Q1 2024 Vacasa Inc Earnings Call
Operator: Ladies and gentlemen, good afternoon. My name is Aaron, and I will be your conference operator for today. At this time, I would like to welcome everyone to the Vacasa Q1 2024 earnings conference call.
Ladies and gentlemen, good afternoon. My name is Aaron and I will be your conference operator for today.
Operator: This time I would like to welcome everyone to the <unk> Q1, 2024 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session and if you would like to ask a question. During this time simply press star followed by the number one.
Operator: All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. And if you would like to ask a question during this time, simply press the star followed by the number one on your telephone keypad. If you would like to withdraw your question, press the star followed by the number one again. We ask that you please limit yourself to one question when your line is selected. Thank you. I would now like to turn our call over to Ryan Domyancic, Investor Relations.
Ryan John Domyancic: On your telephone keypad, if you would like to withdraw your question press. The star followed by the number one again, we ask that you. Please limit yourself to one question. When your line is selected thank you.
Ryan John Domyancic: I would now like to turn our call over to Ryan demand stick Investor Relations, Brian you may have.
Ryan John Domyancic: Good afternoon, everyone, and thank you for joining us for today's call. I'm pleased to be joined today by Vacasa CEO Rob Greyber and CFO Bruce Schuman.
Ryan John Domyancic: Good afternoon, everyone and thank you for joining us for today's call I'm pleased to be joined today by CEO, Rob Greater and CFO Bruce Heinemann.
Ryan John Domyancic: We have posted a shareholder letter on the investor relations section of our website at investorsatvacasa.com that will be referenced by our speaker. Comments made during this conference call and in our letter contain four looking statements. Such statements include those about our restructuring actions, including cost savings, future expectations, beliefs, Plans, Projections, Targets, Estimates, Objectives, Events, Conditions, and Financial Performance, including guidance for future period results. We caution you that various risks and uncertainties could cause actual results to differ materially from those in the forward-looking statement.
Ryan John Domyancic: We have posted a shareholder letter on the Investor Relations section of our website at investors Casa Dot com that will be referenced by our speakers.
Ryan John Domyancic: Comments made during this conference call and in our letter contained forward looking statements.
Ryan John Domyancic: Statements include those about a restructuring actions, including cost savings future expectations beliefs plans projections targets estimates objective events conditions and financial performance, including guidance for future period results.
Ryan John Domyancic: We caution you that various risks and uncertainties could cause actual results to differ materially from those forward looking statements.
Ryan John Domyancic: For additional information concerning these risks and uncertainties, please read the forward-looking statement section in our shareholder letter we issued earlier today, as well as the forward-looking statement and risk factor sections in our filings with the FCC. During this call, we may refer to various non-GAAP financial measures. Information regarding a non-GAAP financial measures, including the reconciliation of our non-GAAP results to the most directly comparable GAAP financial measures, may be found in our shareholder letter. These non-GAAP measures should be considered in addition to our GAAP results and are intended to supplement but not substitute for our performance measures calculated in accordance with GAAP.
Ryan John Domyancic: For additional information concerning these risks and uncertainties. Please read the forward looking statements section in our shareholder letter issued earlier today and the forward looking statements and risk factors sections in our filings with the SEC.
Ryan John Domyancic: During this call we may refer to various non-GAAP financial measures infill.
Ryan John Domyancic: Information regarding our non-GAAP financial results.
Ryan John Domyancic: Including a reconciliation of our non-GAAP results for the most directly comparable GAAP financial measures may be found in our shareholder letter.
Ryan John Domyancic: These non-GAAP measures should be considered in addition to our GAAP results are intended to supplement but not substitute for our performance measures calculated in accordance with GAAP.
Robert Greyber: And now I will turn the call over to Rob Greyber. Okay, Rob?
Ryan John Domyancic: And now I will turn the call over to Rob Great Rob.
Robert Greyber: Rob.
Robert Greyber: Thanks, Ryan and thank you everyone for joining us. This afternoon I'll begin with some opening remarks and commentary on the business Bruce will follow with a review of first quarter financial results and then we'll open up for Q&A.
Robert Greyber: Thanks, Ryan, and thank you, everyone, for joining us this afternoon. I'll begin with some opening remarks and commentary on the business. Bruce will follow with a review of the first quarter financial results, and then we'll open it up for Q&A. For well over a year, we have been working to transform Vacasa into a more efficient, high-performance organization, one dedicated to exceptional service for our owners, our guests, and the people who serve them.
Robert Greyber: For well over a year, we've been working to transform <unk> into a more efficient high performing organization, one dedicated to exceptional service for our owners our guests and the people who serve them with action a variety of improvements across the business and I am proud of the team's progress to date.
Robert Greyber: We've implemented a variety of improvements across the business, and I'm proud of the team's progress to date. We remain on that transformation journey, and in the midst of an unexpectedly ongoing, challenging industry environment, we continue to evaluate opportunities to optimize our business model and shareholder value. I shared with you on our last call that 2024 got off to a difficult start.
Robert Greyber: We remain on that transformation journey and in the midst of an unexpectedly ongoing challenging industry environment, we continue to evaluate opportunities to optimize our business model and shareholder value.
Robert Greyber: I shared with you on our last call. The 2024 got off to a difficult start the short term rental industry continues to adjust to softening economic demand for domestic non urban vacation rentals as well as increases in the supply of short term rental units. The year began with bookings variability and started off slowly then showed some.
Robert Greyber: The short-term rental industry continues to adjust to softening economic demand for domestic non-urban vacation rentals, as well as increases in the supply of short-term rental units. The year began with booking variability and started off slowly, then showed some signs of stabilization. However, over the last several weeks, which are some of the key weeks for summer bookings, it has become clear that the bookings weakness we saw at the start of the year is likely to persist through the remainder of 2024.
Robert Greyber: Signs of stabilization however over the last several weeks, which are some of the key weeks for summer bookings. It has become clear that the bookings weakness we saw at the start of the year is likely to persist through the remainder of 2024. These trends are putting real pressure on our revenue per home and profitability.
Robert Greyber: These trends are putting real pressure on our revenue per home and profitability. With difficult industry dynamics continuing, we are accelerating the business transformation that is already underway to further empower and enable our local teams with the goal of strengthening our business model. Today, we are reorganizing the way we operate by further equipping our field teams to locally manage and be accountable for their market, and we are significantly reducing our central corporate footprint.
Robert Greyber: With difficult industry dynamics, continuing we are accelerating the business transformation that is already underway to further empower and enable our local teams with the goal of strengthening our business model.
Robert Greyber: Today, we are reorganizing the way we operate by further equipping our field teams to locally manage and be accountable for their markets.
Robert Greyber: And we are significantly reducing our central corporate footprint.
Robert Greyber: We believe that empowering our local teams will drive the strongest impact on the homeowner and guest experience, which in turn should result in better business outcomes. As an organization, we believe we must embrace a more local business model and double down on the way we manage our portfolio of vacation homes at the market level. Directing our resources to local teams and to the processes that bring the most value to our owners and guests will allow us to better support our focus on profitability and free cash flow.
Robert Greyber: We believe that empowering our local teams will drive the strongest impact on the homeowner and guest experience, which in turn should result in better business outcomes as an organization. We believe we must embrace a more local business model and double down in the way, we manage our portfolio of vacations homes at the market level.
Robert Greyber: Correcting our resources to local teams and to the processes that they bring the most value to our owners and guests will allow us to better support our focus on profitability and free cash flow.
Robert Greyber: Our field teams will be organized and equipped to run their operations in their markets as we further localize functions including sales, onboarding, revenue management, and marketing. For example, we are transitioning our individual sales approach to be directed by our local teams, leveraging their local expertise and giving them end-to-end ownership of the homeowner relationship. Homeowners trust our local teams with the care and maintenance of their vacation homes and the experiences their guests have in them. Furthermore, our local operations teams know their markets best and are therefore best positioned to identify homes and homeowners who are a good fit for our service model. The homeowner experience from onboarding to welcoming guests in their homes is most seamless when our local teams guide them through that journey.
Robert Greyber: Our field teams will be organized and equipped to run their operations in their markets as we further localized functions, including sales Onboarding revenue management and marketing for example, we are transitioning our individual sales approach to be directed by our local team is leveraging their local expertise and giving them. The end to end ownership with the homeowner relationship homeowner.
Robert Greyber: Trust, our local teams with the care and maintenance of their vacation homes and the experiences their guests have in these homes for.
Robert Greyber: Furthermore, our local operations teams know their markets best and are therefore best positioned to identify homes in homeowners who are a good fit for our service models. The homeowner experience from Onboarding to welcoming guests in their homes is most seamless when our local teams guide them through that journey.
Robert Greyber: As we move to empower our local teams, we're also refining our corporate footprint, sharpening our focus on what is best needed to support those teams. This also allows us to significantly reduce our corporate overhead costs with the goal of becoming profitable in the future. You're also shifting our technology strategy to focus even more on ensuring that we have the tools that increase efficiency and improve the experience for our owners and guests and the team members who support them. This focus will guide what technology we invest in internally and externally and will allow us to take greater advantage of step function improvements in industry third-party applications.
Robert Greyber: As we move to empower our local teams. We're also refining our corporate footprint sharpening our focus on what is best needed to support those teams.
Robert Greyber: This also allows us to significantly reduce our corporate overhead costs with the goal of becoming profitable in the future.
Robert Greyber: We're also shifting our technology strategy to focus even more on ensuring that we have the tools that increase efficiency and improve the experience for our owners and guests and the team members who support them.
Robert Greyber: This focus will guide what technology, we invest in internally and externally and will allow us to take greater advantage of step function improvements in industry third party applications.
Robert Greyber: The actions we have announced today will result in a reduction of our overall headcount by about 800 people, or 13% of our workforce. While a difficult decision, we determined it was necessary to accelerate the transformation of our business given the current industry dynamics. Reductions were aligned with our strategy to prioritize resources for the local market teams in the field. On the corporate and central operations side, we eliminated approximately 40% of roles across all functions. In comparison, we reduced field team positions by approximately 6%.
Robert Greyber: The actions, we have announced today will result in a reduction of our overall head count by about 800 people were 13% of our workforce.
Robert Greyber: While a difficult decision we determined it was necessary to accelerate the transformation of our business given the current industry dynamics.
Robert Greyber: Reductions were aligned with our strategy to prioritize resources for the local market teams in the field on a corporate and central operation side, we eliminated approximately 40% of roles across all functions in comparison, we reduce field team positions by approximately 6%.
Robert Greyber: While we are making some adjustments in the field, they are relatively small compared to our overall field cost base and designed to maintain service levels to owners and guests, even as we adjust to changing market conditions. There's significant work ahead of us to drive the success of this transformation. It will not be easy and will require precision in execution.
Robert Greyber: While we are making some adjustments in the field. They are relatively small compared to our overall field cost base and designed to maintain service levels to owners and guests, even as we adjust to changing market conditions.
Robert Greyber: We have significant work ahead of us to drive the success of this transformation it will not be easy and will require precision in execution, but we believe we have the right team in place to implement these important steps in our transformation the business will be much lighter from an expense perspective, and we believe better positions.
Robert Greyber: But we believe we have the right team in place to implement these important steps in our transformation. The business will be much lighter from an expense perspective and, we believe, better positioned. I'm confident we are making the right strategic decisions to allow the business to reach its full potential. I'd now like to pass it over to Bruce to discuss our first quarter results. Thanks.
Robert Greyber: Confident we're making the right strategic decisions to allow the business to reach its full potential I would now like to pass it over to Bruce to discuss our first quarter results.
Bruce Schuman: Rob, I'll start by reviewing our first quarter results, then provide some additional details on the business transformation Rob just outlined. Unless noted otherwise, I will be comparing our first quarter results to the first quarter of 2023, and I'll be referencing the operating expense line, excluding the impact of stock-based compensation, restructuring costs, and business combination costs, which you can find outlined in our shareholder letter. For the first quarter, gross booking value, which is the combination of nights sold and gross booking value per night sold, was $427 million, down 18% year over year.
Bruce: Thanks, Rob I'll start by reviewing our first quarter results then provide some additional details on the business transformation, Rob just outlined.
Bruce Schuman: Unless noted otherwise I will be comparing our first quarter results to the first quarter of 2023 and I'll be referencing the operating expense line, excluding the impact of stock based compensation restructuring costs and business combination costs, which you can find outlined in our shareholder letter.
Bruce Schuman: For the first quarter gross booking value, which is the combination of night sold in gross booking value per night sold was $427 million down 18% year over year.
Bruce Schuman: Knight Sole had 1.3 million in the first quarter, down 12% year over year. Gross booking value per night sold was $340 in the first quarter, down 7% year over year. As a reminder, there is a strong correlation between nights sold and gross booking value per night sold, and it's difficult to look at either in isolation. Our revenue management algorithms and data team constantly evaluate the tradeoffs between price and occupancy and the mix of nights sold and gross booking value per night sold with the goal of optimizing homeowner income.
Bruce Schuman: <unk> sold were $1 3 million in the first quarter down 12% year over year.
Bruce Schuman: Gross booking value per night sold was $340 in the first quarter down 7% year over year.
Bruce Schuman: As a reminder, there is a strong correlation between night sold in gross booking value per night sold and it's difficult to look at either an isolation or.
Bruce Schuman: Our revenue management algorithms and data team constantly evaluate the trade off between price and occupancy and the mix of night sold and the gross booking value per night sold with the goal of optimizing homeowner income.
Bruce Schuman: Over the past several quarters, we've discussed the year-over-year decline in average gross booking value per home as the industry normalizes off of the record highs from the past few years, and we saw this dynamic play out again in the first quarter, with average gross booking value per home declining by about 15% year-over-year. We finished the first quarter with approximately 41,000 homes on our platform, down from approximately 43,000 at the end of the first quarter last year, reflecting the ongoing churn dynamic that we have been seeing.
Bruce Schuman: Over the past several quarters, we've discussed the year over year declines in average gross booking value per home as the industry normalizes off of the record highs in the past few years and we saw this dynamic play out again in the first quarter with average gross booking value per health declining by about 15% year over year.
Bruce Schuman: We finished the first quarter with approximately 41000 homes on our platform down from approximately 43000 at the end of the first quarter last year, reflecting the ongoing churn dynamic that we've been seeing.
Bruce Schuman: The short-term rental industry continues to adjust to various headwinds, such as increased supply and lower average gross booking value per night sold. We also continue to see owner concerns with rates and the resulting income as a leading cause of churn as the industry wrestles with these factors. Revenue, which consists primarily of our commission on the rents we generate for homeowners, the fees we collect from guests, and revenue from home care solutions provided directly to our homeowners, was $209 million in the first quarter, down 18% year-over-year. Now, turning to expenses.
Bruce Schuman: The short term rental industry continues to adjust to various headwinds such as increased supply and lower average gross booking value per night sold.
Bruce Schuman: We also continue to see owner concerns with rates and the resulting income is a leading cause of churn as the industry Russell's with these factors.
Bruce Schuman: Cost of revenue was 50% of revenue in the first quarter versus 48% of revenue in the same period last year. Cost of revenue in dollars declined by 14% year over year compared to a 12% decline in nights sold. Operations and support expense was 28% of revenue in the first quarter versus 23% of revenue in the same period last year. Operating and support expense dollars were up 1% year over year. In terms of our other operating expenses, Sales and Marketing Expense, which includes the fees we pay our third-party distribution partners, declined 12%. Technology and development expense was up 7%, and general and administrative expenses declined 2%.
Bruce Schuman: Revenue, which consists primarily of our commission on the reps, we generate for homeowners the fees, we collect from guests and revenue from homecare solutions provider directly to our homeowners was $209 million in the first quarter down 18% year over year.
Bruce Schuman: Adjusted EBITDA was negative $36 million in the first quarter compared to negative $12 million in the same period last year. Despite progress on our expense reduction, adjusted EBITDA continues to be affected by booking variability impacting nights sold, gross booking value per home, and ultimately revenue. As Rob indicated, we are experiencing unexpected continued bookings weakness in terms of both price, or gross booking value per night sold, and utilization, or nights sold per home, as we approach our summer. While January started off slowly, we saw an uptick in booking intakes in February.
Bruce Schuman: Now turning to expenses.
Bruce Schuman: Cost of revenue was 50% of revenue in the first quarter versus 48% of revenue in the same period last year.
Bruce Schuman: Cost of revenue dollars declined by 14% year over year compared to a 12% decline in night sold.
Bruce Schuman: Operations and support expense was 28% of revenue in the first quarter versus 23% of revenue in the same period last year.
Bruce Schuman: Operations and support expense dollars were up 1% year over year.
Bruce Schuman: In terms of our other operating expenses sales and marketing expense, which includes the fees, we pay our third party distribution partners declined 12%.
Bruce Schuman: Acknowledging and development expense was up 7% and in general and administrative expenses declined 2%.
Bruce Schuman: Adjusted EBITDA was negative $36 million for the first quarter compared to negative $12 million in the same period last year.
Bruce Schuman: Despite progress on our expense reduction adjusted EBITDA continues to be affected by bookings variability impacting nights sold gross booking value per home and ultimately revenue.
Bruce Schuman: As Rob indicated we are experiencing unexpected continued bookings weakness in terms of both price or gross bookings value per night sold and utilization or night sold per home as we approach our summer peak.
Bruce Schuman: While January started off slowly we saw an uptick in bookings intakes in February.
Operator: However, over the last few weeks, as the summer booking curve has come into view more clearly, we have seen both the number of bookings and the price at which those bookings are made come in below our initial expectations. This weakness is translating into lower revenue and, in turn, lower adjusted EBITDA, and we must take action. We've been on a transformation journey over the past year, with the local markets making or influencing more of our business decisions.
Bruce Schuman: Over the last few weeks as the summer booking curve has come into view more clearly we have seen both the number of bookings and the price at which those bookings are made come in below our initial expectations.
Operator: This weakness is translating into lower revenue and in turn lower adjusted EBITDA and we must take action.
Operator: We've been on a transformation journey over the past year with the local market, making or influencing more of our business decisions.
Operator: Given the industry backdrop we now expect to face throughout 2024, we must accelerate this transformation. While this carries execution risk, we believe that further empowering our local teams and reducing our corporate cost structure is the right decision to optimize our business model and shareholder value. As part of the restructuring announced today, we are reducing our headcount by about 800 employees, or 13% of our total workforce, with the largest impact on our corporate teams, as Rob noted.
Operator: Given the industry backdrop, we now expect to face throughout 2024, we must accelerate this transformation.
Operator: While this curious execution risk, we believe that further empowering our local teams and reducing our corporate cost structure is the right decision to optimize our business model and shareholder value.
Operator: As part of the restructuring announced today, we are reducing our head count by about 800 employees or 13% of our total workforce with the largest impact to our corporate teams as Rob noted.
Operator: We expect these adjustments to provide over $50 million of cost savings in 2024 and over $120 million on an annual run rate basis. The in-year cost savings are expected to be largely realized in the third and fourth quarters, with meaningful reductions anticipated across our technology and development, sales and marketing, and general and administrative expense lines. At this point, it remains difficult to provide guidance for 2024. The ongoing industry dynamics and their impact on bookings variability, average gross bookings per home, as well as continued elevated churn create a wide range of outcomes for revenue, which then flows through to adjusted EBITDA.
Operator: We expect these adjustments to provide over $50 million of cost savings in 2024 and over $120 million on an annual run rate basis.
Operator: The in your cost savings are expected to be largely realized in the third and fourth quarters with meaningful reductions anticipated across our technology and development sales and marketing and general and administrative expense lines.
Operator: At this point it remains difficult to provide guidance for 2020 for the.
Operator: The ongoing industry dynamics and their impact on bookings variability average gross bookings per home as well as continued elevated churn creates a wide range of outcomes for revenue, which then flows through to adjusted EBITDA.
Operator: While the changes we've announced today are expected to reduce our cost structure for 2024, given the current revenue dynamics, we don't anticipate reaching adjusted EBITDA profitability this year. Lastly, given the uncertainty in market conditions, the variability around the timing of our bookings build into the summer peak season, and as we are executing on our corporate transformation, we have taken the prudent step of drawing about $80 million under our revolving credit facility to supplement our liquidity. With that, Rob and I will take your questions. Operator, please open up the line.
Operator: While the changes we've announced today are expected to reduce our cost structure for 2024, given the current revenue dynamics, we don't anticipate reaching adjusted EBITDA profitability. This year.
Operator: Lastly, given the uncertainty in market conditions, the variability around the timing of our bookings spilled into the summer peak season, and as we are executing on our corporate transformation.
Operator: We have taken the prudent step of drawing about $80 million under our revolving credit facility to supplement our liquidity.
Speaker Change: With that Rob and I will take your questions.
Operator: Operator, please open up the lines.
Operator: Thank you. Ladies and gentlemen, at this time, if you would like to ask a question, remember to press star, then followed by the number one on your telephone keypad. And once again, we ask that you limit yourself to one question when your time is selected. Our first question is from the line of Jed Kelly with Oppenheimer.
Speaker Change: Thank you ladies and gentlemen at this time, if you would like to ask a question remember to press Star then followed by the number one on your telephone keypad and once again, we ask that you limit yourself to one question. When your time is selected.
Jed Kelly: Hey, great. Um, thanks. Thanks for taking my question. Just on the local market strategy. Should we anticipate that you're going to kind of focus on the markets where you have a higher density, and you can drive more profitability and maybe, I don't know, unload some of the contracts where you don't have as much density or aren't generating as much profitability? Thank you. Hey Jed, thanks, thanks very much.
Operator: Our first question is from the line of Jed Kelly with Oppenheimer.
Speaker Change: Your line is live.
Speaker Change: Hey, great. Thanks.
Jed Kelly: Thanks for taking my question just just on the local market strategy should we anticipate that youre going to kind of focus on the markets, where you have a higher density and you can drive more profitability and maybe.
Jed Kelly: Don't know unload some of the contracts, where you don't have as much density are generating as much profitability. Thank you.
Unknown Executive: I appreciate the question. So, for the past year, we've been on this journey of transforming the business; we've been looking, as part of that work closely, at where we can do more to empower and enable our local teams to drive more of the business. We see opportunity as we've been executing as a team to improve Service for Our Owners, Service for Our Guests, and Our Financial Results. We think we demonstrated that as we moved through the year in 2023.
Unknown Executive: Hey, Jed, thanks. Thanks very much.
Jed Kelly: Hey, Jeff. Thanks, Thanks, very much I. Appreciate the question. So look for the past year. We've been on this journey of transforming the business we've been looking as part of that work closely at.
Unknown Executive: Where we can do more to empower to enable our local teams to drive more of the business.
Unknown Executive: We see opportunity as we've been executing as a team to improve service for our owners service for our guests and our financial results. We think we demonstrated that as we move through the year in 2023.
Unknown Executive: There is some opportunity to focus more on some markets over others, but really, it's more about sort of how we are allocating capital and what we are seeing in terms of higher velocity or lower velocity sales progress in some markets, for example. So we don't have a lot more to share about those pieces, but it's something that we certainly are mindful of. We are lucky to have a market footprint that we think is very attractive and encouraging going forward, but these are industry-wide dynamics, and so we are wanting to be very sensitive to that and to make sure that we are gearing the business in the right way for what's ahead.
Speaker Change: There is some opportunity to to focus more in some markets over others, but really it's more about sort of how we are.
Unknown Executive: We're allocating capital and what we're seeing in terms of higher velocity or lower velocity sales sales progress in some markets. For example, so we don't have a lot more to share about those pieces, but it's something that we certainly are mindful of where we're lucky to have a market footprint that we think is very attractive and and incur.
Unknown Executive: <unk> going forward, but these are industry wide dynamics and so we're wanting to be to be very sensitive to that and to make sure that we're gearing the business in the right way for what's ahead.
Unknown Executive: And then.
Speaker Change: Thanks for your question.
Operator: Our next question comes from the line of Ben Miller with Goldman Sachs. Your line is live.
Unknown Executive: Our next question comes from the line of Ben Miller with Goldman Sachs. Your line is <unk>.
Operator: Okay.
Benjamin Harold Miller: I guess following up on that, with the headcount reductions more focused at the corporate level than the local market level and having decisions now pushed to be more locally managed, can you give any color on what local market economics look like? In other words, what would a local market P&L or contribution margin look like today before layering on the corporate cost and what that says about the incremental scale you might need to offset those corporate costs to get back to profitability?
Benjamin Harold Miller: I guess following up on that with the head count reductions more focused at the corporate level than the local market level and having decisions now.
Benjamin Harold Miller: Push to be more locally managed can you give any color on what local market economics look like in other words, what would a local market P&L or contribution margin look like today before layering in layering on the corporate costs and what that says about the incrementals scale you might need.
Benjamin Harold Miller: To offset those corporate costs to get back to profitability.
Unknown Executive: Thanks.
Benjamin Harold Miller: Yes.
Speaker Change: Appreciate that question.
Unknown Executive: When we look at our markets, we've been doing a lot of work as you know through the last year or two.
Unknown Executive: Yeah, it's appreciated that question. When we look at our markets, we've been doing a lot of work, as you know, through the last year to drive better, not just better performance, but better awareness, better, better feedback loops, better reporting for the local market teams on how their businesses are performing and what the remaining potential is. This is really about continuing that work. This is something that we've pulled forward in the timing of the way we've been executing it, but something we've been working on for a long time.
Unknown Executive: Drive better not just better performance by better awareness better better feedback loops better reporting for the local market teams on how their businesses are performing what the remaining potential is this is really about continuing that work. This is something that we've pulled forward in the timing of the <unk>.
Unknown Executive: <unk> been executing it but something we've been working on for a long time.
Unknown Executive: I think that there's a lot of opportunity for sharpening the incentives in the work that we are, that we're enabling our teams to do out of their silos and in a more coordinated, in a more coordinated and aligned way, you know, locally. So maybe Bruce can comment on the cost structure. We haven't shared a lot about how we do our reporting and and kind of management internally, but maybe he can share a little bit more about what we put in the contribution margin and how we think about that. Yeah, thanks. Yeah, Ben, that's one way to think about it.
Unknown Executive: I think that there is a lot of opportunity in in sharpening the incentives in work that we are.
Unknown Executive: We're.
Bruce Schuman: Enabling our teams to do out of their silos and in a more coordinated in a more coordinated and aligned way.
Bruce Schuman: Locally so.
Unknown Executive: Maybe Bruce can comment on the cost structure, and we havent shared a lot about.
Bruce Schuman: How we how we do our reporting and in kind of management internally, but maybe he can share a little bit more about what we put in contribution margin and how we think about that yeah. Thanks. Thanks, Rob Yes, one way to think about it if you look at our cost structure roughly our cost of revenue number one and then secondly, our operations and support cost.
Bruce Schuman: Thanks Rob. Yeah, Ben, one way to think about it is if you look at our cost structure, roughly our cost of revenue, number one, and then secondly, our operations and support costs, if you put those together, they primarily represent our local market cost. That's about 70% of our cost structure, broadly speaking. So as we really, you know, lighten our corporate overhead cost load, I think we're going to be able to unlock more of the inherent value associated with those local markets.
Bruce Schuman: If you put those together they primarily represent our local market costs, that's about 70% of our cost structure broadly speaking.
Bruce Schuman: We really lightened, our corporate overhead cost load I think we're going to really be able to unlock more of the inherent.
Bruce Schuman: Value associated with those local markets.
Speaker Change: Thank you for your question.
Operator: Our next question comes from Doug Manoff with J.P. Morgan.
Bruce Schuman: Our next question comes from the line of Doug Manav with Jpmorgan.
Doug Manoff: Your line is live.
Unknown Executive: Hey, this is Dale speaking on behalf of Doug. Thanks for taking the question. So, speaking of the theme of shifting... some of the roles here in local markets, it sounds like their field teams will need to wear many hats going forward, so just I wanted to make sure, like, could you explain, like, what gives you the confidence that they can take on more responsibilities and perhaps roles and activities that require different skill sets?
Operator: Okay.
Doug Manoff: Thanks for taking the question.
Unknown Executive: So sticking on the theme of.
Unknown Executive: Shifting.
Unknown Executive: Some of the rules here in North America, followed by Fairfield scheduled newsworthy.
Unknown Executive: Going forward.
Unknown Executive: One is to make sure.
Unknown Executive: How like what gives you the confidence that they can take on more responsibilities and for us.
Unknown Executive: Growth for us activities that are required to finance close us.
Unknown Executive: And be successful. And is this something that is more temporary, or do you think this is more of a long-term thing, or do you want it to be just more of a permanent change that will work in the future as well?
Unknown Executive: Visa.
Unknown Executive: It's just something about.
Unknown Executive: Temporary or do you think this is more just normal.
Unknown Executive: From a new change that.
Unknown Executive: While we are working with future as well.
Unknown Executive: Yeah, so when we look at the the transformation of work that we've been doing, this has been something that As I mentioned just a moment ago, we've been working on for a long time, so this is not about a change that we have been contemplating for just a moment, but rather something we've been moving toward, and as we shared with you, transforming the business toward over a period of months and quarters. The skill sets of the team, in my experience when I've been out in the field talking with owners and talking with our teams, where we operate best is on some level where our sales teams know what the ops teams want to manage and serve, and where the operations teams know where sales should go and build relationships, and to the extent that we can do more and more to try to formalize those relationships, to try to break down the silos that sort of would keep those teams apart, to align their incentives, that's really where we see and we believe there's a real opportunity for the business to unlock a next level of performance.
Unknown Executive: Yes.
Speaker Change: When we look at the transformation work that we've been doing this has been something that.
Unknown Executive: As I mentioned, just a moment ago, we've been working on for a long time. So this is not about.
Unknown Executive: This is not about a change that we have been.
Unknown Executive: Contemplating for four.
Unknown Executive: For just a moment, but rather something we have been moving toward.
Unknown Executive: As we've shared with you transforming the business toward over a period of months and quarters.
Unknown Executive: The skill sets of the team in my experience when I've been out in the field talking with owners and talking with our teams where we operate best is on some level, where our sales teams know what the ops teams want to want to manage and serve and where the operations teams know where sales should go and.
Unknown Executive: Build relationships and to the extent that we can do more and more to trying to formalize those relationships to try to.
Unknown Executive: Breaking down the silos that sort of would keep those teams apart to align their incentives.
Unknown Executive: That's really where we see and we believe theres a real opportunity for the business to unlock a next level of performance, but there is a lot of work to do to get it done.
Unknown Executive: But there's a lot of work to do to get it done, and the teams are excited to make that happen, and we believe that that is the best way for us to serve our owners and our guests and the people that take care of them as we go. Thank you for your question. Once again, ladies and gentlemen, if you would like to ask a question today, remember to hit the star followed.
Unknown Executive: The.
Unknown Executive: The teams are excited to make that happen and we believe that that is the best way for us to serve our owners and our guests and the people that take care of them as we go forward.
Operator: Thank you for your question. Once again, ladies and gentlemen, if you would like to ask a question today, remember to hit star followed by the number one on your telephone keypad. Our next question comes from the line of Bernie McTernan with Needham and Company. Your line is live.
Unknown Executive: Thank you for your question.
Unknown Executive: Once again, ladies and gentlemen, if you would like to ask a question today remember to hit Star followed by the number one on your telephone keypad.
Bernard Jerome McTernan: Our next question comes from the line of Bernie Mcternan with Needham <unk> company.
Bernard Jerome McTernan: Your line is live.
Operator: Hi, This is stefanos crist, calling in from Bernie Thanks for taking our question.
Bernard Jerome McTernan: Just wanted to ask about churn versus the increasing market supply in and could you talk about what youre seeing in gross ads. Thanks.
Unknown Executive: Yeah, so on CHRN. When we look at CHRN, as we've shared on prior calls, CHRN is not where we want it to be. The industry continues to come off the highs that we saw in 2021 and 2022.
Bernard Jerome McTernan: Yes, so on churn when we look at churn as we've shared.
Bernard Jerome McTernan: On prior calls.
Bernard Jerome McTernan: <unk> is not where we want it to be the industry continues to come off the highs that we saw in 2021 and 2022, we do see owners continuing to site frustration over income levels as one of the top reasons that they that they look to change.
Unknown Executive: We do see owners continuing to cite frustration over income levels as one of the top reasons that they look to change. We've shared that we've seen some improvements in our owner NPS over the last 12 months. We've made substantial investments in working with our owners on one of the other top reasons that they cite, which is around owner communication. So the tools, the processes, the work that we're doing there, we're very focused on those two things, as well as working with them to understand, delivering revenue premiums wherever we can, on making sure that they understand how we are thinking about pricing and pricing strategies and understand the market dynamics.
Unknown Executive: We've shared that we have seen some improvements in our owner NPS through the last 12 months, we've made substantial investments in.
Unknown Executive: In working with our owners on one of the other top reasons, they cite which is around owner of communication to the tools.
Unknown Executive: Processes the work that we're doing there.
Unknown Executive: We are we're very focused on those two things as well as working with them on understanding on delivering.
Unknown Executive: Revenue.
Unknown Executive: Revenue premiums wherever we can on making sure that they understand how we're thinking about pricing and pricing strategy and understand the market dynamics.
Unknown Executive: At this rate, CHRN has not gotten to where we want it to be, but we haven't seen those things translate into less CHRN at this stage. In terms of ads, we're continuing to focus on our organic sales performance during the transformation. As I mentioned, we're focused on empowering our local teams to have more responsibility, more say in this, and be able to be more aligned as they're building those relationships with owners. We're building those things into incentives, and we believe that the teams that are going to be closest to our owners will work together more and more; they know the owners best, they know the local teams best, and they'll have that ability to drive better outcomes over time.
Unknown Executive: This rate churn has not gotten to where we wanted to be we have we haven't seen those things translate into less less churn at this stage.
Unknown Executive: In terms of in terms of ads, we're continuing to focus on our organic sales performance with the transformation as I mentioned, we're focused on empowering our local teams to have more responsibility more assay in this be able to be more aligned as they are building those relationships with owners, we're building those things into.
Unknown Executive: Incentives and we believe that that the teams that are going to be closer to our owners working together more and more.
Unknown Executive: The owners best they know the local teams best and they will have that ability to drive better outcomes over time.
Speaker Change: Thank you for your question.
Operator: Our next question comes from the line of Lee Horowitz with Deutsche Bank. Your line is live.
Unknown Executive: Our next question comes from the line of Lee Horowitz with Deutsche Bank.
Lee Horowitz: Your line is live.
Unknown Caller: Thank you for taking our question. This is Ishan for Lee.
Operator: Thank you for taking our question. This is Sean on for Lee.
Unknown Caller: So in terms of trends, Feb saw a slight uptick in the Knights. So can you give some more color on what that would have been, excluding the impact of extra leave days? And in the shareholder letter, it is mentioned that revenue and GBV for Knights are coming below your expectation. Can you help us understand how that compares to the 1Q? Thank you.
Unknown Caller: <unk>.
Ishan: In terms of trends, so slight uptick into the night, but can you give some more color on what would have been excluding the impact of an extra leap day.
Unknown Caller: And in the shareholder letter just mentioned that nights and GBP for nights are coming below your expectation can you help us understand how does that compare to the <unk>. Thank you.
Unknown Executive: So a couple of things, and I'll ask Bruce to jump in just on the evolution of NYSOL and so forth. So from an industry perspective, when we spoke at the conference back in February, we had indicated that we were seeing a very dynamic environment in the industry. And we saw this as a function of two things: the softening of demand for vacation rentals in the markets that we serve, primarily domestic, non-urban markets; and then the second thing was around increases in the supply of short-term rental units.
Unknown Caller: So.
Speaker Change: So a couple of things and I'll ask Bruce to jump in and just on the on the evolution of <unk>.
Unknown Executive: <unk> sold and so forth.
Unknown Executive: So from an industry perspective, when we when we spoke at the back in February we had indicated that we were seeing a very dynamic environment in the industry and we saw this.
Bruce Schuman: Being a function of two things the softening of demand for.
Unknown Executive: Vacation rental.
Unknown Executive: In vacation rentals in the markets that we serve primarily domestic non urban markets and then the second thing was around increases in the supply of short term rental units. So for US. We saw these kind of weak and volatile intakes in January we did see some stabilization and signs.
Unknown Executive: So for us, we saw these kinds of weak and volatile intakes in January. We did see some stabilization and signs of improvement as we got into February, and that was encouraging as we approached some of the booking windows for our summer peak season. But we were obviously watching that very closely.
Unknown Executive: Of improvement as we as we got into February and that was encouraging as we approach some of the booking windows for our summer peak season, but we we're obviously watching that very closely however, during March and April the bookings build for our peak summer season has remained below our expectations.
Unknown Executive: However, during March and April, the bookings bill for our peak summer season has remained below our expectations. And so as we look at that, and we look out through the rest of the year, it's become clear to us that the summer season and the dynamics through the year will be very challenging and likely down again on a year-over-year basis. So there are some longer-term trends here that we think are in play, just sort of softening consumer demand, but that's what we were seeing as we were looking at it at the beginning.
Unknown Executive: So as you look at that when we look out.
Unknown Executive: Through the rest of the year, it's become clear to us that the summer season, and the dynamics through through the year will be will be very challenging and likely down again on a year over year basis. So.
Unknown Executive: There is some longer term trends here that we think are in play and just sort of softening consumer demand.
Unknown Executive: But thats, what we were seeing as we as we were looking out at the beginning of the year, yes, perfect. Just to give you. This is Bruce just some additional color on how the quarter played out to your question.
Bruce Schuman: Yeah, perfect. And just to give you, this is Bruce, just some additional color on how the quarter played out in response to your question. You know, revenue obviously declined 18% year-over-year, while homes under management declined by about 5%. So think of the rest of that gap as really due to the lower monetization of the homes on our platform. And again, based on the data we see, we think this is happening across the industry. It's not really specific to Vacasa.
Bruce Schuman: Revenue, obviously declined 18% year over year homes under management those declined by about 5%. So think of the rest of that gap is really due to the lower monetization of the homes on our platform and again based on the data. We see we think this is happening across the industry, it's not really specific to the cost and that lower <unk>.
Bruce Schuman: And that lower revenue, specifically because of the ADR, the pricing component, that drives some de-leverage for us across the cost structure, as you just can't lower your cost structure that fast in a quarter by 18%, even though we're much more variable than we were. That really drove the declines in adjusted EBITDA year-over-year. You know, given we believe these gross booking value levels, to Rob's point, are going to persist. That's why you saw us take the action today to really accelerate our company transformation and significantly reduce our corporate expense load.
Bruce Schuman: Revenue, specifically because of the ADR the pricing component that drives some deleverage for us across the cost structure as you just can't lower your cost structure that fast in the quarter by 18%, even though we're much more variable than we were that really drove the declines in adjusted EBIT year over year for the quarter.
Bruce Schuman: Given we believe these gross booking value levels to Rob's point are going to persist. That's why you saw us take the action today to really accelerate our company transformation.
Bruce Schuman: And significantly reduce our corporate expense load.
Speaker Change: Thank you for your question.
Operator: Thank you for your questions. Our next question comes from the line of Nick Jones with Citizens JMP.
Bruce Schuman: Our next question comes from line of Nick Jones with citizens JMP.
Nicholas Freeman Jones: Your line is live.
Nicholas Freeman Jones: Hi, this is Tim on behalf of Nick. Thanks for taking our questions. Just wanted to kind of piggyback on that question. You're just kind of talking about ADRs and driving de-leverage in the business and your guys' priority to maximize income for the homeowners. Can you talk a little bit about what you're seeing in terms of occupancy rates and how that dynamic is playing out with ADRs and maybe how you guys could manage that to maximize income? Thanks.
Operator: Hi, This is Tim on for Nick Thanks for taking our questions.
Nicholas Freeman Jones: Just wanted to kind of piggyback on that question Youre, just kind of talking about ADR and driving to deleveraging the business and your guys' priority to maximize income for the homeowners.
Nicholas Freeman Jones: Can you talk a little bit about what youre seeing in terms of occupancy rates and how.
Nicholas Freeman Jones: That dynamic is playing out with ADR is and maybe how you guys can manage that to maximize income. Thanks.
Nicholas Freeman Jones: Okay.
Unknown Executive: Yeah, sure. So maybe I'll kind of share with you a little bit about the sort of occupancy and ADR dynamics. I think that's your question.
Speaker Change: Yeah sure. So maybe I'll kind of share with you a little bit about sort of occupancy and ADR dynamic I think that's your question. So our homes decline about 5% year over year, our ninth sold declined about 12% that kind of imply as the night sold per home that was kind of a difference there and then to drive those nights sold obviously, we want to make sure we're optimizing.
Unknown Executive: So our homes declined about 5% year over year, and our nights sold declined about 12%. So that kind of implies the nights sold per home, that was kind of the difference there. And then to drive those nights sold, obviously, we want to make sure we're optimizing price to drive that sell through, and you know, gross booking value per night was down about 7%. That kind of gives you the interplay there between the occupancy and ADR side.
Unknown Executive: Price to drive that sell through and gross booking value per night was down about 7% that kind of gives you the interplay there between the occupancy and ADR side.
Operator: Great. Thank you for your question. Ladies and gentlemen, with that, that will end today's Q&A session for today's call. And I would like to turn it back over to Rob Greyber for any closing remarks.
Speaker Change: Great. Thank you for your question Lee.
Robert Greyber: Ladies and gentlemen, with that that we'll end today's Q&A session for today's call and I would like to turn it back over to Rob <unk> for any closing remarks.
Robert Greyber: I want to thank everybody for joining the call today. I also want to take a moment to thank our owners for entrusting their homes to us, to our guests who are making memories with us, and to all of our colleagues at Vacasa who are working so hard to make all of this happen. Thank you all very much for joining us. We're working so hard to make all of this happen. Thank you all very much for joining us.
Robert Greyber: Now I want to thank everybody for joining the call today I also want to take a moment to thank our owners for entrusting their homes to us to our guests who are making memories with us and to all of our colleagues at the cost of who are working so hard to make all of this happened. Thank you all very much for joining.
Robert Greyber: Yeah.
Robert Greyber: Okay.
Robert Greyber: The cost of who are working so hard to make all of this happened. Thank you all very much for joining.