass and oversee the cost of entry into the public market.

I'm excited to watch the cost to continue to redefine the vacation rental management category.

But that rather than I will take your questions. Operator, please open up the lines.

As a reminder, if you would like to ask a question Crestar followed by the number one on your telephone keypad.

Your first question comes from the line of Justin Patterson with Keybanc. Your line is open.

This is Jacob on for Justin could you compare and contrast performance in traditional vacation auto markets first those experienced reps probably gross.

2021 2022.

Definitely what percentage of the markets are stable resort essentially.

Facing <unk>.

Alright, so in terms of the the market platelets from our perspective, we have tenants had that we've seen this you know pretty pretty much across the board. We believe that it is largely driven by.

Lines in in homeowner income, which we believe that the industry is seeing it the whole in terms of the vacation rental segment based on the third party data that we look at so from that perspective, I wouldn't call out any market, specifically, obviously, there's a different seasonal booking patterns that are going to.

Occur for ski markets versus summer market, but generally speaking on on both the touring side as well as it did booking side, we're seeing similar dynamics and I would just call out. There you know, we don't really focused on occupancy or gross looking now you per night. So we really look at those in combination with one another because there there's a.

Constant trade off there right, we have the ability to to optimize pricing and in order to.

We're all good maximize our homeowner income, which might have an impact plus or minus an occupancy.

Your next question comes from the line of Mike Groundhog with Northern Securities you're.

Your line is now open.

Hi, guys.

For Mike.

I was just wondering on the previous call you mentioned that last minute. Okay. Okay for declining I was just wondering if this trend has continued into one Q and even into Tokyo.

Yeah. Thanks for the question you know first of all.

Typically been able to drive.

Bookings early in the book and curves far out from the reservation.

And it's in.

That requires us obviously to be optimizing what we see in demand and price.

It's certainly been it's certainly been changing.

There's been some of that volatility. We think this is a combination of a couple of things higher supply changing consumer demands the macro backdrop, but it's hard it's hard to say.

I think we're seeing less of the the other dynamic more more generally as you are seeing less of this close close and her last minute bookings.

Changes in how those bookings come in so it just makes it a little bit difficult to.

To guide overall and the result of this is that the booking bill has been less predictable than it's been in.

Prior years. So I think this is a this is a function of consumer demand, it's coming off several years of sort of records spray, we think it's occurring across the industry.

And and when were leaning into it to to ensure we are putting our our owners and their ability to earn revenue in this environment at the forefront of our minds.

Great. Thanks, and then is there anything a call out on the international front.

No I don't think so I think I think we are businesses is primarily domestic in the U S and primarily in the vacation rental markets, we do see demand coming from overseas, but nothing to call out in terms of the shape of that.

Okay. Thanks for taking my question.

Course again.

Minder, if you'd like to ask a question press star followed by the number one on your telephone keypad.

Pause for any last minute questions.

There are no further questions at this time Mister Rob Rosemary turn the call back to you for closing remarks.

Thanks, very much for joining us today I just wanted to take a moment to say thank you you too.

To our owners for and trusting us with their homes to our guests who make memories with us to all their colleagues that the costs are working so hard to make make this all happen and finally to to Jamie for everything she's done for the call. Sir. Thank you very much look forward to speaking with you next quarter.

This concludes today's conference call. Thank you for attending you may now disconnect.

[noise].